From the uptake of mobile payments to the challenges of cross-border treasury, Sunil Veetil, Regional Head of Payments and Cash Management, Middle East and North Africa (MENA) at HSBC, shares his insights on key developments in the region.
Regional Head of Payments and Cash Management, HSBC Middle East and North Africa
Sunil Veetil is Regional Head of Payments and Cash Management, HSBC Middle East and North Africa. Based in Dubai, he is responsible for growing the Cash Management franchise across the region. Veetil relocated from South Korea where he was responsible for connecting the fast growing Korean businesses to the outside world, whilst positioning HSBC as the leader in Cash Management in the country.
Prior to South Korea, Veetil was in HSBC Indonesia heading the Payments and Cash Management business for three and a half years. Veetil started his career with HSBC in Dubai where he acted as the deputy head of transaction banking and regional head of product management for the Middle East region. Throughout his tenure in the Middle East, Indonesia and in South Korea, HSBC has been consistently recognised as the leading cash management provider in all these markets, as evidenced by the accolades received during that period. Prior to joining HSBC, Veetil worked with the logistics group FedEx and the rating firm Standard & Poor’s. Veetil is a Chartered Accountant, Management Accountant, and Certified Treasury Professional and is a graduate of Mathematics.
Corporate treasurers operating in the MENA region are increasingly being faced with the challenges of operating in a cross-border, multi-currency environment. Sunil Veetil, Regional Head of Payments and Cash Management – MENA at HSBC, explains how treasury professionals can overcome these hurdles to make the most of the opportunities that these challenges present.
You recently moved back to the Middle East to take up the role of Regional Head of Payments and Cash at HSBC. How has the MENA region progressed in the eight years that you have been away?
There has been a great deal of positive growth in the MENA region in recent years, with one of the most obvious areas being trade volumes. This is certainly a trend that we at HSBC believe will continue to blossom, given that the MENA region sits as a strategic gateway between East and West. While the developed economies continue to be key trading partners for the MENA region, there is a definite move among businesses to expand their trade links with the emerging economies in Asia and Africa, too. Eastern Europe is another area of interest for MENA companies looking to open up new trading partnerships.
Intra-regional trade flows are also growing, which is helping to boost confidence in the sustainability of the MENA region, and the UAE in particular, as a trade hub. The UAE has also made remarkable strides in becoming a popular treasury hub. In the same way that locations such as Singapore and Hong Kong are top of the list for establishing centres of excellence or regional treasury centres in Asia, the UAE now has that reputation within the MENA region. This is in no small part thanks to the country’s developed infrastructure and the government’s work towards e-readiness.
Nevertheless, other countries in the region are also making significant advancements and are becoming increasingly attractive as strategic business locations as a result. Egypt, for instance, now has its own Digital Law and is extremely forward-thinking when it comes to intellectual property rights. And this is just one example – there are positive developments such as this happening right across the MENA region.
In terms of payments and cash management, what have been the most noticeable changes or greatest leaps forward in the MENA region of late?
There have been numerous important changes which represent real progress in the world of payments. First and foremost, countries including Bahrain, Kuwait, Qatar, Saudi Arabia and the UAE have moved towards an IBAN-led bank account structure. This assists greatly with standardisation in the region.
The introduction of new or more efficient settlement infrastructures across many MENA countries is another important development. Egypt now has an established direct debits system and the UAE is following suit with UAEDDS. Although work is still ongoing for UAEDDS to be fully live, since very material payments infrastructure changes have been necessary, there is a two-phase approach in place that seems to be working well. Phase one went live on 5th October 2013 and saw DDs become available for the first time for mortgage payments and retail financing such as car loans. All UAE collections for personal financing can now be done through direct debits.
The next phase, which is likely to go live in Q2 2014, will see all other recurring payments, such as utility fees, service fees, insurance premiums, rent, school fees, retail loan repayments and credit card payments being carried out by UAEDDS. This will be of benefit to corporates operating in the region and will allow greater automation in their day-to-day payments and collections. Additional positives will include increased transparency and reduced usage of cheques.
Other countries within the GCC region, such as Qatar, are also now looking to adopt their own direct debits systems. This is something that HSBC sees as an extremely positive move. And having consulted on such projects across the globe, we are in an excellent position to not only be a vital part of these growing direct debit clearing infrastructures, but also to advise on best practice.
Elsewhere, Lebanon has made enormous changes to its clearing and settlement infrastructure. After the successful launch of its Real Time Gross Settlement (RTGS) system in 2012, the Central Bank of Lebanon unveiled a new Automated Clearing House (ACH) in November 2013 for the clearing of credit and debit transfers, including cheques and cards payments. This has vastly improved the safety, security and efficiency of the clearing and settlement of payments in Lebanon.
In the UAE, Oman and Qatar, image-based cheque clearing systems have been successfully introduced in recent years. These have boosted the efficiency and speed of cheque processing.
As such, it’s clear that individual countries across the MENA region have made great strides forward where payments and clearing are concerned. The next step will be the introduction of a GCC-wide clearing infrastructure, tailored to the specific needs of the region. Talks are already taking place among GCC authorities to work towards this natural progression.
Do you see the use of mobile payments increasing in MENA?
If you go back to the early 2000s, the Middle East was comparatively slow in adopting e-commerce. There were no real government-led initiatives to get the right infrastructure in place for the adoption of e-commerce, so the region was somewhat behind its Western counterparts. Fast forward a few years to the advent of smartphones though, and the MENA countries have been able to skip ahead.
