Perspectives

How the impact of digitisation cuts across industries

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If there is one element that unites most companies across sectors and regions it is the innate desire to improve operational efficiency. This series with Bank of America Merrill Lynch looks at how different sectors are using technology to achieve their goals. It reveals how lessons can be drawn from across the sectors, and how, by bringing together data and expertise, banking partnerships are adding more value for corporate clients.

Chris Jameson, head of Financial Institutions Sales, GTS EMEA, Bank of America Merrill Lynch

Chris Jameson

head of Financial Institutions Sales, GTS EMEA

Financial institutions: different needs, same goals


The financial institutions (FI) sector, formed of banks and non-banks, is characterised by an extensive subset of sectors, including banks, insurers, asset managers, aircraft leasing companies, card schemes, central counterparties and governmental agencies.

Whilst it may appear difficult to pinpoint a consistent need across this broad sectoral remit, it does in fact harbour many shared elements, says Chris Jameson, head of Financial Institutions Sales, GTS EMEA, Bank of America Merrill Lynch.

Indeed, there are common challenges and opportunities across the FI space – and technology can be the unifying factor. Principal amongst opportunities, he notes, is the real-time sharing of rich data. Where speed and efficiency may not always have been part of FI payment flows, technology can deliver impressive results for bank and non-bank FIs alike.

Keeping it real-time

With around 28 countries having implemented the necessary infrastructure, real-time payments are becoming the de facto norm. For FI players seeking greater process efficiencies, Jameson believes that connectivity into these mechanisms is essential. And with SWIFT gpi uptake gathering momentum, the richness of data shared in the bank space is taking a major step forward too, as participants begin leveraging a real-time, end-to-end view of payment status.

Another opportunity for FIs is around KYC streamlining. In banking, KYC has long been a challenge from a regulatory compliance, legal and technical perspective. However, notes Jameson, the results of The Wolfsberg Correspondent Banking Due Diligence Questionnaire (a 2018 revision of its 2004 Anti Money Laundering Questionnaire for Correspondent Banks) demonstrates how the sector is cooperating to achieve KYC process standardisation and simplification.

This collaborative stance is strongly supported by technology, with a number of central KYC repositories facilitating inter-usability of KYC records across the sector. Again, SWIFT, which has the broadest reach of all providers, is becoming the leading service provider.

With this clear willingness to cooperate and standardise, the next step is to digitise KYC documentation, says Jameson. E-signatures and document exchange via web portals is something that Bank of America Merrill Lynch is already offering clients in the US, he explains. “There are still challenges around the legal acceptance of digital signatures in some jurisdictions but extending their use across the banking landscape is an important part of simplifying and enhancing the KYC process.”

One of the main threats in a digitised FI world – and indeed most others – is that of cybercrime. Jameson cites SWIFT’s Customer Security Programme (CSP) as a significant step forwards in the reinforcement of global banking system security. By strengthening the links in that system, and helping the weakest links to protect against incursion, it reinforces the message that the sector is working as one in the face of pernicious cybercriminals.

Treasury to the fore

At the highest level, the FI sector is making bold strides towards efficiency. The role of the treasurer in facilitating positive change is extensive, says Jameson. At this level, the treasurer often acts as the crucial interface between operational teams, business unit owners and client relationships. But in the last decade, the scope and responsibility of treasury has grown even more in importance, he notes. “It has become an area for significant efficiency gains, cost reduction and innovation.”

This evolution has seen the need for treasury to be at the forefront of available technology, including the emergence of innovations from the fintech community and banking sector, increasingly in partnership. Being at the cutting edge is potentially a means of enabling success, not just for treasury but for their business as a whole, notes Jameson. “Efficiencies delivered by the right tools can have a positive knock-on effect, right across the business lines that treasury is supporting.”

Virtual success

Success stories are often found where a well-resourced treasury has secured senior executive buy-in for efficiency-focused projects. Where industrial sectors have made huge leaps forward in this respect, a transaction-heavy sector such as insurance is only now beginning to leverage technology towards this end, notes Jameson.

In this setting, a solution such as virtual cards uses traditional card payment rails but diverts those payments through an alternate channel to gain advantage. The structure enables companies to extend payments terms, as before, but then improve business processes and exert tighter control over their payments. Indeed, it is the richness of data now made available that affords them far greater transactional transparency and understanding, explains Jameson.

