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 

Aligning Accounting Standards: The Grail of One Global GAAP

11 March 11

The push towards global harmonisation of accounting standards is gaining momentum. What is the future for UK generally accepted accounting principles (GAAPs) according to new proposals from the ASB?
Universal accounting standards are slowly becoming a reality as countries begin to align generally accepted accounting principles (GAAPs) with International Financial Reporting Standards (IFRS). This alignment is being promoted by the G20 - in September 2009, the leaders called on “international accounting bodies to redouble their efforts to achieve a single set of high quality, global accounting standards within the context of their independent standard setting process, and complete their convergence project by June 2011.”

IFRS-based standards have been adopted across the EU and in about 120 other countries, and are being introduced in Canada, Brazil and China. Japan is holding back its decision until 2012, but some Japanese companies that are more focused on overseas markets, such as Japan Tobacco, are making the leap early and have set specific timetables for reporting earnings under IFRS voluntarily.

Likewise, the US has yet to decide whether it will back IFRS over its own system, the US GAAP, and should make a final decision by the end of April this year. There are some positive signs that harmonisation will move forward - recently the International Accounting Standards Board (IASB) and the US-based Financial Accounting Standards Board (FASB) have proposed to establish a common approach to offsetting financial assets and financial liabilities on the statement of financial position (balance sheet).

In the UK, the Accounting Standards Board (ASB) is further along in the harmonisation process - it published its proposals on the future of UK GAAP in October 2010, aiming to “simplify UK standards into a concise, coherent and updated form”. The exposure drafts contain proposals for a three-tier reporting framework based on public accountability, which aims to balance the needs of preparers and users of accounts. It proposes that the new framework would be effective from 1 July 2013.

The three tiers are defined as follows:

1. Tier 1 EU-adopted IFRS for publicly accountable (PA) companies.
2. Tier 2 Financial Reporting Standard for Medium-sized Entities (FRSME), which is a new standard based on the IASB’s IFRS for Small and Medium-sized Entities (IFRS for SMEs), as adapted for use in the UK and to comply with EU law. The draft standard runs to less than 400 pages.
3. Tier 3 Financial Reporting Standard for Smaller Entities (FRSSE), which is for smaller entities - i.e. those with 50 or fewer staff, turnover of less than £6.5m and assets of less than £3.26m - without public accountability.

The ASB released a draft impact assessment explaining the need for a change to current UK financial reporting standards and why it considers its proposals to be the way forward. As well as the costs, which are estimated at £78.9m, the impact assessment sets out the expected benefits that will arise from a consistent accounting framework. As part of the consultation process, the ASB has launched a series of outreach meetings to debate the way forward.

Consultation - Feedback Wanted

On 24 January 2011, the ASB gathered users (20% of the audience), preparers (46%) and auditors (34%) in London in order to present its methodology, as well as some criticisms from within its own ranks, but mainly to gauge the industry’s response to its proposed changes to UK GAAP.

The audience focus was varied. In a straw poll of 100 participants, almost half (48%) chose more than one tier as their main area of interest; Tier 1 and subsidiaries (1S) was the main interest for 29%, while Tier 2 and Tier 3 were of interest to 14% and 10% of the audience respectively.

Roger Marshall, ASB interim chairman and a former partner at PricewaterhouseCoopers (PwC), led off the discussion by explaining why the ASB decided to reform UK GAAP, which many believe is no longer fit for purpose. “UK GAAP is probably not where we would like it to be - it is a fairly incoherent mixture of standards with some original UK GAAP and some IFRS standards,” he said.

In addition, continuing to run two frameworks with different terminology was not an option. “It is difficult for preparers and also audit firms that have to do their own training on UK GAAP and IFRS,” he explained. Therefore, the ASB decided to design a UK framework based on the IFRS with some amendments, for example retaining revaluation that was allowed under UK GAAP but is not included in IFRS for SMEs. But its overarching aim was for efficiency and simplicity, with minimal change.

Why the tiered approach? “Because we think that this structure will meet the needs of the preparers and the users,” said Marshall. “On the one hand, users for PA companies need more information; and on the other hand, preparers need a simple methodology that will address the needs of the users.”
A Contrary Opinion

Presenting an opposing opinion from inside the ASB, Edward Beale, chief executive officer (CEO) of City Group and an ASB member, began by defining the objective of accounts as one of providing users with useful information in a usable format. “Accounts are all about communicating information,” he said, “and the big challenge lies in identifying the relevant information to be communicated. In order to meet the objective of accounts, the ASB needs to know who uses GAAP accounts, yet it does not have that information to date.

