On this matter, open banking, particularly from a European perspective, is generating a lot of discussion. Traditionally, whichever institution held the bank accounts also provided the services linked to those bank accounts. PSD2 essentially enables that connection to be broken. Banks have to open up their infrastructure to third parties to be able to develop and provide services from those bank accounts.
Open banking has ostensibly been driven by consumer needs, offering them more services, more differentiation, more competition and more choice. It was not rolled out with corporates in mind. But what starts in the consumer space often leaches into the corporate space. Treasurers are very aware of that, so we spend time talking to them about the impacts of regulation such as PSD2.
We should not forget the power of data here. Think about how reconciliation is greatly aided by better data, and then consider the huge opportunity that arises as we move towards real-time clearing and get more information to accompany payments; this is leading to straight through reconciliations.
Corporates sit on a huge amount of data. If they can collect that in one place and use it in a more meaningful way, there is so much more that can be achieved in many different areas.
If, in the way a company runs its credit process against its key customers, it uses its own and third-party data to run a more efficient process, it has an opportunity to create more appropriate limits, potentially selling more product. There’s a lot that corporates and their banks can do to help source that data.
Of course, any talk about data should consider the regulatory challenge that comes in the form of GDPR compliance. This has global implications. Regardless of where in the world they are, any organisation holding data on an EU citizen must comply or face stringent penalties.
How are these challenges affecting the day-to-day operations of treasury?
It is interesting to see how different corporate treasurers are responding. The core functions of treasury remain as they ever have. However, the capacity to add value and take a more prominent role in the organisation is as never before. But it takes diligence to carve out the time and resources to focus on what can be achieved from an efficiency perspective. Only through doing that can treasurers really free-up that capacity further down the line. The most effective treasurers make sure they can draw a line between BAU and adding value.
How are treasurers staying ahead of the curve?
These are interesting times. Within transaction banking, nothing much changed for about 30 years. We are now in a period where a number of elements are coming together at the same time in terms of pace of regulatory and technological change. Treasurers have got to stay ahead of the curve in this period of great change.
They have to have the right relationships with the right banks and consulting firms to ensure they are getting the right advice and information, especially on the international stage where needs will be diverse. Treasurers must also possess an intellectual curiosity to seek out new ways, and, I believe, it is incumbent upon all of us to be open to change.
How are these areas of treasury concern affecting relationships with banks?
Banks often touch a number of different areas within the client’s organisation and so can be effective at offering a holistic view of the organisation, from a group, regional and domestic entity level. Banks are also taking on a more advisory role than they have in the past, where the ability to tackle local issues from a global perspective is key.
Where transaction banking used to be about selling bank accounts and payments and liquidity structures, it has become one where technology is offered to make our clients’ financial lives easier, most notably at an international level where centralised operations can be removed from local activities.
We recently partnered with a fintech to bring ‘intelligent receivables’ to market, using AI to help clients automate their reconciliation processes, sometimes with automated match rates as high as 90%.
The impact of improved efficiency is felt throughout the organisation, allowing the redeployment of resources to more value-added functions. But quicker cash applications also help credit teams to free up capacity for the sales team to sell more to that client.
What drives your creative approach to meeting international client needs?
For us, innovating is about more than just spending money on building new solutions. It is about collaboration with partners to bring new capabilities to market but, perhaps as a differentiator, it is also about innovating with what we already have in-house.
We recently launched Liquidity Express, where we took our global liquidity platform and combined it with our virtual account management platform and our CashPro® front-end online banking application. From this combination, we are able to offer a more streamlined, easier to use liquidity management solution for a core segment of our client base.
In fact, at Bank of America Merrill Lynch, we have spent quite a lot of time thinking about our clients’ needs, thinking about what we already have within the bank that we can put together in different ways to meet those client needs, whether it is driven by home or overseas market concerns about regulation, cost and efficiency optimisation or adding value.