Regional Focus

Nordic and Baltic challenges

Published: May 2017
Erik Seifert
Erik Seifert, Head of Cash Management Sales, Nordea Sweden:

The depths of winter in Stockholm is certainly not the best time of year to entice customers out of self-imposed office hibernation and into the city for a treasury seminar. But in January 2017, the topic we presented to our corporate customers saw a record number of treasurers and CFOs in attendance to hear about the latest developments in payments and what the future payment landscape might look like.

And yes, over the last 12 months we have seen consistent and perhaps even increased interest from treasury in a range of topics such as working capital management, compliance, automation/digitalisation in the treasury mid- and back-office and the new strategic demands of the treasury at C-suite level and in achieving overall business goals. However, these topics have been on the agenda for quite a while and will continue to be so for the foreseeable future.

But if we focus on the last year, it really has been the increased speed of development in the payment space that has come to dominate the agenda. Treasurers are now faced with a multitude of payment channels, a lack of standardisation and an increasing requirement that they become the “procurement” hub in terms of digital financial infrastructure. To be successful across these areas, they need to be completely on top of the digital agenda and have a solid vision of the future payment landscape.

The main driver is changing consumer behaviours, where the expectation of the seamless, digital experience is moving from the high street to treasury departments. This is forcing treasurers to recognise that payments are not just the moving of funds from A to B, but rather that they have become an integral part of the experience of their own end customers. Consequently, treasurers have been forced to look at novel ways of managing payment flows and consolidating flows from a variety of different channels into one manageable stream.

In our recent Future of Payments survey and report, customers ranked a lack of standardisation as their greatest concern and indicated a preference for third-party and fintech solutions in payments to be delivered to them by banks, rather than having to deal with external providers. This desire for a simplified and standardised structure is something we are working towards providing and see Nordea acting as a “digital banking superstore” or one-stop-shop for customers in the future. To arrive at this point, we are working in close collaboration with our customers from idea stage through piloting and on to launch so that we co-develop solutions and new service methods that we know answer their needs and industry needs.

This year, for instance, we launched an automated hedging solution, AutoFX, that came about when we were approached by a customer with a specific need. We then involved a small group of other customers as we developed and piloted the solution before full release. Then, in terms of standardisation and delivering the optimum solution to customers in the most user-friendly way, we see Nordea as a future one-stop-shop that provides the best of home-grown, co-created and third-party solutions.

Ultimately, customer demands and expectations will dictate which new services are developed and integrated into the final, user-facing solution. Banks will most likely continue to become increasingly like tech and IT companies, by turning their platforms into agile plug-and-play hubs that deliver optimum, smart solutions in a one-stop-shop for customers. And that’s a future worth braving the Stockholm winter to hear.

Julia Persson
Julia Persson, Head of Cash Management, Swedbank:

Like all players in the financial markets, corporate treasurers are affected by the major increase in financial regulation that has been ongoing for some time. This increase has meant that banks must invest considerable amounts in compliance, leaving them with less flexibility to meet the needs of their clients. As a result, the requirements of corporate treasurers are changing constantly; now they need to not only take care of funds but also support management in decision-making.

Corporate treasurers can, however, benefit from the increased regulations, for example, as banks increase their transparency and it becomes easier to make informed decisions about their banking relationships. The industry is in a period of constant change; the regulatory factors driving the banks are now almost as important as shifts in the market.

The compliance pressure on corporates is also mounting and they are feeling increasing pressure to bring in more resources, which takes away from their core business. The situation has intensified during the past five years, and there is no reason that this will change soon. Banks now need to request more extensive documentation from their clients in order to meet the regulatory demands, and even clients operating within a single country may be asked for different types of documentation. For those operating in multiple countries, the efforts needed to ensure regulatory compliance are even greater. We see it as a “must” for banks to simplify documentation within the cash management area in order to free up resources for both themselves and their clients.

In addition to issues related to regulations and compliance, corporate treasurers are dealing with other challenges as well. For example, it remains difficult to fully capitalise on the implicit potential of standard payment products for Europe. Although the introduction of the Single Euro Payments Area (SEPA) has provided a standard for EUR payments, many markets have evolved local variations or market expectations on payments. Further, non-euro countries have been slow to offer new SEPA-like payment types for their currencies. For treasurers, this means in practice that the market is almost as fragmented as it was before from an account-holding perspective, as the need for local accounts remains unchanged.

