UniCredit: A meeting of minds – Botond Vincze and Preston Moerke




When one of the world's leading money transfer companies sought out a banking partner to optimise its European business, a priority was to master the regulatory landscape of SEPA and the technology of XML. Another was to ensure the right geographic coverage for US-based business reaching out into new markets. Botond Vincze, global account manager for UniCredit, and Preston Moerke, director, senior treasury manager at MoneyGram, explain why it took very little time for the companies to realise that they were a perfect fit for each other.


In 2014, MoneyGram already had some experience with the European payments system defined by SEPA and with the XML technology that forms a key part of it. As a leader in the global money transfer space, it certainly understood the regulatory landscape, but without first-hand experience it needed the right banking partner to help optimise its European operations.

Based in Dallas, Texas, MoneyGram is the second-largest money transfer company in the world, has two key business categories - global funds transfers and financial paper products, or money orders - and its works with individuals and businesses through a network of agents and financial institutions. At present, it has over 350,000 agent locations in more than 200 countries. Optimising its European reconciliation process has been a key priority for over a year and it has made great strides working with UniCredit.

The project began with UniCredit becoming intimately acquainted with MoneyGram's business model during intensive meetings in London and Dallas before putting forward a proposal under which it would provide a settlement hub based in Germany. This provided the platform for focusing on the key areas of SWIFT, virtual accounting and cash-pooling.

"We have an evolving business in Europe and we need to figure out how to optimise it and improve it. Before, we focused on large-scale integration with all legal entities, and now we are centralising and bringing it in house, so we wanted the best banking partner to streamline and revamp our processes. We need to stay on top of different technologies,processes and products, but it has been very easy from our side," says Preston Moerke, senior treasury manager at MoneyGram, who is responsible for global cash management and treasury support for all global initiatives.

The beginning

The first step was to get MoneyGram up to speed with the SEPA rules and the incremental requirements of this initiative, which proved relatively easy thanks to the work the company had already done to get to grips with the regulatory regime in Europe; so further enhancing the global rollout initiative. From there, UniCredit and MoneyGram were quickly able to build a European XML file to be run out of Dallas. Following a short period of successful testing, MoneyGram was able to start channelling European agents' payments through the German UniCredit hub.

"MoneyGram knew what it wanted to achieve and we have a view of the European landscape encompassing SEPA, XML, virtual accounts and cash-pooling. We are supporting the whole reconciliation process. SEPA represents a different regulatory need and European treasurers are clear about it now. But even though it is based in the US, MoneyGram also had a good understanding of it. It was well prepared, but it still had something to learn about its full potential," says Botond Vincze, global account manager for the US cash management sales portfolio at UniCredit, based in Munich, Germany.

The tangible benefits of virtual accounting

There was a time when European financial institutions saw SEPA implementation as a slow and laborious process, but since its adoption in 2012 to a single European market for retail payments, and the switch in 2014 to an environment in which all credit transfers and direct debits in euro would be made under the same format - 'SEPA Credit Transfers and SEPA Direct Debits' - it has come to be viewed as a platform that provides opportunity rather than simply a compliance burden.

"We knew a lot about SEPA before our project with UniCredit began. We have been involved in SEPA Direct Debit for a while now and we were among the first to implement it. Through MoneyGram's transformation over the past two years we know about SEPA Credit Transfer and SEPA Direct Debit but we needed to roll it out. We have been using XML schema for four years - since we migrated to SWIFT - so there has been no steep learning curve for us. We have a European XML file run out of Dallas and Minneapolis and we have a seasoned Oracle ERP team, so we got up to speed very quickly," explains Moerke.

The partnership of a bank that is heavily focused on unearthing the opportunities inherent in SEPA and an informed client that is committed to optimising its payments network in Europe has enabled both to move swiftly up the value chain. Shortly after the implementation of the payments hub in Germany, MoneyGram was able to adopt virtual accounting, which helped it to streamline its collection process.

"Virtual accounting is something we were about to come to market with, so we were looking for companies that would fit with it well. MoneyGram wanted to use virtual accounting for its cash application and accounts receivable matching. Virtual accounts are actually using SEPA capabilities such as IBAN and can be implemented using ERP. MoneyGram wanted to achieve its goal for a centralised payment hub with as few accounts as possible. You can open and close virtual accounts as and when they are needed, so they offer simplicity and flexibility, as well as naturally using SEPA capability," explains Vincze.

Virtual accounting is very easy to use for collections and the next phase is to use them for payments, though so far have had less traction in this space. For Vincze, that is the next step in a relationship that has already yielded great benefit.

"UniCredit and MoneyGram are good partners because we understood each other from the start. We both have a similar country focus, and through our hub in Munich we offer a consistent point of contact for people in Dallas and London," he remarks.

"UniCredit is very global and by coincidence it happens to be in all the countries we were engaging with, including our move into Eastern Europe," adds Moerke. "The real difference is that we now have a bank that responds very quickly to our needs and truly understands our goals. The ease with which we have got structures in place is very satisfying and the framework is ready now, so all we need to do is implement it."

Unearthing opportunities

For many corporate clients of banks, XML remains an untapped resource. They have not embraced it as willingly as might have been hoped, but UniCredit can explore much more of its capabilities through a successful collaboration with an informed client such as MoneyGram.

"In terms of XML, we are not yet there with customers. Banks had to get used to XML but corporations don't use the full potential of it yet. It is much like NFC capability for payments - it is there and is useful but its uptake has not been as big as expected. MoneyGram, however, had a good understanding of it. Real use of XML is not in the minds of many corporates yet, but the SEPA region in the future will have the same fee - through camt086 - definitions for example, so XML will play an increasingly important role in the SEPA 2.0 world," says Vincze.

Using camt.086 in XML-based 'bank service billing' a bank can provide a detailed report about fees related to account management payments and cash management services at a level of detail that allows a client to check and analyse bank services in terms of price, service quantity, and costs. It is a structured format that enables fully automatic and central processing.

"There is certainly an opportunity around camt.086, so there is much more that we can exploit there," notes Moerke, who recognises that cash-pooling is another area in which value could be gleaned, though it is at a very early stage for MoneyGram.

One of the keys to success for this partnership is UniCredit's continued commitment to SEPA-related services.

"SEPA is very important for us. Its introduction may have led to banks losing fees on foreign payments, but we have to embrace it and continue to develop opportunities. The first iteration of SEPA was about technology - IBAN and XML - and regulation. It was about the basics and focused on compliance. SEPA 2.0 is the world we are in now - the world of virtual accounts and different usage of the XML format (like fee reporting and the recalling of payments). People have grasped the idea of SEPA through the need to be compliant and now they understand that they can do most payments through one SEPA hub," says Vincze.

As the synergistic relationship between MoneyGram and UniCredit evolves, more opportunities will arise, including cash-pooling with a master account in Germany. With the right partner, a rapid evolution of services is possible, which helps to wring out value at every stage on the journey.