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I am deputy editor at The Banker, a Financial Times publication. I joined the magazine in August 2015 as transaction banking and technology editor, which remain the beats I cover. Previously I was features editor at Profit & Loss, an FX and derivatives publication and events company. Before that I was editorial director of Treasury Today following a period as editor of gtnews.com. I also worked on Banking Technology, Computer Weekly, and IBM Computer Today. I have a BSc from the University of Victoria, Canada.

Wednesday, 13 April 2011

Battling Complacency: A Paradigm Shift in Transaction Services

29 March

The International Payments Summit (IPS) attracted over 250 participants around the theme of 'strategies for growth'. Innovation was the key word for the incumbent transaction banking players, who will need to battle against complacency in order to compete with new entrants.

Despite numbers being down by almost a third on last year, the International Payments Summit (IPS) 2011, held from 22-24 March in London, still attracted a number of global and regional - mainly banking - participants, 27% of who were at the conference primarily to explore new growth strategies and 22% attended for the networking opportunity.

Paul Camp, global head of cash management financial institutions, Deutsche Bank, opened the conference with an upbeat message, stating that 2011 was the best year for many. “Last year we saw the early days of recovery, but 2011 is at a good point in the business cycle where growth is back,” he said. “Although limited budgets persist, there is room now to grow. Therefore, businesses need to focus on their growth strategies given their budget constraints.”

The majority of the audience was ‘cautiously optimistic’: 53% of participants thought that 2011 was shaping up ‘somewhat better’ than 2010. Only 15% thought 2011 was significantly better, while 22% thought it was the same and 10% believed it to be worse.

In the first plenary, Federico Papa, managing director and head of global transaction Banking Europe, Santander Global Banking and Markets, summarised the persistent concerns of the majority of participants that came from Europe (55%): “The US banks are back on their feet in the market - which is good for us. But Europe is still struggling. Looking at the macroeconomic indicators, the question remains: is the recession over?”

Global economic strategist Roger Nightingale came down in the side of the pessimists, saying that there is a definite slowing in the global economy and come autumn things will be will be “very bad”. Speaking on the topic ‘Where Are the Global Flows?’, he raised the possibility of protectionism - if countries decided to close their borders to imports, this would slow down international trade. He believes that it will take at least 18 months before the market begins to improve.

SEPA End Dates: The Final Push?

With the European Commission’s (EC) proposal at the end of last year for single euro payments area (SEPA) end dates came a huge sigh of relief from across the eurozone. Yet there is still much work to do. In the session ‘How Will a SEPA End Date Change the Game?’, Elemér Terták, director financial institutions, directorate-general internal market and services, EC, explained that the end dates were necessary to cut the migration journey short. With just 14.7% of credit transfers being executed as SEPA Credit Transfers (SCTs) and 0.07% of direct debits as SEPA Direct Debits (SDDs), it is clear that there was opposition to a complete change from the old to new payment instruments, as long as there was no specific and binding end date. As he said: “It is better to have a painful end than endless pain.”

Giving a corporate perspective, Massimo Battistella, manager of accounts receivables (A/R), administration services, Telecom Italia, said that he wanted three things from SEPA:

* Same payment and collection instruments.
* Increased bank competition, which would decrease fees and overall costs of processing collections.
* Standardisation and automation, with enterprise-to-enterprise (E2E) straight-through processing (STP).

Although SEPA has done well to deliver on the first bullet point, Battistella believes that bank competition is only part way there, while standardisation and automation have not been significantly improved. He thinks that one of the major issues is a different value perception: banks see payments as a means of moving money, whereas corporates believe that the real value of SEPA lies in the transfer of information as well as money.

Battistella believes that corporates need:

* Standardised payment initiation messages.
* Standardised payment execution messages.
* Standardised statement of accounts.
* Standardised payment receipts.
* Standardised use of counterparty identifiers.
* Wider and full transportation of structured remittance information.
* Bank-to-business interfaces for checking or exchanging information.

By providing the above, banks will help corporates to move forward with their SEPA migration. However, with the introduction of end dates, the discussion over whether or not SEPA is a business opportunity for corporates has been superseded by the fact it is now a compliance project.

What Do Corporates Want?

In the roundtable session ‘What Do Corporates Want from Their Payments Providers Now?’, participants were asked three questions:

1. Are banks providing information on regulatory change? Eighty-four percent of the audience disagreed - surprising since bankers made up 45% of the conference.
2. Do banks listen to your needs and try to understand? Only just over half (54%) agreed with this question.
3. Are banks providing services you need? Over two-thirds (68%) said no.

Gianfranco Tabasso, chief executive officer (CEO) FMS Group and chairman of the payments commission, European Association of Corporate Treasurers (EACT), listed a number of areas that banks should be providing in payments, starting with information around SEPA and also touching on assisting with trade finance within the supply chain. “They need to look at providing more stability, security and information as part of their services,” he said.

There was a lot of discussion around the new entrants to the financial services market and how banks have to innovate in order to stay in the game. Speaking at a strategy roundtable entitled ‘The Integration of Cash Management and Trade Finance’, Herbert Broens, head of trade finance at chemical and pharmaceutical giant Bayer, was clear: “We want banks to be our partners. We can’t define the counterparty risk of Facebook, for example. Therefore, we want to be in a regulated market but banks need to step up their efforts to deliver what we need.”

First published on www.gtnews.com 

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