“Without a clear vision, the ASB cannot identify the benefits arising from these proposals. This is why the ASB is struggling to put together a coherent impact assessment,” he asserted.

Although Beale agreed with the main building blocks, such as the tiered approach, he too grappled with the question of the cut-off points. “The different tiers should reflect three sets of different information that users need depending on the nature of the company. They must be significantly different to require three sets of rules,” he argued. “At present UK GAAP is subject to all, bar certain limitations, so question is why can’t Tier 2 be an option for all?”

He also questioned the assumption that the ASB is the best body to set cut-off points. “As Donald Rumsfeld says, it is a known unknown. But for the ASB to be comfortable with certain cut-off points, this needs to change to a known known. The ASB has not been able to differentiate between different sets of users. Although it has stated that the IFRS for SMEs is not suitable for PA entities, it has not presented any evidence to support this.”

Pushing the ASB to fulfil its remit as a world leader in standards, Beale suggested that the board should be looking for the best possible solution, not just improving on the status quo. “If we are going to replace UK GAAP with IFRS standards, then the ASB ought to have the ambition to review those IFRS standards critically and improve them where necessary,” he said. “I don’t accept the policy that the changes should be minimal for the sake of convergence.”

In a straw poll of the audience on whether the ASB should be looking to improve on IFRS for SMEs, two-thirds wanted more extensive change, i.e. allow revaluations, whereas 20% wanted limited changes, for example deferred tax, and 14% were in favour of minimal changes, such as legal modifications.

He concluded by asking users to say what information they needed, particularly those who currently use UK GAAP. “The FRC [Financial Reporting Council] document challenges standards setters to reduce complexity and ASB should rise to the challenge. This is a once in a generation opportunity and we should take advantage of it. We shouldn’t be forced into doing the wrong thing by self-imposed deadlines. I would like this project to finish sooner rather than later, but think we should take our time to get it right. We have the time to do it - the question is do we have the inclination?”

Input From the Industry

The open discussion took up the issue of the lack of input from users and preparers. One participant argued that it was mainly medium-sized companies that reported under UK GAAP, but there aren’t any users of those financial statements. “If there were, they would be telling us what to do,” he said. “Most accounts that are filed at Companies House are never looked at again. This reality supports a solution based on minimum requirements by company law.”

From the panel, Brian Shearer, national director of financial reporting, Grant Thornton, argued against the idea that this was just an exercise in compliance and said that other companies, for example trading partners, would be the primary users of these accounts. “What do users want and why don’t we hear from them? They are a difficult group to hear from largely because they are too busy doing what they do to spend a lot of time explaining their usage,” Shearer said.

The number of tiers was the main area of contention. When surveyed as to whether the tiers are set at the right level, almost half (45%) favoured only two tiers, with the lower tier based on IFRS for SMEs (i.e. FRSSE taken out), while 30% were happy with three tiers and the remaining 25% wanted two tiers, with the lower based on FRSEE.

A Tier 2 participant asked: “Whereas UK GAAP has traditionally allowed us a choice of accounting policy, why does ASB want to stop that and force us into straightjackets and dumb down accounting?”

Andy Simmonds, a Deloitte partner, an ASB member and chair of the Institute of Chartered Accountants in England and Wales (ICAEW) Financial Reporting Faculty, said that the FRSME objective was to be as short as possible and a key way to do that was to remove choice, such as revaluation and a large amount of disclosures. “One of the reasons why there are only 300 disclosures rather than the 3000 in full IFRS is because the choices are limited. But we recognise that there are things such as revaluation that many would like put back in,” he explained.

Simmonds posed an important question: “Is international comparability important? Do we need a standard that is the same as that in other countries or is it more important to get it right for the UK?” In response, many voiced despair over the potential number of different variations, urging the panel to hang on to the grail of one global GAAP.

One participant from a company that provides training for small accountants said that it was good to have options available for FRSME, but she challenged the panel to consider whether FRSSE was needed. “Is there going to be that much difference to justify three tiers? The smaller practitioner will have clients following the FRSSE and FRSME, so the differences in training and education, which were the pain points in running two GAAPs, are going to continue,” she explained.

