Executive View: Eddie Norton, HSBC

Published: Apr 2017
Eddie Norton HSBC

The payments space is changing rapidly creating numerous opportunities for treasurers to add value to their organisations. What are the key developments and how can treasurers prepare themselves to take advantage of these changes? Eddie Norton, Head of Global Liquidity & Cash Management, Europe at HSBC explains.

Eddie Norton

Head of Global Liquidity
& Cash Management, Europe

Published: April 2017

What has been driving developments in European payments?

Regulators will gradually be opening up the payments space to a broader range of Payment Service/Third Party Providers (PSPs/TPPs) via the Second Payment Services Directive (PSD2). By developing the original objectives of consumer protection and efficiency, PSD2 aims to facilitate a fully integrated payments experience for consumers and online retailers as the industry continues to move toward a digital economy – allowing access to new markets by all customer segments including SMEs. Meanwhile, other trends such as the rise of instant payments are also leading to changes in the payments landscape.

How might these developments, and in particular instant payments, benefit corporate treasurers?

At present, there are over 18 existing instant payment schemes live with many more currently in development. Although these systems differ from country to country, the majority share common characteristics:

  • Instant and irrevocable debits and credits to customer accounts.
  • Immediate confirmation to both payer and payee.
  • Service availability 24/7/365.
  • ISO20022 XML format supporting additional remittance information.
  • Participation in overlay or value added services is a growing development.

Legacy instant payment schemes have generally been used for P2P, B2C and B2B transactions. For corporates these schemes allow for better visibility and control of their cash, straight through processing reconciliation, the optimisation of their working capital as well as better marketing tools with the enriched payment data.

Corporates anticipate numerous use cases, among which the capacity of immediate refunds to compensate customers, salary payments in a digital economy where beneficiaries want to be paid as and when a service is provided.

More recent schemes and certainly those that are currently in build and implementation also enable the introduction of added value and overlay services such as ‘Request to Pay’, making B2C payments efficient and easy to reconcile. Other overlay services are being developed, such as customer apps with IP functionality incorporated or QR code screening for payments in retail stores.

Instant payments, and the richness of data they provide through the use of XML 20022, can also open up a world of possibilities around data mining and analytics. This can provide marketing opportunities and may prove an invaluable tool in developing business models or entering new markets with a view to further strengthen customer relationships.

Will the development of ‘open banking’ bring opportunities or challenges to banks?

Open banking will provide opportunities for banks to work with fintechs to bring agile payment solutions in response to identified client needs. HSBC aims to be at the forefront of this development. The bank is not only innovating internally but is also working with fintechs to better understand the technology and how it can be applied within our own operations.

Elsewhere we have invested in Tradeshift, a global B2B platform that helps companies run more efficiently, using cloud-based technology to improve processes like invoicing, workflow and supplier financing. A strategic investment has also been made in SaaS Treasury Management System provider Kyriba.

These investments are not speculation – they are partnerships that allow us to bring greater value to our customers in the medium and longer term.

How can treasurers prepare themselves for the changes that are coming?

There is a lot that corporate treasurers need to be thinking about. While this can be a challenge, there is also tremendous opportunity to improve efficiency and drive cost savings.

Our view is that treasurers may benefit from working with banking partners, rather than going on this journey alone, to understand the impact of developments such as instant payments and PSD2 on treasury management. Where PSD2 is concerned, treasurers should also aim to understand the role played by Payment Initiation Service Providers (PISPs) and Account Information Service Providers (AISPs) and how the relevant solutions can help to optimise their business models.

Once the landscape is understood, treasurers will then need to review their treasury management solutions and talk to their banks and intermediary parties about the possible benefits of actions such as switching from SWIFT statements to APIs.

HSBC Innovation

At HSBC we are also working on numerous innovations that will enable our clients to take full advantage of changes in the digital economy and are investing $2.1 billion in digital transformation between 2015 and the end of 2020. HSBC is also the biggest financial services user of biometrics globally and are developing partnerships with financial technology companies and using innovation labs around the world. Projects include:

  • Developing new payment services that provide rich self-service and track and trace capabilities.
  • Developing “open” services using modern API technologies to make payments available via our own desktop services, mobile and embedded within other platforms and providers.
  • Implementation of modern user-interface designs and standards for corporate services.
  • Using “big data” to drive analytics that can benefit our clients.
  • Exploring the potential of Distributed Ledgers and Blockchain and their ability to offer a digital alternative that removes the need for centralised reconciliation.

The aim of all of this work is to create a seamless and efficient payments process for our clients with value add-services before and after the payment itself. This is what our clients are looking for and this is what we aim to deliver by taking advantage of the changes happening in the payments ecosystem.

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