Perspectives

Bank Interview: Marilyn Spearing, Deutsche Bank

Published: Jun 2007

In this interview Marilyn shares her views on whether Deutsche Bank can become a global player, what SEPA is leading to and whether banks can add value to managing the supply chain.

Marilyn Spearing

Global Head of Trade Finance and Cash Management Corporates

Marilyn Spearing joined Deutsche Bank last year as Global Head of Trade Finance and Cash Management Corporates. Marilyn has over 25 years experience in the banking industry, having previously been Head of Sales, Global Transaction Banking at HSBC and been at Barclays earlier in her career. Marilyn is also a board member of SWIFT.

What led you to join Deutsche Bank recently?

Deutsche Bank takes a long-term view on transaction banking services and has invested heavily in the past to stay well ahead of the game. I was always watching them. Deutsche Bank’s ongoing growth on a global scale provides an attractive set of new challenges for me and I am excited to be involved in the bank consolidating its position as a global transactor with a leading footprint in the European home market. It is a great opportunity with a great bank.

So it was the attraction of being able to grow a business and have some impact?

Even more than that. Deutsche Bank truly integrates its transaction banking business units and fosters cross-divisional client delivery. A good example is the closely aligned cash management and trade finance delivery, which I now have the privilege to develop beyond our established stronghold to build upon growth areas such as the States, Brazil, Eastern Europe and Asia. Frankly put, cash and trade can’t be run in isolation.

Does Deutsche really have the ability to become a global player? The argument would go there’s only going to be a few in that space, some are very close to being there already and to get there – and stay there – is going to take a lot of investment.

With a presence in 73 countries, Deutsche Bank is already an established global player. In my view, it is not so much about being physically present in every single market worldwide, it is being able to provide solutions for clients operating in these countries. We listen very carefully to what our clients’ needs are and in which regions they want comprehensive transaction banking services. This is where we are focusing our ongoing investments and activities, notably Western and Eastern Europe, the Americas and Asia.

Deutsche is a strong player in Europe and this could be seen as a strength or a weakness with the introduction of SEPA. SEPA is leading to a need for a lot of expenditure on new systems and at the same time the revenue line is under attack from the regulators. What are your thoughts on that?

We’ve made significant investments here. This started a few years back and will be ongoing. We clearly view SEPA as an opportunity. Very few banks in Europe can match Deutsche Bank’s scale, network reach and technological capabilities and SEPA will give us the opportunity to continue to expand our leadership.

Meanwhile, our wholesale solutions team are looking at those players who either do not wish to invest in SEPA, or simply do not have a financially justifiable business case to do so. They might want to use a partner bank. Other banks around the world are saying ‘how do I access Europe in the future?’

So, it is a big opportunity for your correspondent banking business.

Yes, exactly right. We are able to offer solutions ranging from relatively light partner banking services, through front-end white labelling, to more comprehensive payment infrastructure solutions. So it’s a nice staged proposition we’ve put together.

New regulations are set to drive down profitability, but the forecasts are for volume growth. So it’s a question of how we participate. We are looking to keep growing our share within a market that is becoming characterised by consolidation. Scale, scope and technological capabilities play a major role here and we are seeing many leading corporates selecting Deutsche Bank as consolidator of choice to gain the maximum benefits from centralisation.

SEPA does not seem to be providing a big value add to the corporate. How will the banking industry ever get the big volumes of domestic payments to move to the new clearing systems?

Admittedly for the heavy consumer collection orientated companies, it would be a far cry for SEPA to add value to them in the shortterm. Because of their situation, they’re heavily domestic in their collections and all of that is already lined up or it’s heavily in-country (by accessing domestic payment systems cross-border) and there’s not a huge amount that’s going to switch.

They will be using a cheap and efficient ACH already?

Exactly, but on the business-to-business side, we think there are opportunities. They should have a rolled out schedule considering consolidating accounts. At the same time, they would have asked the question, how can I clean up the reconciliation and use the ‘pay on behalf of’ payments in order to clean up the outgoing payments as well as to eliminate in-country accounts? They may have been avoiding the cross-border charges that were always in place in this way.

Similarly, SEPA may be used as an initiator to streamline payment factories, shared service centres or in-house banks. The only drawback is – is it compelling enough? And I will admit that what we are hearing from certain organisations and clients is that they already have advanced treasury structures in place.

The banks are going to want to shut down the domestic clearing systems as soon as the SEPA system – or soon after – the SEPA systems are up and running.

I don’t necessarily see an immediate folding down from some of the big economies where the ACHs are well advanced. However, there will clearly be a reduction from the 39 or so independent clearing systems currently in place today.

So you are seeing a multiple PE-ACH environment?

Yes. If you look back to the States, it took about 20 years for all of those separate systems to consolidate into two ACHs.

Is there going to be any profitability in this business?

Yes, I think there is if your processing unit costs are at the right level. Plus, you’re still going to be based on the amount of accounts that you’re controlling and the corresponding put-through. And I think that’s where the profitability will be. This, however, will only be beneficial for the large players in the market.

The supply chain is obviously very important given the fact that you’re running cash management and trade and its very much part of that. The banks seem to be trying to work their way up the trade cycle from the bottom where they are dealing with the payment at the end of the transaction. No bank has ever seemed to have found a way of doing that successfully.

So far, I think that can be seen as a fair comment. The different treasurers that I have been talking to point out consistently that banks have a very small part of the efficiencies in the supply chain right now. What the banking world does, is clearly only a component and that’s why I have focused less on talking about supply chain as a broad topic, but rather tried to distil what we are building out from.

In my view, we are currently building out from documentary trade decreasing and moving towards open account. So far, we were taking in clients’ invoices and factoring them or financing them in some way. We are now looking at ways to collect that information better and feed it back to them. As a result, the invoice financiers can, in turn, better feed their systems. Then a value-added service of reconciliation goes along with the capturing of the invoice data and the financing. Their supply chain is, of course, a lot wider than that, but we are now, at least, in the position to benefit clients by combining innovative finance, channel management and our service excellence.

We are then seeing if we can offer any value adds to feeding logistics information down the same pipeline collaboratively with the various players. There are also other ideas. If we were to offer a service guaranteeing the trade cycle, but without having to go through the reams of paper, then that might be advantageous for trade situations where a company doesn’t want to go fully open account. So it all depends on what the relationship is between buyer and supplier.

Looking to the future, what are you priorities?

There are four areas in which we’re investing. The first of which is SEPA, making sure we are there to catch the volume globally that we’re going to be intermediating through Europe.

The next is building from established trade and cash solutions into further value added, collaborative services, to assist clients on the supply chain stage.

The third investment for us is Asia. We already have processing and technology capabilities and we have a presence in 14 countries. We will now be looking to build on this position and leverage the overall growth in the Asian market.

Fourth, is our overall commitment to best in class practices. We’re going to keep making investments in technology and service provision, as well as our set of products. We will also be looking to optimise our processing centres and keep a close eye on how well they are ranked. In a nutshell, we will keep turning the dial up on efficiency.

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