What corporate treasurers want from their banks and what they actually get may be mutually exclusive propositions. When a bank claims to have realigned itself with the real needs of its corporate clients, both for the here and now and for the long term, it seems prudent to let that bank explain just what it means.
Head of Transaction Services
Listen in to any mainstream conference session where treasurers are asked what they want from their banks and the excitement is often ratcheted up a few notches. There will be more than a handful of responses listing what the particular audience does not want typically bemoaning the act of ‘being sold to’ rather than being treated as respected partners. But amongst the opprobrium will be found nuggets of information that all bankers in the room would do well to act upon. For treasurers, choosing the right banking partner is a matter of utmost seriousness, perhaps even the commercial equivalent of tying the matrimonial knot – and the earnestness with which that choice is made must be fully reciprocated for it to succeed.
Most financial institutions aim to provide intelligent solutions, build a stronger and more open relationship with their customers and deliver everything with a professional flourish. But the list of treasury requirements goes so much deeper than common platitudes. In no particular order (and with due credit to the Association of Corporate Treasurers), that wishlist is likely to include fairness, clarity, relevance, innovation, choice, proactivity, respect, confidentiality, and a keen eye on future developments. It is quite a list and one which, if delivered, will act as a mark of distinction.
One bank that has taken stock of the treasury community’s wants and needs and, in light of this understanding, sought to reinvigorate its strategic agenda, is Royal Bank of Scotland. For Paul Thwaite, the bank’s Head of Transaction Services, the measures it has implemented now set out its stall for the long term but, importantly, also serve as a timely reminder of who its clients are and why it is important to deliver what they need: in the current somewhat volatile economic environment, Thwaite is absolutely convinced that the true bank-client relationship needs to be acknowledged.
A broader view
The corporate treasurer is today faced with a host of practical issues. Not least of these will be in trying to strike a balance between running an efficient day-to-day operation, and the unending pressure that comes from safeguarding the function’s capacity to support the organisation’s long-term goals. It can do the job today, but what about tomorrow?
Of course, cost efficiency has always been a key driver here and remains so, as indeed has the need to be operationally effective, delivering an optimal service to internal and external clients. “But most treasurers will have also perceived a mounting need to look beyond their immediate treasury remit, to engage with and support the wider business strategy, taking on an ever-expanding sweep of responsibilities: in essence, the role is more complex now than it has ever been.”
In seeking to meet the longer-term goals of the business, no one could fail to have noticed that the regulatory back-drop has seen intense activity in recent years, driven in the main by macroeconomic events that show little sign of dampening down. All such changes must be subsumed within the treasurer’s strategic and operational development plans, with the added challenge that comes as the rapid advancement of treasury technology tests the decision-maker’s ability to differentiate between fact and fiction.
Moving away from the old school view that treasury is a necessary cost centre, Thwaite is alert to the fact that today’s function will position itself as one able and willing to add value to the rest of the organisation. “This is a very healthy view and one which provides an opportunity for banks and other industry partners to work alongside the treasury community to enhance its value proposition.”
Indeed, partnerships with third-party providers should be leveraged by corporates because therein lies expertise and solutions to potential stumbling blocks, not least in the form of direct and indirect regulatory change. View the level of cash held by some corporates in the context of Basel III’s Liquidity Coverage Ratio, for example, and it is clear that close liaison with banks is essential. The issue of impediment is of course broader than the regulatory piece, notes Thwaite. The prognosis on the economic environment, for example, looks somewhat different today from how it did just a matter of months ago in late Q3 2015: contemplation of a ‘lower for longer’ interest rate scenario will force a different set of responses from the treasurer. The challenge of dealing with the ‘here and now’ issues – such as galloping regulatory change, tumultuous economic conditions and sinister cybercrime – whilst trying to equip and build treasury for the future is clearly ongoing.
A true partner
When corporate treasurers seek to match commercial threats with the skills of their banking partners, it should be considered that opportunity is often born out of adversity. In other words, it makes as much sense to actively seek the support of a respected partner to discover every positive, as it does to seek their advice on the negatives.
It is the role of the true banking partner, in the words of Thwaite, be part of a “holistic relationship” where the sought-after balance between current and future corporate needs is met head-on with a tailored mix of ideas, advice, services and products. To this end, he feels that creating a transparent and open connection with the corporate across all touchpoints leads to an agreeable level of proactivity on the bank’s part. Such an empathetic approach yields honest discussion and the mutual development of ideas and insights which are capable of supporting the immediate goals of treasury and those of its progressively wider corporate remit.
Adding value in this way may further be established by the bank through investment in its own technology and innovation processes, improving the resilience and quality of its proposition. This in turn enables clients to develop more efficient and robust operational models of their own. “At RBS we are clear that we put the customer at the heart of what we are trying to develop in our transaction and treasury services business,” states Thwaite. “We have invested significantly both in the systems and infrastructure of today, and in the propositions that we will take to customers in the future.”
