KLM Royal Dutch Airlines is the first successful pilot customer to use Deutsche Bank's single link between Europe and Asia for global payments processing. The system allows multinational companies (MNCs) to process their cross-regional business directly through one bank.
Under this payments processing solution, the airline sends a single file of payment instructions for its Asian suppliers from its global treasury service center in Amsterdam directly to the bank in Frankfurt. The instructions are in EDIFACT format and contain both ACH payments and drafts for beneficiaries in Asia. Deutsche Bank then sends the information to its Singapore branch where the information is split into instructions for payments to KLM beneficiaries via Deutsche Bank's in-country branches. The payments are then processed through local clearing systems, issued and the drafts mailed. KLM then funds its in country accounts with Deutsche Bank on the day the payments are made. Payments from local Deutsche Banks branches can be made by various means including electronic transfer, bank drafts, credit notes or cheques depending on beneficiary preference and the local clearing system.
"This is a reflection of a trend of MNCs setting up shared service centres and wanting a centralized of payments solution for the center. This is the Asian part of KLM's project to have globalized payments system," says Jimmy Yap, Deutsche Bank's Asia Pacific head, global cash management for corporates. "db-worldPAS features one central access point, one interface, one file type and one format for all countries."
The system has so far been implemented in five of the eight countries to which KLM flies. "Airlines tend to be thin on the ground, and so you cannot expect on-ground sales staff to be responsible for treasury as well," explains Yap. "Also, it is better for risk management to have treasury functions controlled at a central level." KLM has managed to par down some six banking relationships in Asia to the one.
However, setting up such an efficient and seemingly easy to use system is not without a cost. "The cost of setting up such a payments system is high," Yap admits, " KLM had to ensure that all its offices in Asia were on the same ERP system and that its security was sophisticated on this type of host to host system."
The quantifiable benefits to KLM using this central payments system are yet to be ascertained as the company intends to run an evaluation program after six months of using the system, but Yap expects that KLM will find a positive impact on their revenues. "It's not just cost savings, the payments system will relive the workload on local staff so that they can concentrate on growth."
Deutsche Bank is currently working with another multinational on the same project, but this time the company is based in Hong Kong. The company will send the single file of payment instructions to Deutsche Bank in Singapore which will then on send the information to its European headquaters. The Hong Kong's beneficiaries in Europe will then receive payments via the bank's in European branches when instructions are received from headquaters.