Danielle Stewart, one of the original authors of the FRSSE and a member of the ICAEW Financial Reporting Committee, said: “I think we should operate the middle tier for a bit longer because the cost will be disproportionately large for the smaller companies, particularly for preparers that do it themselves and don’t use accountants. Plus, very small companies haven’t got the complexity, such as using complex derivatives, that larger companies face.”

In terms of the timeline for change, most of the participants (61%) were in favour of the ASB’s proposal of mid-2013, with early adoption permitted, while only 10% wanted implementation to be done sooner and 29% wanted a later date.

However, one user made the point that he didn’t want constant change, as he struggled to keep up with change and discontinuity between the different standards. “I don’t want to constantly relearn, so please make your minds up and stick to it. Let’s have some longevity in what comes out of this process,” he urged.

The consultation period is open for comment until 30 April 2011.

First published on www.gtnews.com 

Money Market Funds: State of Play

8 March 11

In this Q&A, Conor Maher, board of advisors, Institutional Cash Distributors (ICD) Funds, and former head of treasury services, Europe, Middle East and Africa (EMEA) and Latin America at Hewlett-Packard, talks about the post-crisis growth of MMFs, as investors look to achieve a more balanced approach to cash portfolio management.

Q (gtnews): There was a flight to quality at the beginning of the financial crisis and the money market funds (MMF) market experienced considerable growth - it this continuing? Why or why not?

A (Conor Maher, board of advisors, Institutional Cash Distributors (ICD) Funds, and former head of treasury services, Europe, Middle East and Africa (EMEA) and Latin America at Hewlett-Packard): During the financial crisis period, we saw different behaviours among investors in terms of a perceived flight to quality. Some were clearly uncomfortable with MMFs, perhaps because they did not fully understand them, and so exited completely.

Others increased their MMF exposures because they wanted the benefits of broader diversification and same-day liquidity these instruments offer compared to, for example, term deposits with a limited number of bank counterparties. In many cases, investors were attracted to newly-created sovereign asset class MMFs to achieve diversification away from bank and corporate sectors altogether, but without the need for separate trading arrangements in gilts, for example.

In the post-crisis period, MMFs have continued to grow as investors better appreciate their important role in achieving a more balanced approach to cash portfolio management. Also, we have seen a new investor base enter the MMF market as a result of the crisis. This group is staying with it, increasing their cash balances as they develop confidence and understanding in the market and underlying providers.

Q (gtnews): What are the main issues/pain points with using MMFs?

A (Maher): MMFs are no different to other investment instruments. Investors need to have timely line of sight to their exposures, as well as achieving operational efficiency with trade execution, cash settlement and confirmation processing. Most MMF providers provide online access for investors to access their accounts for reporting and, in some instances, trade execution, but this of course does not in itself provide straight-through processing (STP) capabilities between the front- and back-office functions. Increasingly, independent MMF portals are facilitating more end-to-end STP transformation by linking front-office trade execution with back-office settlement, confirmation and reporting activities.

And it isn’t just treasurers who need to be comfortable with MMFs - for new MMF entrants it can take time to get their accountants and internal stakeholders up to speed with the risk and reporting profile of MMFs.

Q (gtnews): How is technology developing to solve these pain points?

A (Maher): As stated earlier, we have seen MMF providers develop online capabilities to deliver varying degrees of front and back office capability.

Beyond that, however, just as we have seen in other treasury markets such as foreign exchange (FX), technology has enabled the development of independent MMF portal providers to offer treasurers a ‘one-stop shop' approach to MMF trading and portfolio management. In particular for larger investors, this is increasingly essential to complement their ongoing focus on STP capabilities and the need for more efficient treasury operations without comprising on key areas such as risk and reporting.

Technology is also responding to a growing risk agenda by facilitating the collation of information from multiple data sources and presenting it in a way that supports timely exposure tracking and informs decision making.

Q (gtnews): How can banks help their corporate clients navigate the MMF environment?

A (Maher): Many banks already have subsidiary businesses providing MMF investment services and dedicated liquidity sales advisors available to help investors with investment ideas and considerations. It is important that investors, in particular, understand the counterparty profile of a bank’s MMF versus, say, a term deposit with the bank itself.

Q (gtnews): What regulatory changes are on the horizon that will affect MMFs?