A case in point is Amazon Business which is partnering with Mastercard and Bank of America Merrill Lynch to enable procurement teams to acquire invoice-level data about their purchases through the bank’s online portal. In this context, treasury will often be the bridge to the bank, further heightening the importance of the role.

Continuing the virtual theme, Bank of America Merrill Lynch virtual accounts have been facilitating improved collections and reconciliations for longer than most providers. “We have a strong understanding of how to structure and generate benefit from virtual accounts,” says Jameson.

Virtual accounts are beginning to progress from manufacturing into the non-bank FI space. Here, the ability to match receivables based on a unique virtual account number that each client is given “makes the reconciliation process so much more efficient”.

In a non-FI context, virtual accounts are often deployed in an in-house bank armed with a ‘payment of behalf of’ structure. However, Jameson notes, in the FI space, for major consumer-based players such as insurers, it is likely to be reconciliations of receipts where the virtual format “really comes into its own”.

Cutting edge

Whilst many non-bank FIs may not have had the time nor capacity to focus on innovative solutions, Jameson notes that as their core systems – ERPs or TMSs – are upgraded, the technological platform from which they can build out new efficiencies emerges. It is then the role of the relationship bank to understand the challenges of the client, introducing innovation where it is an appropriate means of solving each pain point.

There is a persistent conversation around AI, robotics and blockchain in the FI context. Blockchain is still some way off, he believes, but AI is “very real”. There is an opportunity here for banks such as Bank of America Merrill Lynch to use AI as a way of simplifying and improving its back office functions, with robotics already in place to support some of that activity.

As the technology extends to client-facing solutions, Bank of America Merrill Lynch, in partnership with a fintech, has created intelligent receivables (IR). This uses AI, machine learning and optical character recognition to match incoming payments with disparate remittance data.

IR identifies payers, associating their payments with remittances that are received separately. It then scans the remittance email inbox for information, enabling it to match payments to open receivables using the enriched remittance data. IR can read free-formatted emails, attachments and even access web portals using its Web Crawler feature. Payments that are matched are posted to the ERP on a straight through basis; those that can’t are shifted to an exception portal to be manually matched.

When an operative manually matches the payments and remittance information in the exception portal, the solution uses machine learning to analyse and follow the steps taken. Next time a payment is made, it will replicate those corrective steps, attempting to post it straight through, ultimately removing most of the manual reconciliations work.

Journey ahead

Clearly not all treasuries are using these innovative solutions but many are in a position to learn from the early adopters across the sectors. In the FI space, insurers are making encouraging noises in this respect; there may be a longer journey ahead than perhaps those in the consumer, retail and healthcare industries but, as Jameson has said, the banks have a responsibility to bring every client up to speed.

The banks themselves are constantly working on platform upgrades. Some have embraced the opportunity to partner with the fintech community (Bank of America Merrill Lynch’s IR is a prime example). Arguably, the discovery of “viable and relevant” innovations via this route is necessary to meet the rapidly evolving needs of business. “We can then offer guidance to our FI clients on what we are doing, sharing the innovation process and exploring the build-versus-buy or partner pathways,” says Jameson.

Every innovative project requires a strong set of drivers. Where efficiency is targeted, cost savings are often at the helm. In a sector such as transaction banking or insurance, the essence of success is partly defined by volumes processed. Improving processes supporting the volumes can deliver significant benefits. But using the right tools can deliver enhanced visibility too, empowering more timely decisions.

“In a world where market events can rapidly force industry change, access to real-time information and payment capabilities is giving treasurers the opportunity to be more agile on behalf of the lines of business they are supporting. Bank of America Merrill Lynch refers to this as Intelligent Treasury which is Powered by People, Driven by Technology,” says Jameson.

Bank of America Merrill Lynch undertakes to help and support such clients, raising awareness of what it sees across the sectors, and discussing what it has achieved itself and with its partners. “In this sector, there is considerable difference between the requirements of a bank, an insurance company and an aircraft leasing firm, but all are looking for efficiency. As advocates for our clients, we are there to support their broader enterprise-wide goals.”