Another major challenge for treasurers has been how to handle the excess liquidity in a negative deposit rate environment. Those who are cash-rich have few alternatives for how to invest in the current situation. Therefore, it is important to re-evaluate investment policy and whether the excess liquidity should be used in a different way, such as increasing dividends, investing in research and development, or acquiring other businesses. Another driver for finding alternatives for excess liquidity is the Basel III regulation, which stipulates that these types of deposits are very likely to have a high outflow in a stressed scenario and makes it costlier to hold corporate excess liquidity — both for the bank and for the client.

In addition to these challenges, geographical strategy is at the top of the agenda for many international corporates today. Consistency within geographies is important; corporates need to know what kind of trusted partners they have in all the geographies where they are present. Here in the Nordic-Baltic region, working with an established bank with deep roots and a focus on local knowledge means that the client can be confident that the bank is a trusted, reliable partner throughout all the markets where they operate.

Frank Palser

Frank Palser, Director, Treasury & Trade Solutions, Citi Sweden:

Twenty years ago the word ‘Scandinavian’ conjured up images of sturdy (if slightly boring) cars, seafood-heavy diets and smiling Eurovision winners. Fast forward a generation and the image has turned: homes from Vancouver to Vladivostok contain Nordic furniture, millions download music through a Scandinavian platform and property owners aspire to offer Danish ‘hygge’. And no self-respecting fiction reader or TV viewer can survive the winter without regular immersion in Nordic Noir.

But what about the more prosaic world of corporate treasury? Are we talking about an ‘old school’ Nordic operation – dependable but sticking to the tried and tested – or a funky Södermalm hipster leveraging the latest technology and looking to lead rather than follow? The truth lies somewhere in between – leveraging the best of both.

In reality, the challenges facing corporate treasurers globally have never been greater. For those in the Nordics and Baltics this is equally true – arguably more so given the stable economic and political environment which has prevailed for years. Facing the combined threats of geopolitical upheaval (sharply brought into focus by the recent Stockholm incident), negative rates, ever accelerating changes in industrial practices and consumer behaviour, it has been informative to witness how treasurers have become ever more laser-focused in their activities – whilst at the same time adaptable to external factors and opportunities. Three broad themes emerge: visibility, control and working capital management.

Visibility has always been at the heart of a treasurer’s armoury – as the adage goes ‘if you can’t measure it, it’s not worth doing’. But our surveys and dialogue would suggest that it is more important than ever to know where corporate cash is sitting and how it can be accessed and optimised.

The same can be said for control, with the emerging impact of global initiatives such as BEPS and Basel III, traditional liquidity management techniques (cash concentration and notional pooling) are under increased scrutiny by tax authorities but remain at the heart of most Nordic cash optimisation structures. And where funds cannot be pooled, corporates are actively looking to maximise their return or at least minimise cost. Tools such as dynamic discounting are now being used as a means of leveraging surplus cash and simultaneously supporting suppliers by providing access to favourable finance terms.

Working capital management whilst once peripheral to some treasurers is now seen as a core competency and has instigated far greater partnership between the treasurer and the underlying business. Scandinavian treasurers have long seen the benefit of corporate card programmes but are now extending these into a wider B2B context by introducing P-Card programmes. And whilst supply chain finance has been available for years, many if not most large Nordic groups now have at least one such programme in place: many opting to extend the number of finance providers to reward relationship banks and simultaneously diversify credit risk.

In summary, the Nordic and Baltic corporate treasurer is a far more ‘street savvy’ and adaptable operator than his or her predecessor – a business necessity rather than a style choice.

Next question:

“With the IFRS 9 deadline now very much on the horizon, what benefits will this bring and are corporates ready for the changes?”

Please send your comments and responses to

All our content is free, just register below

As we move to a new and improved digital platform all users need to create a new account. This is very simple and should only take a moment.

Already have an account? Sign In

Already a member? Sign In

This website uses cookies and asks your personal data to enhance your browsing experience.