UniCredit: Würth Finance Benefits from Payment Factory Makeover

Würth Finance International wanted to update its payments factory in order to be better connected to its banking partners, to achieve straight-through processing and be SEPA-ready. Würth's Daniel Ochsner and UniCredit's Jürgen Lutz explain to FDE's Steve Dunkerley the rationale behind the implementation and its business impact.

Steve Dunkerley (SD): What is the background of Würth Finance International and its relationship with the Würth Group?

Daniel Ochsner (DO), head of central settlement, Würth Finance International: The Würth Group is a strong, growing, highly successful trading company with more than 400 companies in 84 countries. The core business of the company is global trade in fastening and assembly technology. The group has over 58,000 employees worldwide and in 2009 achieved revenues of €7.5 billion. As the in-house bank to the de-centralised Würth Group, Würth Finance provides financial services including treasury services, financial risk management, group financing and international payments to group members. As such, Würth Finance operates as the Würth Group payment factory. In 2009 the payment factory processed about 1.1 million invoices and settled a payment volume of €2.1 billion to more than 15,000 suppliers worldwide.

SD: What was the corporate transactional banking relationship like prior to the implementation?

DO: Before 2006, Würth Finance set up a number of new bank relations to enable the settlement of local euro and foreign currencies payments in Europe. In 2006 Würth Finance deployed the first Swift MA-CUG with a target of streamlining the number of banking applications (eight in total) and being able to make use of new payment standards such as XML formats for SEPA payments.

"Würth is evaluating the feasibility of bringing together the different stakeholders of the physical and financial supply chains by setting up a centralised portal and communications platform."

SD: When did the need for change arrive? Was it a top-down or bottom-up strategy; who and what was the driving force?

DO: I initiated the project strategy. As head of the central settlement department, the approach would be something in between top-down and bottom-up. The driving force was the enormous complexity of the different communications channels to banks and the great opportunity to gain greater efficiency, reduce costs and harmonise the formats in which SEPA and XML were offering.

SD: What were the biggest operational decisions that needed to be made along the way to implementation?

DO: The biggest strategic decision was to select, out of our existing banking relations, a partner who was able to offer expertise in SWIFTNet connectivity, SEPA readiness and XML format processing. This partner also needed to have the required resources and know-how to implement such a project, whilst still fulfilling the necessary requirements which would enable them to maintain their status as partner bank. With UniCredit we have found a partner who meets these requirements and who was even able to expand our payment factory solution to more countries in Eastern Europe.

SD: What role did UniCredit play in this project and what experience and value did it bring?

Jürgen Lutz (JL), International Cash Management Sales, UniCredit: In 2008 Würth Finance finally implemented XML messaging together with UniCredit as first banking partner. UniCredit was able to contribute to the project with excellent SWIFTNet and SEPA know-how and could offer the necessary technical infrastructure. As a consequence, Würth Finance routes a substantial part of its EUR payments through UniCredit. The possibility of a setup with a single point of entry to the UniCredit Group is very customer friendly and convenient.

SD: What impact has the implementation had on the business?

DO: Thanks to its SEPA readiness, Würth Finance can now consolidate the multiplicity of the EUR accounts in Europe. This will not only give us considerable cost saving opportunities in regards to bank charges but also a substantial increase in the efficiency of payments processing, cash management functionality, accounts reconciliation, the required level of IT and future orientated flexibility.

SD: Where can the payment factory be taken next? Are there any further projects in the pipeline or further aspirations?

DO: At the moment, Würth is evaluating the feasibility of bringing together the different stakeholders of the physical and financial supply chains by setting up a centralised portal and communications platform. The Würth purchasers will have the opportunity to use e-procurement features, supplier e-billing, electronic payment for easier reconciliation of open items, the possibility of pre-financing open invoices and a market place to promote products and services to the Würth Group companies. For the Würth Group in general we would like to create a one supplier master database and introduce group wide supplier rating standards.

SD: Why do corporates like Würth Finance select UniCredit as a partner in these projects?

JL: The main reason is that the corporate can leverage UniCredit's expertise and track record in supply chain finance and payments management, SEPA, SWIFTNet and XML for centralisation projects without needing to have the capability to develop or deploy such payment infrastructure by itself. Secondly, the simplicity and speed provided by UniCredit's "EuropeanGate" is a real value generator as it only requires one agreed communication line between bank and customer. The gateway also combines the advantages of SWIFT and classical Electronic Banking, for example the use of electronic signatures. This makes the step up to e-banking easier and more attractive especially amongst smaller and non-multinational corporate customers.

Daniel Ochsner, head of central settlement, Würth Finance International
Jürgen Lutz, International Cash Management Sales, UniCredit