A number of initiatives driven by regional governments have assisted with this ability to leapfrog the ‘PC age’, and a good example is the UAE’s Emirates ID card. Similar to a social security card, all UAE residents are issued with an Emirates ID card, which has a chip and PIN, and represents state-of-the-art technology in the field of smart cards. By May 2015, residents will be able to make payments to government offices by mobile phone, thanks to the creation of a nationwide mobile payments, identification and authentication system. This forms part of the UAE’s aim to create the world’s most sophisticated mGovernment.
Thanks to the improved payments and clearing infrastructure that I mentioned earlier, mobile initiatives such as this are now filtering down from government entities across the MENA region to the corporate sector. Over the next three to five years, we therefore expect the adoption of mobile payments among corporates to really take off, as well as the usage of apps that provide visibility into transactions.
Statistics from our award-winning HSBCnet Mobile solution certainly back this up: since our regional launch in November 2011 up until the end of September 2013, we processed over $900m worth of transactions. This figure not only reflects corporates’ open attitude to new technologies, but also that HSBC is very well positioned to capture the mobile opportunity.
How sophisticated are corporate treasury functions in the region, in terms of automation and technology?
When I was working in the region eight years ago, treasury technology (other than Excel spreadsheets) was merely a pipe-dream for many corporates. But revisiting these same corporates today, and looking at how they manage their treasury function now, there is a great deal of sophistication. One of the main drivers behind this gearing up is that MENA companies are increasingly expanding across the region and out into other markets. Managing treasury in a multi-country, multi-currency scenario is very challenging.
Technology is a good tool to help overcome these challenges. Through automation and FX solutions, for example, companies can quickly reduce their cross-border payments processing costs. Connecting with the right bank is also imperative to ensure smooth cross-country operations. At HSBC, for instance, we can help clients make the most of the opportunities that operating internationally presents. Perhaps by improving their regional concentration of funds, helping them to establish a shared-service centre (SSC), or even setting them up to use SWIFT.
What makes HSBC unique in this respect is that we have true global connectivity, with a presence in 75 countries and territories. We can connect an Asian, European or Middle Eastern MNC to various geographies both within the MENA region and outside it. In addition, we have sophisticated liquidity solutions available across all of these geographies that offer visibility on a real-time basis, as well as the ability to move currencies on a real-time basis. It’s about making a client’s money really work, regardless of geography or currency.
In short, while technology remains a key enabler for treasury functions, strategic partnerships with key relationship banks can leverage that technology to deliver even greater benefits.
Are SSCs becoming more popular in the region? If so, in which locations are they being established?
We are certainly seeing a number of corporates, including family owned companies, setting up in-house banks, or broader SSCs, to centralise and bring greater efficiency to their treasury function.
As I mentioned earlier, although the UAE ticks all the boxes in terms of infrastructure for telecommunications and travel, access to resources, political stability and lifestyle, that does not preclude other countries in the region from attracting SSCs. In fact, I know companies that have regional treasuries in Bahrain and Oman, for example. All of these locations offer a tax-free environment and are favourably placed from a time zone perspective to deal with both European and Asian operations. So we are seeing more and more treasury SSCs being established in MENA.
Interestingly, we are also seeing more Asian companies come to the region – not just to set up SSCs, but in terms of extending their general operations. Previously, the main influx of foreign companies was from the West. The quality of goods being produced by Asian companies has increased dramatically in recent years and this has helped them to gain traction. Asian companies are also more likely to enter riskier markets than their Western counterparts. We are therefore seeing a number of Korean, Japanese and Chinese companies coming into this region and around 50% of the large EPC contracts are now being awarded to Asian MNCs.
With Asian MNCs gaining a good foothold in the region, is there a growing call for the use of renminbi (RMB) among your client base?
Absolutely – the RMB is a huge focus for our clients, and for HSBC as a bank. As an institution, we have a major presence in all RMB centres, including Hong Kong, which means that we have enough RMB liquidity to cater for any client’s requirements. In addition to handling the currency, we also offer RMB advisory services. Given that the RMB is a relatively new currency, a number of corporates are looking to discover the best way to settle trades in RMB. At HSBC, we have a team of consultants who can assist clients to switch from their previous trade settlement currency to using RMB.
You will be opening the EuroFinance Dubai conference at the end of March. Why are conferences such as these so important and what do you expect to be speaking with clients about whilst there?
Being present at industry conferences provides an independent forum through which we can demonstrate thought leadership and help clients to understand new developments in the market.
Topics that are high on regional treasurers’ minds at the moment include counterparty risk and bank relationship management. Companies don’t want to have to manage ten different bank relationships across ten different countries – the amount of time spent on filling in each bank’s KYC documentation alone is a real negative for treasurers. At the same time, corporates are looking to minimise their counterparty risk. Since HSBC has a strong credit rating and balance sheet, and has a global footprint, we will no doubt be speaking with corporates looking to consolidate their banking relationships.
Other topics of conversation are likely to include SEPA, for those companies with European operations, and the RMB for those trading with Asia. Of course, any conversation about MENA wouldn’t be complete without mentioning the UAE’s Expo 2020 and Qatar winning the honour of hosting the World Cup in 2022.
Going forward, we will see significant investment taking place in the infrastructure of these countries, which can only be positive for businesses located there. These events will also have a positive impact on the tourism trade and the amount of FDI coming into the UAE and Qatar. Naturally, HSBC will continue to work closely with our corporate clients to help them leverage this growth to their advantage.