A (Maher): This is clearly an evolving area. The US President’s Working Group on Financial Markets’ MMF Reform Options Report is a clear indicator that MMFs are not immune from the scrutiny spreading across financial markets. Although we have yet to see any clear legislative changes post-crisis for MMFs, it is nonetheless timely for MMF providers and investors alike to take stock of their objectives, re-affirm their understanding of the risk profile of MMFs and their role as part of an ongoing portfolio approach.

If the MMF industry is to take a steer from the banking sector with regulatory developments such as Basel III, and in the UK the Financial Services Authority’s (FSA) proposed individual liquidity adequacy assessment (ILAA) regime, MMF providers need to thoroughly understand their investors’ behaviour under both normal and stressed market conditions from a liquidity perspective (and of course those of the underlying credits).

Will this lead to new investor protection measures? It remains to be seen but we can already point to a new ratings system for MMFs, increasing demand for segregated mandates, guidelines on liquidity for overnight to one-week maturities, as well as discussions on measures such as primary emergency liquidity facilities, insurance schemes and a two-tier system with enhanced protection for stable net asset value (NAV) funds.

The views expressed in this article are solely those of the interviewee.
First published on www.gtnews.com 

HSBC Celebrates 100th Anniversary of International Women's Day

11 Mar 11

HSBC invited more than 80 businesswomen to its Canary Wharf headquarters to discuss the future of women in the boardroom.

Commemorating the 100th anniversary of International Women’s Day, HSBC played host to more than 80 women in London on 8 March at an event entitled ‘The Shape of Things to Come’, with video links to similar events in Hong Kong and New York.

The main theme was looking out 50 years into the future to imagine what the business world would look like in terms of gender composition. Five workshops discussed what steps could be taken today to increase the proportion of women in future boardrooms. The workshops covered areas such as:

* Education and development.
* Technology.
* Home and health.
* Community and connections.
* Environment and climate.

Head of HSBC Global Research, Bronwyn Curtis, who was awarded an OBE for services to business economics, made the point that it was not just about getting more women onto the board but making it possible for women to reach their full potential within an organisation, instead of knocking up against a glass ceiling or being pushed off a glass cliff.

Over 250 participants across the three locations also completed a survey looking at how to increase women’s role in business: 92 of the respondents were based in the US, 87 in Asia and the remaining 79 in Europe. Ninety-two percent of the respondents were female. The survey illustrated some interesting regional differences.
Question 1: In the future, who do you believe should be most responsible for encouraging young women to play a role in business?

Just over half (51%) of the responses to that question globally said that it’s the business world itself which is responsible for encouraging young women to go into business, with the education system taking second place with 25% of the vote.

Interestingly, the US and UK responses ranked parents, the government and media in third, fourth and fifth place respectively, whereas Hong Kong said it was government, media and then parents in last place.

Parents get 15% of the vote in the UK, versus only 3% of the vote in Hong Kong and the US 26%.

Anita Fung, head of global banking and markets, Asia-Pacific at HSBC, who joined the discussion via video link from Hong Kong, remarked that a possible reason why only 3% from Hong Kong thought parents should play a major role in encouraging young women to go into business is that Hong Kong parents are very open to personal choice. “I think they believe that their daughters should be free to do what they want and take up what interests them,” she said.
Question 2: Which of the following subject areas do you think would be most helpful for women aspiring to chief executive officer (CEO) level to study in the future, in order to help them progress to the top?

Forty-six percent of respondents globally said the answer was business and finance, but 41% said that they didn’t believe that the subject a woman studied would affect her chances of becoming a CEO. Eight percent of the vote went to languages, arts and humanities, with 3% to technology and the sciences and finally 2% to mathematics.

Curtis highlighted that practical experience is also desirable, as headhunters usually look for substantial experience in running a business, for example dealing with risk and understanding products and the marketplace.
Question 3: Which of the following do you think most needs to change in learning and development to help women reach CEO level?

The results look differently by geography - the US and UK said that their top answer was more exposure to a broader range of career opportunities in business, with 43% versus 47% of their local responses respectively. Hong Kong respondents had their top answer as needing more training on ‘soft skills’ such as negotiation, assertiveness, influencing and communication skills with 40% of their local vote. That response only got 30% of the US vote and even less - 16% - in the UK.
Question 4: How do you think childcare responsibilities will be split in 50 years time?