Jay Norris, Global Transaction Services C&R Corporate Sales Executive, Bank of America Merrill Lynch

Jay Norris

Global Transaction Services C&R Corporate Sales Executive

Consumer and retail: ensuring the customer is always right


Consumer and retail (C&R) is in the midst of a rapidly changing environment. For Jay Norris, Global Transaction Services C&R Corporate Sales Executive, Bank of America Merrill Lynch, this transformational period should be embraced by both corporate and bank stakeholders alike.

With a blend of common and specific impact points across C&R, where multiple sub-sectors are operating, the needs of all stakeholders harbour complexity and, given the speed of change across the board, urgency.

Bank of America Merrill Lynch, with its own vast direct retail experience, has first-hand experience of meeting the wants and needs of clients in this sector. On the premise that ‘the customer is always right’, delivering the most appropriate platforms and experience is essential to retain the competitive edge.

In the banking sector that serves both retail customers and corporates operating in the C&R sector, this necessarily translates into major platform migrations and integration work, notes Norris. It is an imperative equally true for many corporates in the C&R space.

The reason in both cases is simple. A typically disparate combination of core systems (ERPs and, for corporates, TMSs) often lacks useful connectivity. This lack can present a serious challenge to achieving visibility over data, and subsequently, the flexibility and optimal performance that this facilitates.

The issue is only amplified by the need for a rapid response created by the current pressured trading environment. The ability to facilitate true visibility in cash forecasting, in particular, is inhibited by disparate platforms. Leveraging data, market intelligence and innovative technology has become an essential part of securing visibility, process fluidity and agility, especially given the limited resources typically available to treasury, says Norris.

Digital drivers

But there is a strong external pressure on C&R sector treasuries to become more agile too. This is being driven by major changes in customer buying behaviour. Preferences are shifting in terms of the nature of preferred goods and services (with health and experience-based products, for example, on a steep upward curve). Digital touchpoints are also becoming the norm in most markets, with the prevalence of mobile devices and reliable infrastructure enabling e-commerce to flourish.

Indeed, the C&R sector has become a story characterised by digitisation. And just as financial institutions have had to repurpose, and in some cases reinvent, their organisational structures to meet these new demands, so traditional C&R players are also being drawn towards the advantages of digitisation. “In this rapidly evolving environment, there are new and disruptive entrants in the markets; existing players are seeing these as both a threat and an opportunity,” says Norris.

He sees the perceptive traditional retailers analysing their marketplaces and expanding into e-commerce to combat the major online retailers. To be able to do this with sufficient speed, some traditional players have made strategic acquisitions, enabling them to build out their response to how customers want to shop now, and how and when they wish their purchases to be delivered.

Treasury to the rescue

If within the C&R sector, technology is both driver and enabler, its treasury functions are perfectly poised to make sense of these changes, says Norris. At the root of this is a fundamental change in approach to technology.

In many cases, the retail experience that has been made easier through online and mobile is beginning to influence how shoppers’ expectations are being translated into their roles as employees. There is an increasing desire to be able to use devices in a professional setting that offer the same level of user experience that is often found in the domestic context: simplicity, clarity and fluidity.

This, he feels, is bringing treasurers and banking partners together in the quest to deliver that experience. In doing so, the advantages of optimisation through digitisation are beginning to infiltrate and reshape a host of corporate processes and channels, from payments and collections, to forecasting and risk management – and many points in between.

As partners in delivering the response to this changing environment, treasurers have earned a seat at the table – and a broader set of responsibilities – notes Norris. “They are now looking at how to support the growth of the company, not just deliver a solid back office function.” Treasury is now so much more of a collaborative function with a common aim. Indeed, working with marketing teams and suppliers, treasurers are helping to analyse data and model customer behaviours with the aim of forming a targeted growth strategy.

Given that C&R customers have increasingly demanding expectations, any technological response will have to address their needs at an ever more localised level; for a far-reaching international business this can be challenging, says Norris. Solutions must also be future-proofed as far as possible, placing the emphasis on engaging with the right technology from the outset.

In this setting, he sees forward-looking treasurers in C&R “taking the lead in their organisations and helping other functions to realise their goals through appropriate solutions”. With treasury being tasked to do ‘more with less’ – continuing to manage the fundamentals whilst keeping up with rapid change – it requires acceptance and understanding of new digital models.

