Amara’s law dictates that we overestimate the effect of a technology in the short run and underestimate the effect in the long run. We tend to focus on the here and now, but we barely notice when the change happens slowly overtime. Do you remember when Google Maps was launched? When Google added navigation and real-time traffic estimation? Most of us adopted these tools gradually, and it feels that they have always been there. It is the same story with transactional banking – like any other business, it is adopting new technologies to compete and survive in the future. The change is there, even if we do not notice it.
Reality check. All around us we hear buzzwords: machine learning, artificial intelligence, APIs. The day-to-day reality I deal with while working with the biggest global banks is very different: the onboarding and connectivity process is very slow, there is little flexibility provided by banks in file naming conventions due to hard-coded IT requirements, basic end-of-day statements are incorrect and sometimes they even mysteriously ‘disappear’. The reality is that incumbent banks struggle with multiple legacy systems and complex internal structures in different geographies. Heavy investments and time are required to replace existing IT infrastructure.
Is it really that gloomy? Absolutely not! Things are improving very fast. Just not as fast as we want it. Competition and technological changes make treasurers’ lives better each day: payments have become faster and cheaper, TMSs offer multiple ways to connect to banks, SWIFT gpi provides better tracking, there is more visibility and clarity on banking fees. Especially in emerging markets, the paperwork burden has been a big challenge. I remember, in India, supporting documentation requirements for cross-border payments being overwhelming. I was very pleased to see how banks started to accept it electronically via online banking or SWIFT.
What are treasurers looking for in transaction banking? I rarely hear my peers referring to their banks as ‘transaction banks’. Typically, I hear ‘our (core, non-core, tier 1...) relationship banks’. It is because treasurers value the relationship, the proactivity, the full package of services that banks provide, even beyond transaction banking. During bank selection and evaluation projects, the cost of services is rarely the key consideration. Neither is it purely technological solution. The decisive criterion is often the feeling that when everything goes wrong, the team in front of the treasurer will resolve it.
Will transaction banking have a role in the future? In my view, the role of transaction banking will not disappear anywhere in the future. It will evolve together with technological progress and adapt to the needs of companies. Next to major transaction banks, new agile players are popping up and trying to find their niche in areas of traditional transaction banking. Considering how low barriers of entry have become and how fast software solutions can be scaled, smaller specialised service providers are putting pressure on incumbent players. Banks will have to learn how to operate (and cooperate) in the new digital treasury ecosystem. However, it should not be forgotten that technology is there to improve processes, not to replace relationships and commitment to excellent service when technology fails. It will be very interesting to see who will prevail!