Erik Zingmark explains Danske Bank’s philosophy and the role that its real-time technology platform plays in supporting its business objectives, as well as its customers’ business aims.

Setting new standards in cash management to make the customer better

Technology as an enabler is very much how it should be. Within Danske Bank this view is a fundamental belief driving an approach to solution, process and service delivery that, combined with a unique advisory methodology, places it ahead of the pack. Erik Zingmark, Global Head of Cash Management, SVP at Danske Bank, explains the rationale.

Can you define what it is that sits at the heart of Danske Bank’s philosophy and how this approach influences your cash management offering?

Danske Bank is a bank with a long history, having been around in one form or another for more than 140 years. Being a Danish bank it also has a strong tradition of trade and, like the country itself, we cover a lot of ground with a small footprint. From an early stage we understood the importance of having sophisticated technology and took a major decision almost 20 years ago to deliver upon that understanding, giving us that reach with one technology platform.

Coming to Danske Bank in January 2013 has enabled me to fully appreciate the implications for the bank and for our customers of having this one real-time technology platform; it gives economies of scale that are seldom found in other banks, it provides a quicker time to market for products and services and it allows us to provide solutions to customers that are more bespoke than they would normally expect to find, simply because we can make the changes in one place for all the markets in which we are present.

This can come as a surprise to customers, especially those with a parent company or group treasury outside of our part of the world. A truly multinational company may look at Northern Europe or the Baltic rim and see almost ten of everything – from legislation to regulation, from language to currency and so on. But then they find they can operate – transferring and receiving data and even from a terms and conditions perspective – through one point of entry with Danske Bank. It can be a genuine positive moment for them to realise our technology and our service which, as a mid-sized bank, is genuinely based around the formation of longer-term relationships, can help them become more efficient, lower their costs and be more flexible.

It can be extremely difficult for banks of all sizes to make this kind of leap forward with service and technology, especially in today’s environment. But Danske Bank took that difficult decision to centralise on a single platform and it paid off; we have created, and continue to create, a lot of opportunities for our customers and ourselves.

The discussion around tailoring cash management solutions for customers scared me at first because I always equated it to high cost and high operational risk. But I have learnt that because of this technology we can do it in an efficient and risk-controlled way, and work for the customer across the entire wholesale division.

In essence then, our success is achieved through a unique technology platform across our markets and a customer-centric approach. This ensures that we cater for customers in an ‘holistic’ manner. As a wholesale bank we offer solutions for customers within a wide range of areas and solve tasks ranging from the highest complexity to the most basic transaction, and all points in between.

However, it is our belief that we create most value when the relationship with the customers goes beyond single transactions to becoming long-term partnerships. In that way our ability to discuss strategic matters, the quality of our products and our advisory and solutions-based services give the maximum benefit to the customer.

Given the depth and breadth – and the unified approach to your offering, what is the process of discovery you use to find most appropriate opportunities and solutions for customers?

Our driving ambition is to have a long-term relationship with the customer where they are open with their targets and strategy, especially around treasury and the financial processes of the company. That open dialogue is necessary in order for us to understand their pain-points and the opportunities that lie within. We have established an advisory methodology where we run through the different processes of the treasury – ‘walking the process’ – which has at least two unique features. The first is that we do not provide the customer with a generic financial value-chain as the starting point for the discussion but instead we together establish the key aspects of the customer’s value-chain, exactly how they work and how they will work in the future and thereby also the opportunities which should be realised. We will then run through a number of questions to establish where the customer is in terms of quality and efficiency within these operations. Once we have made that assessment, the customer will be able to benchmark their processes against best-in-class if they wish.

With all this information we are able to deliver the second unique feature and that is quantifying the benefits of these improvements and stating how much effort will be required to achieve them – an R.O.I approach. We want to put numbers to our claims, to make them real, but they could be realised in a number of ways such as stronger financial net, release of tied-up capital, lower IT costs, number of staff needed etc. We know that cash management initiatives within companies have not always been top of the agenda.

The financial crisis has pushed it to the forefront but if treasury is able to submit hard numbers for return on investment, a stronger business case is immediately created. With agreement, we establish a joint agenda with the customer defining the responsibilities of both parties from the outset. To see the process through, we look for a shared commitment to quickly realise each step, but every customer is different so timing varies accordingly.

Does the Danske Bank methodology influence the way in which you manage the rising tide of regulation, particularly where it impacts upon corporate customers?

We have strategic dialogue with the customer to look at opportunities to improve processes, where we discuss industry events such as regulatory change. As a bank we are of course ready for SEPA but with our customers we have chosen to focus on the opportunities that it can present, not the disasters that may befall them if they don’t comply. SEPA has been discussed in the industry for so long people have switched off, even as the deadline fast approaches. We are delivering to those that are ready and helping those that aren’t because there is no upside to scaring our customers. We explain that having a harmonised and streamlined payments infrastructure is a great opportunity to improve efficiency.

The whole process falls into line with the Danske Bank philosophy of using technology to achieve the most appropriate solution and part of what we offer, born out of that, is true real-time information. This means our customers have full control of liquidity, which is a vital source of efficiency on the corporate side, especially nowadays.

Your transaction banking unit set up is characterised by use of virtual teams – what does this mean for the customer?