The successful treasurer, in an equally successful organisation, will therefore have to be proactive in their approach. Undertaking research and pushing their banks and other partners to provide answers, and developing a consultative relationship, should now be par for the course. “The more informed the treasurer,” notes Norris, “the more able they are to push their providers into developing their solutions in the ways that suit their business needs.”

Sector solutions

In the C&R sector, the kind of products that Bank of America Merrill Lynch delivers have a strong focus on trade and supply chain finance (SCF), says Norris. “What’s really important for this sector is to ensure there is no disruption in the supply chain; the right product in the right place at the right time is critical.”

The current geopolitical environment featuring, for example, the trade relations between the US and China, and Brexit uncertainties, unsettles supply chain optimisation. Foresight and planning aid the ability to be proactive but businesses also need to be able to respond rapidly to challenges or opportunities as they arise.

With Bank of America Merrill Lynch continuing to develop its SCF programme, it has invested in the ‘distribute’ model, enabling sponsor and investment bank partners to widen the opportunity for clients to benefit from this form of funding. By leveraging the availability of capital outside of the traditional bank market, its distribution model of supply chain finance means businesses that otherwise might not have access to funding – particularly SMEs – now have that available to them.

SCF is seeing something of a resurgence in the current environment, notes Norris. With around 60% of Bank of America Merrill Lynch’s major C&R clients having adopted some form of SCF programme, and many of the remainder in discussion, it has clearly benefitted from heighted market awareness.

SCF traditionally enables major buyers to improve their working capital metrics by extending DPO, yet still enhance relationships with smaller suppliers by providing them with earlier payment and lower cost of funds based on that buyer’s stronger credit rating.

There is a technology play here too, says Norris. Bank of America Merrill Lynch is enhancing it SCF offering by leveraging Optical Character Recognition (OCR) and artificial intelligence (AI). This, he explains, helps clients reduce operational risk by enabling far greater visibility and deeper analytics around their trade-related data. Bank of America Merrill Lynch is a notable early adopter of blockchain and digitisation in this space too, facilitating Smart Document exchange to expedite the flow of goods.

The bank is also currently engaging with the concept of using supply chain financing to support inventory management, working with a large C&R client to investigate new ways of tracking inventory, controlling stock and streamlining relevant data. Furthermore, its export and agency finance unit is exploring ways of leveraging its work with the world’s export credit agencies, aiming to give clients more opportunities to expand into new (and perhaps higher risk) markets, or perhaps provide bespoke short-term trade finance to mitigate exporter-client risk.

Shaping the future

These new tools could benefit many businesses in the C&R space, but some are still on the lower end of the adoption curve, notes Norris. The challenges of harnessing such technologies must be overcome before meaningful progress is made, he comments. “With multiple factors impacting development, it’s going to take a holistic strategy to bring it all together.”

Clearly not all current C&R players will be able to adjust to changing market conditions and the demands of the consumer. There have already been some notable casualties, where certain large corporates failed to recognise in time that they were under attack. Some have paid a heavy price. For those that remain alert to market change, Norris believes that the “continued buzz around harnessing technology” will steer the market to a point where many more are able to climb the curve and begin operating “in a more flexible and nimble way”.

Those that are on the low end of the curve, who feel they are nonetheless achieving good results, can take an even more positive stance if they realise that, whilst they have a long journey ahead of them, they have considerable opportunity to grow their business into something far more powerful. “For treasurers, the ones that will be successful will be the ones who understand this and can articulate it within their organisation, to the point where they can influence buy-in from senior executives, helping to shape strategy.”

Mark Sims, Managing Director, Bank of America Merrill Lynch

Mark Sims

Managing Director
Lynn Wiatrowski, Executive Vice President, Bank of America Merrill Lynch

Lynn Wiatrowski

Executive Vice President

Healthcare: industry upheaval creates transformational opportunities for treasurers


The healthcare industry is undergoing massive changes presenting numerous challenges for the sectors treasurers. Experts from Bank of America Merrill Lynch explain how they can meet them successfully.