The positive experience of treasurers when dealing with banks can be undermined when the relationship is seen by the bank solely as an opportunity to up-sell and cross-sell its products. An aggressive sales-oriented push is much maligned by treasurers so when engaging strategically at a relationship level, banks must develop a deep understanding of what the corporate client and its treasury function is trying to achieve, insists Thwaite. In such a case, he feels proactivity that introduces industry insight or best practice alongside sales ideas “can add value to the broader aspirations of the corporate client”. Providing there is mutual understanding about what the priorities are, and the bank can deliver support and ideas consistent with that, he believes treasurers “will embrace the approach”.
Giving clients what they want
The capacity to deliver ideas and insights has been in the spotlight more since the onset of the financial crisis. Although he acknowledges that there is “still some way to go”, Thwaite comments that recent industry surveys have tended to indicate a higher degree of satisfaction amongst the treasury community with what their banks provide. The effort undertaken since 2008 has, for example, made deep inroads into the simplification of processes.
Development of the digital arena in particular exemplifies this positive evolution, enabling the removal of a significant proportion of costs. “There is a lot more transparency across the industry and banks have become more open to agnostic solutions,” he adds. The call for bank-agnostic technology as a means of easily unhitching from one provider, may send silent shockwaves through the industry but, says Thwaite, this is what customers prefer. “RBS absolutely embraces agnostic technology. We have invested in our understanding of the benefits of it for corporates and are committed to making sure we can align with it to deliver what the client wants.”
Necessarily broad in its viewpoint, the banking sector remains on the lookout for improvements. Account opening and KYC processes are constantly under the microscope, for example. And whilst progress is being made in the use of data, Thwaite notes an industry acceptance that “additional effort” is required to advance the ways in which banks harvest, process and deliver information to afford clients superior decision-making. Naturally, he adds, there is constant investment in the resilience and security of systems within this ever-evolving landscape. “All banks, including RBS, are increasingly looking to deliver in even better ways.”
The discovery process
Delivery of the right ideas, solutions and products by banks must commence with “open and clear conversations” at the outset of any partnership, states Thwaite. The goal is a solid understanding of what the corporate and its treasury function are trying to achieve. “It is very much a relationship-led discussion where we aim to clearly grasp what the short and medium-term priorities are for the treasurer.” Of course, priorities will vary according to indicators such as ownership, sector, industry and geography. But the early discovery phase will shed light on opportunities for mutual additional value.
There is a key difference that must be acknowledged when meeting the needs of new and existing clients, notes Thwaite, the latter requiring regular and structured conversations around the operational service and operational delivery of treasury. “It’s about making sure everybody understands the nature of that delivery, what is working well and where there are opportunities to improve.” The RBS approach in all cases, he adds, is to establish regular reviews to ensure that it is delivering “to its fullest extent”. Conversations will thus be had around the broadest strategic aims of the organisation – a process which affords the bank’s team the chance to review the client’s operational service “with forensic attention to detail”. This sets the scene for the subsequent delivery of insights and ideas, aligned with the treasury function’s stated targets and priorities.
A new model bank
“We have always been and continue to be relationship-led,” says Thwaite of the RBS strategy. “We have historically made significant investment in our treasury and transaction services product set in the UK but we don’t just look at these core elements, we expand that to consider the whole relationship.” However, where many offerings – especially around core functions such as payments – have become largely standardised to the point of commodification, treasurers may find great difficulty in differentiating between one transaction bank and its corporate client services and another, especially when all tend to make similar claims around customer-centricity and product innovation.
For a bank that wishes to stand out from the crowd there is no dodging this issue. “It is a key focus for the industry and it is key focus for RBS,” admits Thwaite. For RBS then, its sources of differentiation are based around a ‘past, present, future’ approach to modelling perception. It starts with the “extent and longevity” of its relationships, with “very deep and long-standing connections with a significant proportion of UK plc”. History and public awareness clearly have a significant role to play in forming an emotional response but a bank still has to deliver. The second and ‘present’ strand for RBS is its recognition – not least through a variety of industry awards – of what Thwaite describes as its “very strong and compelling product set”. This extends across cash management, payments and trade finance and its breadth alone, he believes, “gives us a source of differentiation”. Complemented by “heavy investment” made in its service delivery model around core day-to-day treasury and transaction services, clients are assured of interaction “across the range of channels” as the bank seeks to enhance its future proposition.
A virtuous circle
RBS is characterised by the ‘focus on strength of relationship’ with its customers. Of course, acquiring new customers plays an equally important role too and this informs an additional ‘future’ strand for its differentiation model. “Acquiring new customers and delivering the products and services they want is a virtuous circle,” states Thwaite. “As new customers become the retained customers of the future, we continue to invest in our product range and service model so that as each relationship grows over the years, it deepens across those products and services,” he explains. “As those customers’ needs inevitably change in response to market forces, it helps us develop our future offerings, and so it continues.”
In delivering its wider strategic focus on the UK and Western Europe, transaction and treasury services remain at the heart of RBS’ corporate banking division. From SMEs through to the largest UK businesses, Thwaite speaks with confidence when stating that its investment in products and solutions, and realignment with the genuine wants and needs of its clients, perfectly positions RBS “to fulfil the strategic priorities of corporate treasurers, today and tomorrow”.