One of the largest corporate entities in the United Arab Emirates (UAE), Dubai-based holding company Majid Al Futtaim owns and operates retail and leisure properties in 13 countries. As the business continues to grow, it is essential that internal financial procedures and systems are able to meet increasing demand.

Majid Al Futtaim’s treasury function saw an opportunity to improve its financial management systems and become more efficient by moving to a payments factory model. This would integrate the disparate transaction flows and streamline a process that involves e-banking with multiple proprietary bank platforms. The ultimate goal is to establish an in-house bank that will give greater visibility of cash and better control of liquidity, allowing for flexible management of cash pooling. The focus in this first phase has been moving from the existing manual processing of payments and statements to an automated system for cash management.

Identifying an expert

As one of the first corporates in the UAE to embark upon this journey, the team at Majid Al Futtaim found it challenging to find adequate industry benchmarking for such a challenging project and one involving SWIFT. The first step was to identify a trusted technology partner that could help identify the most appropriate IT infrastructure to meet Majid Al Futtaim’s requirements and provide local support. The company turned to BAS, an experienced team of middleware experts based in Paris, with an excellent reputation in the Middle East region. The company already had a high level of confidence given the fact that it was able to successfully achieve a way to integrate bank statements across 13 countries into the BAS application.

The project not only involved moving from manual to automated processing, but there was the added complication of integrating multiple enterprise resource planning (ERP) systems. Each of Majid Al Futtaim’s three business units had its own system and the project had to ensure the existing process flows—such as the approval procedures—could be maintained.

The central treasury team has for 20 years evolved a reliable policy-driven cash management process. Group treasury also handles bank account/mandate management, and managing changes in signatories, with banks identified as an area of value-addition by migrating to the middleware solution. The other objective of monitoring cash balances, with a central visibility of liquidity, was also made possible only via a centralized middleware. The manual approach was simply not going to be fit for purpose in the long term.

Group treasury also blueprinted a technical architecture vision that was stress-tested with industry leading banks and experts to get an opinion on the efficiency of the model.

Defining the scope and parameters

The key objectives for this first phase of the project were to:

• Reduce operational risk
• Streamline operations and reduce cost
• Improve cash management control
• Optimize dependency on internal IT
• Improve bank relationships while reducing transactional cost to the company
• Internal process reengineering value-additions
• Reap certain other process innovations, like 100 percent soft paperless approvals
• Better value-added back-office processing in terms of reduced reconciliation time on vendor queries by having a vendor notification sent from middleware on payment batch invoice breakup.

The project requirements

Treasury recognized that by automating the process so that payments could be prepared and sent directly from the ERP systems across the SWIFT network to the nominated bank, the company would easily be able to cope with higher volumes of payments generated from multiple ERP sources. Importantly, the concern about operational risk that is inherent with manual processing would be eliminated and efficiencies immediately realized.

The challenge went beyond manually prepared payments. Each day, statements were generated and the payments manually matched and reconciled (for majority of the businesses) to create a daily cash position. This became a time consuming process as volumes increased. With the move to automated transaction processing of payments, and having access to automatically generated statements, intraday cash reporting would be easy in the future—something that the treasury team felt essential for timely decision making.

E-banking with multiple institutions created further challenges. These included managing multiple passwords and tokens, as each bank has its own secure login requirements. Also, each bank has its own specific format to receive payment information (if a traditional H2H proposition was contemplated) and any errors in keying or rekeying information only added cost and delayed processing. Naturally, single payments processing is much too cumbersome to process manually, so Majid Al Futtaim moved to pre-authorized payment files and processed in batches. However, there was still the issue of meeting individual bank payment formatting requirements. The creation and formatting of payment files was creating a real challenge for the team.

Majid Al Futtaim today

Majid Al Futtaim now has a centralized hub to handle the execution of payments to banking partners, facilitated by decentralized accounts payable processes. The company underpins this approach by using middleware technology provided by BAS. The interbank connectivity channel is SWIFT, with Alliance Lite2 as the interface between the company and its multiple bank partners. The inherent flexibility of SWIFT’s solution allows for additional banks and other entities to be added over time, which is important to any growing business.

The benefits for Majid Al Futtaim of using the payment factory and SWIFT model include:

• Full automation of payments processing
• Ease of tracking payments through the payment lifecycle
• The ability to monitor payments and provide “on demand” responses to queries
• Secure and dependable connectivity between the treasury and nominated banks
• Improved and cost-efficient bank relationships
• The ability to meet changing regulatory requirements
• The model can easily scale to meet growing business demands.

Over the course of this project, the streamlining of the payment processing activities has driven down bank transaction fees by more than 75 percent. These are tangible and significant cost savings applied on monthly message volumes currently running at 1,500 payments and set to grow. The end results were monetary savings, reduction of duplication in workflow, and the inherent reduction in manual errors.

Lessons learned

It cannot be emphasized enough that projects of this magnitude benefit from identifying all of the internal beneficiaries at the very beginning and this is not as easy as it may seem. These projects touch many people in the organization at many different levels. Ensuring that all teams are engaged and their commitment and responsibilities to the project are included as part of their overall objectives is the key to success.

The project can take many months, so regular communication with everyone involved is vital. Anyone embarking on this journey should be aware that there are many “unknown unknowns”, as there are bound to be plenty of challenges and surprises that crop up along the way no matter how much preparation one does, and due provision for these should be made in terms of cost and time.

Pradeep Prakash is senior manager, treasury at Majid Al Futtaim Holding LLC.