Twist was conceived in 2001 to review the standards involved in corporate treasury operations. Originally called the Treasury Workstation Integration Standards Team, Twist has come a long way in five years. Today, Twist stands for the Transaction Workflow Innovation Standards Team, and is led by Tom Buschman from the corporate treasury operations of Royal Dutch Shell.

What is interesting is that the original aims of Twist were to develop standards for the automation of treasury, working capital management and commercial payments activities. Since 2001, they have placed pressure on the banking community to work in this context and yet, five years later, there is still a battle taking place to achieve these ambitions.

The reason for the battle is that there is no standard in linking treasury operations with banks. Sure, there’s Swift for post-trade settlement, but Twist is frustrated because Swift is only one piece of the payments process whilst Twist is looking at the end-to-end trade process between governments, corporations and banks. In that context, there are many standards from FIX for pre-trade and trade to Swift for post-trade and from FpML for trading in complex financial instruments to MDDL for market data.

Twist’s stated mission is to deliver "non-proprietary XML-based standards" that enable organisations to implement "effective straight through processing" through "single points of data entry, from end to end of the relevant processes".

By picking up key standards and technologies that are widely accepted, such as FIX, FpML and Swift, and then leveraging these through the relevant authorities, such as the International Standards Organisation (ISO), Twist is managing to agree single standards for key areas of the supply process. In other words, Twist does not compete with the other guys, but really tries to stitch them together and make them work in an integrated fashion through XML.

XML is one key to the TWIST approach...

...but XML on its own is not enough. XML wrap-arounds do not deliver integration on their own. Nor do they deliver common sense as the issue is not just around technology but, more importantly, around process. And it is the process issues in the supply chain where standards break down.

That is why Twist has concentrated its initial efforts to create new standards in the areas of processes rather than technologies, with the first project focused upon creating a single standard for identity management.

The issue with identity management is that it crosses over the boundaries of the supply chain – between governments, corporate and banks – and none of the parties have had a burning requirement to change things.

For example, governments will not enforce identity management standards as it would cause issues with other governments. Corporates should be the enforcers of a single identity management standard, but they have historically been uncoordinated in their activities. Meanwhile, banks are considered to be excellent issuers of identity keys, but corporates do not feel comfortable with the idea that banks become the managers of identity in the supply chain cycle. A bank's role is perceived to be purely for the payments element of the process, not the whole end-to-end process.

In addition, banks have compounded identities by issuing multiple standards and multiple identity keys. Historically, every country in Europe had its own identification system but, following regulation from the European Commission in 2001, banks have now standardised upon Iban (International Bank Account Numbers) and BIC (Bank Identification Codes) for all cross-border transactions. Even then, Ibans and BICs are non-standard, as the USA uses Upic (the Universal Payments Identification Code) and corporates use IBEIs (International Business Entity Identifiers).

The reason why this is something Twist believes it can resolve is due to a variety of pressures that are creating the impetus for corporates to work closely with banks and governments.

The first pressure is that it is no longer acceptable for individuals to have multiple identity signatures in today’s world of 24*7 electronic communications; pervasive connectivity; low-cost global airlines encouraging continuous movements of economic migrants; and extreme terrorism.

The second is that banks and corporates believe the time is right to create a global standard for identity management due to regulatory change. The significant changes in corporate processes demanded by Sarbanes Oxley, combined with similar changes to payment processes demanded by Europe’s Payments Directive and related global Anti-Money Laundering and Anti-Terrorism regulations, means that banks and corporates are willing to look at working together for standardisation. This is for no other reason than cost efficiency and effectiveness. For example, corporates estimate the bill to implement Section 404 of SOX is around $35 billion whilst banks estimate the bill for Europe’s Payments Directive to be around $40 billion. Such astronomical costs have made both parties come to the table to consider how to make globally interoperable standards between corporations, countries, banks and businesses a reality.

Regulatory change and global connectivity are forces working together to drive banks and corporates to rethink their connections. So the time is right for Twist, and a couple of other factors are driving the market to listen to them.

"I’m as mad as hell, and I’m not going to take it anymore!"

The corporates voice wants to be heard, and this is no more obvious than when we discuss the idea of direct corporate access to Swift. Even at Sibos 2004, the annual Swift networking event, the banking community was saying that direct access needed to be avoided. The view then was that corporates should only access Swift via MA-CUGs (Member-Administered Closed User Groups), ie via a bank-sponsored link.

This long-held resistance to including the customer in the settlements process has always been irksome to the large corporates. The customer’s view has been that banks have maintained this exclusion as a method of keeping customers locked-in to their proprietary services.

The customer no longer believes they should be locked-in to proprietary connections when we live in an age of IP connectivity and global communications. So the lack of direct access to Swift is making them mad as hell.

The mantra - first bellowed by Peter Finch in the 1976 movie Network - has become a slogan for the corporate treasury movement. They are as mad as hell and they are not going to take it anymore. Take what? You name it: being locked into proprietary bank connections and systems that are unresponsive; being kept at bay from direct access to the bank networks; paying extortionate charges for cross-border processing fees and related transactions …

Corporates also get mad when they hear other corporates discussing their treasury processes and banking partnerships. Here is one that came up the other day. A corporate treasurer from a major technology firm said the following at a public conference I chaired in February:

"Our firm has rationalised systems globally to allow us to process our treasury operations on a global basis with just two banks. As a result, our quarterly financial numbers are available within two days of the close date for the whole corporation. Most companies take at least six weeks. In addition, we saved over $1 billion by digitalising the supply chain and collapsing our global bank relationships down to just two providers."

That’s enough to make me as mad as hell and not take it anymore. Especially if I have banks in every country processing transactions that cause me to take two months to reconcile, consolidate, validate and produce my quarterly results … at ten times the cost of my competitors.

Therefore, Swift is working extensively to ensure Direct Corporate Access to the co-operative network SwiftNet. It is part of Swift's Vision 2010 and the executive team finally appear to have banks on board in supporting this move, even though the banks fear disintermediation as the process rolls forward.

The problem with the co-operative approach is that change tends to happen at a glacial pace. The danger for the banks is that if Swift does not deliver direct access for all in the near future, then the corporates may just do it themselves. That may be the reason why Twist recently hired Peter Guldentops - the former head of standards at Swift - as programme director with a specific focus upon standards.

It should prove interesting to see how his role pans out, and I would suggest you watch the Twist-Swift developments closely as a result.

See me, hear me...

In conclusion, we seem to have a merry band of firms coming together under the Twist banner to rock this world. There are some banks involved such as JPMorgan Chase, HSBC, Nordea, Standard Chartered, Deutsche, Citigroup, Barclays and SEB, to name just a few. There are some corporates involved including HP, ICI, ABB, IKEA, General Electric, Nokia and, of course, Royal Dutch Shell. There’s a bunch of other folks on board from infrastructures such as Voca and Interpay, to service providers including IBM, SAP, Oracle, Reuters and many more. Go to this page. on the Twist website to see the full list,

The real point is that Twist has created the platform for all of these firms to work together, to give them a place to meet and agree, and to give them a voice. That is the real point, to get these folks working together and to ensure they can see each other and hear each other.

Whether they can get agreement or not is the next challenge. After all, in five years of lobbying we still do not seem to have gained any new agreements or standards that work. However, that does not stop the customer demanding change and, if Twist has anything to do with it, then they will achieve it.

Chris Skinner is a director of TowerGroup and founder of Balatro.
Web links: www.towergroup.com and www.balatroltd.com
Author's email: Chris Skinner