There aren’t many sectors at present that are as complex and, at the same time, in the throes of as much upheaval as healthcare, with strong M&A activity across the space an accurate indicator of the profound transformation taking place across the industry.

Law firm Baker McKenzie, for instance, predicts that M&A volume in the healthcare sector will increase to US$331bn in 2019, up 7% on year, and mark a solid recovery from last year’s 5% drop. The report predicts deal-making activity is likely to be the most intense in the US and Asia as companies look to respond to a fast-changing healthcare market.

It’s certainly an outlook that chimes with what Mark Sims, Managing Director, Bank of America Merrill Lynch, is seeing: “There continues to be a high degree of M&A activity across the sector. It is against a backdrop of; patent expirations, growing political uncertainty, evolving consumer demands, and mounting regulatory pressures such as those centered around protecting patient data.” As a result, he says, firms at the sharp end of the shakeout face numerous challenges including in cost containment; better management and forecasting of cash and liquidity; efficient integration of acquisitions; effective interaction with consumers; proliferating payment mechanisms; and making best use of new technology.

Sims adds: “Digitalisation is especially pervasive. It is not just associated with the different types of payment methods that are coming through. It’s about how people, consumers, now basically want to use mobile devices to transact. Digitalisation is a great opportunity to drive efficiencies, remove manual processes, as well as get visibility, whether its account management or global liquidity.”

Lynn Wiatrowski, Executive Vice President at Bank of America Merrill Lynch, echoes Sims, adding: “Innovation is disrupting the way payers and providers do business, but also creating new opportunities. There’s now an intense focus on gaining market share with consumers and employer groups, not just via consolidation but through innovation focused on the patient experience. This innovation isn’t just limited to the clinical experience – for example retail clinics or telemedicine. Innovation in the patient financial experience is occurring as well with improved price transparency, patient billing and collections processes, and new financial tools for consumers. We know that treasurers in our clients’ firms are partnering with other internal stakeholders to improve the patient’s or member’s financial experience.”

At the same time this shift to “consumerism” is occurring, efforts to move to “value-based” healthcare continue. In this delivery model providers, including hospitals and physicians, are paid based on patient health outcomes rather than procedures. “Payment models between providers, patients and their health plans are changing very significantly, often in ways that threaten fee for service revenue streams. Providers are challenged to make this transition while still maintaining financial health.”

Changing roles

More broadly, with governments increasingly alarmed by the ever-increasing cost of healthcare, firms globally are under huge pressure to reduce costs and that is squeezing margins. For Wiatrowski this particular challenge demands that healthcare organisations redesign their processes and increase automation across back and front office functions: “The banking industry has undergone its own digital transformation and has a lot to offer providers and payers.”

As transformation across the sector picks up pace, Sims has also noticed treasurers reviewing their role, with technology in particular provoking a change in their mindset: “In the past the treasurer’s focus was very much on the basic requirements – looking at capital markets for debt issuance, looking at hedging tools and so on. Now the whole focus is on how they can create a digitalised platform to secure all those benefits.”

Wiatrowski is equally emphatic about the need for healthcare treasurers to reinvent themselves: “They need to really think differently about their role and the value they bring to the organisation. The forward thinking treasurer is setting the example to inspire change and innovation. As a result of mergers and acquisitions, many find themselves running disparate, often antiquated systems. Often focused attention and investment is needed to redesign the operating approach and integrate or replace systems to become more efficient, create more centralised, digitalised, platform-driven models.”

There are already successful examples of treasurers using technology to manage cash and control costs more effectively: “Our CashPro corporate treasury platform allows treasurers to access all of their banking information, even via mobile. And our clients are continuing to integrate their financial systems directly with our platform through traditional means as well as our APIs. As processes are increasingly automated, treasurers are freed up to focus on more strategic activities. Focusing on automation and working with like-minded partners helps healthcare organisations build more efficient front, middle, and back office operations.”

Sims is sympathetic to the view that when it comes to digitalisation, treasurers are currently swamped with potential solutions and technologies like API’s, blockchain, AI, robotics and big data. “It’s all developing so rapidly and it’s a lot to take on for many. Certainly, we are a great source of information for our clients about what’s happening in the space so my recommendation to treasurers is leverage your bank relationships.”

