The Future of Transaction Banking
An Executive Roundtable - chaired by Helen Sanders, TMI
On 30th June 2014, TMI was pleased to welcome four senior transaction banking executives from major international banks to a roundtable to discuss the future of transaction banking. The roundtable was held in association with Fundtech, with the intention that this will be the first of a regular series of roundtable discussions on the changing face of transaction banking. We would like to thank Fundtech for their support, and Barclays for hosting the event.
Helen Sanders, TMI
What changes to customer priorities have you seen over recent years?
Nick Diamond, Standard Chartered
While globalisation remains a theme, its implications have evolved. Many global corporates have already met some key objectives, such as setting up regional treasury centres and shared service centres in Asia and Europe, standardising their various entities on ERPs and implementing treasury management platforms. Now when we talk to clients about globalisation, the focus is typically on the more challenging steps: for example, clients are looking to leverage the centres of excellence they have built in Europe or Asia and expand their focus to other regions. For example, where should you set up a regional treasury centre for Africa, and how would you go about it? While it is not the same as doing so in Europe, what can you leverage from past experiences in Europe and Asia? Consequently, I think globalisation means something very different now than it did five or ten years ago.
Michael Pechner, Barclays
I agree, but there are also different perceptions of globalisation. While globalisation at one point meant expansion from one developed market to another, then developed to emerging markets, we are now seeing growing trade flows between emerging markets: for instance, we are experiencing significantly increased volumes to and from Africa. Global multinationals are following global trade patterns as they evolve, which will also have an impact on their transaction banking and liquidity requirements. Ultimately, our clients are looking to improve the way in which they achieve their objectives by making the most of improved information and data streams.
Shahrokh Moinian, Deutsche Bank
As you say, one of the trends we are seeing is that many companies are now moving to the next level of their globalisation strategy, but this is coming at a time when the macro-economic environment is changing. One of the main challenges of this scenario is there are things that you cannot do in some emerging countries that you can do in more developed markets, resulting in the need for new solutions and strategies. Another important trend is the impact of technology innovation. Companies are now able to carry out in–house many of the functions that, historically, their banks would have executed on their behalf. Globalisation and digitisation are among the key reasons why treasurers’ objectives and measures of success are changing. For example, some companies establish working capital targets at a senior management level, so cash management, including payables and receivables, is a priority. However, it is not only operational efficiency that is important but also working capital efficiency through improvements in the management of payables, receivables and inventory.
The difference I see is not necessarily treasurers’ objectives, but how they go about achieving them. Going back to the issue of trade flows, treasurers are looking to their banks to emulate the solutions they already have in place in developed markets as they expand their presence in emerging markets. Going back to the point Shahrokh mentioned, it is not always as easy to do things in emerging markets as in more established economies. Furthermore, it is not enough to consider regions such as Africa as homogenous: there is enormous diversity across countries. Therefore, how treasurers – and we their banks – go about achieving these objectives can pose enormous challenges.
I think that’s an interesting point. You’re right, clients need a far greater depth of support than in the past. Ten years ago, a corporate would look for a global banking partner or one for an entire region, despite having to compromise on coverage in some countries. This is no longer the case. For example, they may work with three of their global partners in one region to leverage the best coverage and solutions in each individual country, and then build a liquidity structure on top.
Presumably, as Shakrokh mentioned, technology is one of the drivers of change in companies’ buying patterns, particularly with multi-bank connectivity such as SWIFT. Corporates no longer need to compromise on services and coverage as they should be able to work with multiple banks without fragmenting processes and data.