Technology Priorities: Enhancing The Customer Experience
An Interview with Diane S. Reyes, Global Head of Payments and Cash Management, HSBC
Diane Reyes joined HSBC as Global Head of Payments and Cash Management in September 2011, building on a highly successful career at Citi. In this article, we are delighted to feature Diane’s views on trends and opportunities for technology in the payments and cash management space.
What particular challenges do you see your customers seeking to address at present?
The most significant issues that we see clients seeking to address remain in the liquidity arena. Although this is not a new trend, there has been a subtle shift over the past year or so. Before the crisis, investment yield was an important priority within companies’ cash investment strategy. The global financial crisis resulted in a seismic shift in priority, as preservation of principal and liquidity became predominant themes, and yield no longer figured as the primary consideration. Over time, we have seen a gradual rebalancing of priorities. Principal preservation and timely access to liquidity remain crucial, but treasurers are now focusing on their ever increasing cash holdings.
Treasurers’ need for yield has developed during a period in which the available instruments has become constrained. The Eurozone Sovereign debt crisis and ensuing downgrades have caused treasurers to re-consider guidelines regarding acceptable counterparties and instruments that comply with investment mandates. Additionally, concerns about the sponsors of MMFs, the challenges of monitoring composition thereof, and the relative cost/return have resulted in a lower appetite for passive investments into pooled assets. In order to achieve the desired return treasurers extended the maturity of their cash portfolio, using an actively managed array of deposits and selective purchases of qualifying securities. The extension of maturity has put heightened pressure on corporate treasurers’ to ensure they have the appropriate visibility and control of their operating cash, so that they can meet their daily requirements while being able to invest on a longer-term basis. As a consequence, more treasurers are using multi currency cash concentration and pooling techniques to enable them to streamline their funding process.
This more proactive approach to cash investment applies not only to our large corporate clients, but also mid-cap companies. Few corporations can boast large treasury departments, so they need to achieve a high degree of efficiency and automation in their cash and treasury management activities so they can focus on decision-making rather than collating and processing data.
How are corporates, and their banks, going about achieving these objectives?
Multi-bank connectivity and interoperability, and standardisation of file formats are key to achieving these objectives successfully. Treasurers only want to set up a process once, and then roll it out across their banks. Consequently, initiatives such as ISO 20022 standards for financial messaging, as well as bank connectivity through SWIFT are gaining traction.
For example, while early adopters of SWIFT connectivity were typically large multinationals headquartered in Europe or North America, companies from every region, including both large and mid-cap corporates, are now leveraging lessons learned by these companies and are able to implement SWIFT connectivity quickly and cost-effectively. This reflects a universal desire to implement industry best practices and ensure a global approach to cash visibility and control.
Not only are interoperability and standardisation initiatives positive for corporates, but banks also benefit. In the past, a great deal of resources have had to be invested in supporting a wide variety of customer-specific file formats. Increasingly, investment can be channelled into genuine innovation and enhancing the customer experience.
What does this mean in practice in terms of banks’ investment priorities?
There is an important, but often hidden investment to be made in contingency planning, for both natural disasters and major economic events. At HSBC, we spend significant time and resources on modelling different scenarios and ascertaining how our customers would need us to respond. As we are all aware, market change can happen very quickly, so we need to be prepared. Additionally, a portion of technology spend has to be dedicated to regulatory compliance and to maintaining and upgrading infrastructure.
Beyond these essential investment priorities, discretionary spend should be invested in initiatives that bring true value to customers. However, not every customer has the same requirements or priorities, so a valuable innovation for one customer may be of little benefit to another. Furthermore, it is rarely in the interests of a corporate customer to introduce a tool in one country or region that cannot be rolled out more widely, as this leads to fragmentation of processes and differences in the way that information is reported.