There has been a trend in transaction banking for many years where banks have been searching for a ‘magic recipe’ that will allow them to organise themselves around the customer’s need. I’ve always been sceptical of that quest; there are customers where both trade finance and cash management is core or businesses where custody and cash is core. But there are even more companies where cash and FX are twins; each need is very different and it is almost impossible to rigidly organise a bank’s units to meet every customer’s individual needs. So I think it is a mistake to try and organise and move people around because the world is changing constantly; there is uncertainty in the market and events can happen so fast it is hard to keep up.

But Danske Bank has organised its entire transaction banking unit to be very flexible, enabling us to look at a customer’s specific needs and then work together as one team to meet those needs. This goes for the transaction banking product areas, but also along the delivery chain where the daily customer support is a key component to keep our customers satisfied. That is also true for the way the entire wholesale banking division operates. It means we do not have to constantly think about how we are organised to meet customer expectations. It really is much better for customers that we, as a provider, can quickly adapt to their specific needs at any time.

If we broaden out this flexible and co-operative model to the industry, I believe significant improvements could be made for all parties. One aspect of banking that often surprises me is how, with all the regulations being imposed, many banks are still trying to address them individually; there is very limited discussion on how, without limiting competition, we can co-operate on non-core processes and investments. The airline industry has a number of major alliances around shared infrastructure. Banking has occasional partnerships springing up and Danske Bank has what we call our ‘Network Extension’ scheme giving customers one point of entry across numerous countries, aside from the 13 we cover with our own branches. But if we look at SEPA preparations in Europe, there are thousands of banks making the same individual investment, pouring money into the same commoditised services.

It need not be like this. It is an ambition here at Danske Bank to find new, simple and streamlined ways of increasing geographical reach for our home-market customers using smart, industry-aligned thinking. SWIFT and global IT companies have a role to play here, but it is something banks seriously need to discuss. I think the solution will be found in what I call a ‘rent infrastructure’. Under a reciprocal agreement, and of course without impacting rules of competition, banks could agree to access each other’s infrastructure in a seamless way to complete a transaction, with the initiating bank taking care of everything under its own brand so as not to confuse the customer. It is complicated to make it work, but the banking industry needs to be smarter to solve customers’ problems. Other industries have.

Given the obvious importance of technology, how will it shape the future of treasury – or does treasury shape the future of technology?

Danske Bank’s ‘One Group – One System’ concept, which describes our single technology platform across all the countries in which we operate, has shaped the course of our IT strategy for several years now. It has certainly been one of the cornerstones for our growth through acquisition and integration of other financial services providers. But also I believe the technology platform differentiates us from our Nordic – and perhaps even northern European – peers, and allows us to offer unique solutions to our customers, such as true real-time cross-border cash pooling.

Treasuries today are justifiably very demanding when it comes to technology. The right technology allows for a higher degree of process automation, standardisation and communication with partners, including banks. At Danske Bank, we believe that customers should be involved in shaping the future of technology. Earlier this year we ran a series of round tables in the Nordic region, inviting treasurers to tell us what they may need in the coming years so that we know we are focusing development in the right places.

Treasurers increasingly take on assignments within their companies and having ready access to data can be vital for these projects. The real-time information that we can deliver can, for example, reduce the need for intraday credit lines – and credit lines in general – by giving quicker access to information for forecasting liquidity requirements. It will thereby enable a stronger financial net of the company. By knowing the targets and KPIs of the treasury, we are trying to fully understand the pain-points and to respond with solutions that can make the life of the treasurer as easy as it can be. In fact, the more sophisticated, reliable and robust the technology we can provide the easier and better the treasury will perform its many tasks, freeing up time. It’s about competency and pro-activity on our side but it is also about harmonising technology to make it as simple and reliable as possible. But reliable systems and high quality solutions must in turn be accompanied by competence and commitment from us. Customers require guidance and recommendations from banks in regards to strategic matters, setting up complex cash management solutions and regulatory issues as well as a high level of operational quality and customer service in daily operations.

I have noted that there is an ongoing industry move towards standardisation of processes and we fully support such a move. We are, for example, a member of the SWIFT Common Global Implementation initiative (CGI) for ISO 20022 bank-to-corporate messaging. We were also the first bank in Europe to support the Transaction Workflow Innovation Standards Team (TWIST) solution for unified bank billing; it is surprising that there is not more discussion about TWIST in the market place because many banking customers say they are frustrated by complex charges.

Ultimately, our mission is to provide our customers with a positive singular experience, where the treasurer can look at his or her screen and have a complete overview of everything that matters. To achieve this, technology needs to be simple and of course to work on a daily basis. We need to continue listening, being flexible and being able to balance economies of scale with our ability to tailor-make solutions. We also believe that there should be even more involvement from customers in solution development and for that, strategic dialogue is essential.

Your transaction banking promise to customers is that by leveraging technology and competence “we make you better”. What does this say about the customer experience and how you work with them to differentiate from the pack?

That promise is not a slogan but something we use on a daily basis within cash management and transaction banking. We also have a goal of making our treasury counterpart an ‘internal hero’ by finding ways of making that person and their treasury department successful. It is about being competent and proactive, but it is also about building relationships so that the customer is comfortable telling us what their goals are. I would say the majority of our customers, once they realise and understand our genuine eagerness to do that, tend to reveal their goals; I think this reflects the positive mind-set of every individual within Danske Bank to be better too.