From the treasury perspective, the world changes slowly. Markets and products, constrained by complex regulations, develop over periods of years. Corporate treasury processes and systems, and indeed treasury thinking are designed to be conservative. And, according to Daniel Marovitz, Head of Product Management, Global Transaction Banking, Deutsche Bank, speaking at a recent payments summit, banks’ internal processes and decision-making are “glacial”.
And yet the world outside is changing extremely rapidly, and nowhere more so than the software and hardware we all use to engage in commerce. As retail customers, we now expect to be able to purchase goods and services online on static and mobile devices with a minimum of clicks and with instant, user friendly and free payments. The banks that provide cash management services to treasurers increasingly believe that what we do outside work will drive our expectations of what systems should look like and do at the office. If so, the world of treasury management systems and the payments industry are due a revolution.
As one market participant puts it: “If you look around, then you see lots of what we might call 21st century artefacts. The obvious example is the iPad. But where are the 21st century artefacts in treasury and payments? The systems look pretty much like the client-server boxes of 20 years ago and the problems that treasurers are trying to solve, like centralization, haven’t changed either.”
One set of these “21st century artefacts” is the multitude of payments systems that have sprung up to service the retail and small business customer. PayPal is the most obvious, but there are many others, including innovative collaborations between payments companies and telecommunications giants. Google itself in January hired Osama Bedier, vice president of product development at PayPal to run a 700-strong team in its new payments group. And virtual currencies, notably Facebook’s, are making headlines again.
Why should treasurers care about all this? There are two reasons. First, they care anyway without even knowing it. No-one faced with an ERP system or TMS today can fail to notice how unfriendly they are to use. It’s no surprise that so many treasurers will endure higher error rates and hold on to their Excel spreadsheets rather than switch to a dedicated system. And it’s no surprise either that all the key providers stress the importance of training as part of the systems implementation process. But when was the last time anyone needed to be trained how to use a piece of software or hardware outside the office?
So treasurers will demand change, but when they do their jobs will be transformed as their knowledge of how clunky systems, protocols and payment formats interlink is rendered obsolete, or at least much less valuable, and new skills, truly aligned with the operating business become the differentiators.
Second, the banks care and what the banks care about the treasurer needs to care about. Banks have already worked out that something odd is happening to their business model. Napster made digital music free. But iTunes took the content and successfully made it paid for. And then raised the price. Banks made payments faster and more secure by taking them online, but made the product essentially free. They got the business model the wrong way round. PayPal has better margins than bank payments businesses and yet it uses bank systems to function.
Increasingly the banks’ response is to look strategically far beyond the old-fashioned business of solving geeky treasury problems, towards trying to leverage their payments infrastructure into a 21st century technology business. They want to talk to the CFO, the head of marketing and even the CEO about using transaction banking infrastructure as tools to grow customers’ businesses, not simply keep them running on a day to day basis. While treasury has become somewhat more part of the operating business, this development has been significantly exaggerated.
As one transaction banker says, “I was talking to a major handset manufacturer and their question to me was, ‘how can you help me grow my business?’. You have that conversation with the C-suite, not treasury.” Transaction banking tools are, if designed properly, business development tools for corporations. So the banks will deliver products that re-define the role of the treasurer, driven by the demands of the operating business, whether treasurers want them or not.