One area Wiatrowski believes banks are supremely well placed to help healthcare organisations is cyber-security. The sector has traditionally been very protective of its patient and member data, but the increasing pace of M&A, and changes in the relationship between provider and payer, and increases in third-party relationships are exacerbating cyber-security risks: “It’s the number one priority across the sector. Healthcare firms are realising that their extensive third-party relationships are opening them up to more cyber risk. High profile breaches and ransomware attacks have made cyber-security top-of mind.”

She strongly advises healthcare treasurers troubled by their organisation’s exposure to cyber attack to seek advice and help from their bankers. “We for instance have an abundance of educational opportunities for clients focused on protection against various cyber threats, ways to organise their companies to be better protected. As a major global player defending against cyber attacks and fraud is mission critical for us.”

Leveraging technology

Bank of America Merrill Lynch is also seeing a lot of demand from treasurers looking for solutions that enable consumer to business payments to be digitised. Wiatrowski says: “Payment models are amazingly complex in US healthcare, creating multiple impediments to upfront collections. Providers especially struggle to determine what a patient owes and collect at time of service. This and other factors drive a high volume of paper based payments in healthcare. And payers and providers both end up over-collecting and needing to issue refunds back to their patients or members.”

While cheques are still the dominant form of payments from healthcare businesses to consumers – such as refunds and payments for participation in clinical trials – organisations do have a growing number of choices. “Patients can get a prepaid card, which isn’t a digital transaction, but it’s certainly more efficient than a paper check. Or they can receive digital disbursements whereby payments can be made electronically without the need for the consumer to provide their personal bank account information. And payers and providers are both rapidly adopting solutions to collect from consumers electronically. Patients and members increasingly have the option of paying online by card or direct bank account debit. In a consumer-centric health care environment, providing convenient payment options is critical to the patient or member experience.”

Bank of America Merrill Lynch is also investing heavily in exploiting leading edge technology to develop solutions to help healthcare firms and their treasurers. Machine learning is currently a major focus for application in receivables processes and predictive analysis to the benefit of Bank of America Merrill Lynch’s corporate treasury platform CashPro, while robotics is being implemented in its Lockbox solutions.

AI has found application in Bank of America Merrill Lynch’s “Intelligent Receivables” product, a matching solution that helps to take the manual work out of reconciling receipts. Sims explains that by using AI and various web scanning techniques, IR scans all remittances for critical information and then enriches the payments with that data and matches them to open invoice files. It promises nearly 100% data capture and straight through reconciliation levels that may reach up to 90% or even more.

“Such technology helps to take people who were previously manually reconciling and better deploy them elsewhere for more value-added exercises. Everybody’s talking about virtual accounts and virtual account management. That’s great but what we are finding is that reconciliation is even more important. So, having virtual accounts and IR layered onto that is a real advantage.”

More specifically focused on healthcare is Bank of America Merrill Lynch’s HealthLogic platform which automates the historically paper-intensive flow of dollars and data from health plans to providers. “With very large health systems there could be hundreds of people involved in posting and reconciling payments, handling various correspondence from payers and consumers, and digitising documents,” Wiatrowski explains. “By combining HealthLogic with our patented Lockbox process we have created a highly automated solution for collecting these paper-based payment volumes. We are able to automate the posting of the complicated remittance advices that accompany healthcare payments and manage the ever-growing volume of correspondence, allowing for the redeployment of personnel to higher value-added opportunities.”

As healthcare organisations look to navigate the many challenges confronting them, Wiatrowski believes it more important than ever they look to examples of success across the sector: “What we’re seeing in the industry is that there are more “shiny objects” being offered to the healthcare industry than you could possibly imagine. What the most successful healthcare companies are finding is that partnering with someone who can be an end-to-end partner versus a bolt on here, a bolt on there, is a more successful strategy whether it’s to address cyber-security, or broader organisational and treasury digitalisation. It’s a more streamlined strategy, a more efficient way to deal with partners, and it doesn’t open up as many potential windows for cyber-attack or fraud.

“And I do think we’re seeing organisations taking that long view, and being very thoughtful and strategic about the partnerships they create. It is a lot of effort. It’s one of the reasons we created a consulting team whose role is to go into an organisation and help treasurers identify key opportunities for changes, begin prioritising and implementing them.”

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