The survey revealed that 60% of the respondents globally think that childcare will be split 50/50 between men and women in 50 years time. The regional variation is significant: 70% believe this in Asia, 58% in the US and 52% in the UK.

Thirty-seven percent of respondents still think that women will have the primary responsibility, and only 3% think that men will be running the show with the kids.

It’s worth noting that the 3% came from the US and Hong Kong respondents - no one in the UK thinks that men will have that primary responsibility, even 50 years from now.

Irene Dorner, president and CEO of HSBC Bank USA, who joined the discussion from New York, was encouraged by the fact that a majority thought that the childcare responsibility would equally split, but added that this would mean a significant cultural shift within the business environment.
Question 5: Do you think that flexible working will actually be practised by anyone aiming to be CEO in 50 years time?

In Hong Kong 49% of the local respondents said 'yes, both men and women will practise flexible working', with 29% saying' no, it won’t be practised by anyone wanting to become CEO'.

The UK and US voted no as their top response. It will come as no great surprise that globally 20% answered 'yes it will be practiced but mostly by women', but only 1% said yes to mostly by men. This could be due to cultural attitudes and whether or not the policies and framework will be there for both men and women to work more flexible schedules, and clearly those shifts may be moving at different speeds in different locations.
Question 6: Do you believe that having more women in charge of big business would help achieve the environmental and sustainability goals in your country?

In Hong Kong the ‘yes’ was 36% of the vote, whereas in the UK 51% said yes and in the US it went up to 59%. Globally 31% of the vote in the number two spot was that people just didn’t know.

Dorner commented: “We don’t have enough women in the boardroom to really know whether they would have a positive effect on long-term sustainability. But I do believe that women are more accepting of diverse views.”
Question 7: What is the biggest influence women will have in the future on the environment and climate change?

Forty-two percent globally said they don’t think women will have a particular influence that differs to men. Underneath that each location ranked their next responses differently. Twenty-two percent in the US said women will champion environmentally-friendly purchases and initiatives at work, whereas Hong Kong said 21% of women will make changes at home to encourage recycling and sustainable behaviour, and in the UK 21% said women will support positive action on the climate change agenda.
Question 8: As technology and virtual working grows, how do you see women of the future continuing to connect?

Seventy percent globally think that networking will be split 50/50 face-to-face versus virtual. Only 14% think networking will be done primarily virtually.
Question 9: What influence do you think the future female CEO will have on the enhanced integration of businesses into their local community?

Over half (56%) globally think that she will champion better integration with the local community. Only 2% think that she will decrease that focus on integrating.

Although Curtis believes the findings are somewhat optimistic, she thinks that women are more engaged with the local community as a marketplace and as a result will be better placed to promote integration.
Question 10: What do you believe will be most effective in encouraging more women to get into science and technology roles over the next 50 years?

Hong Kong’s top vote was for more female role models working in these fields, with 43% of the local vote, followed by greater financial support or incentives to study or work in science or technology with 19% of the local vote. The US and UK both voted for better promotion of those fields at the high school/secondary school level as their top choice, followed by getting more female role models working in those fields.
Question 11: What role will technology play in how the future CEO manages her life?

Sixty-four percent of the respondents globally said that we will still be using multiple devices to manage our work and personal lives, while 27% thought that everyone would finally be down to just one.

“The thought of only having only one device is a bit daunting because I know I would break or lose it,” joked Dorner. “I think a chip under my skin would be a better solution.”

First published on www.gtnews.com 

Logica Launches Global Regulatory Reporting Solution for Banks

0 Mar 11

Logica, a business and technology service company, has launched Logica Insurance and Banking Reporting Architecture (IBRA), a multi-jurisdictional solution that enables financial institutions to meet statutory reporting requirements in all the markets in which they operate. IBRA's architecture and framework will help financial institutions deliver global, European and country-specific regulatory reports, reducing lead times and compliance costs.

Logica has separated the framework software, which provides the generic functionality that all regulatory reporting applications require - i.e. capturing or importing data, generating draft returns, providing inquiry and drill down facilities to enable the user to verify the accuracy of the returns, and electronic submission to the regulator - from the reporting content, the detail around a particular liquidity report or capital adequacy report. The reporting content is described in the form of metadata.

"With the separation of the general functionality from the reporting content, customers benefit from a much simpler implementation and a more timely response to changes in the reporting requirements because they don't have to go through a lengthy period of installing and acceptance testing a new release of the software," said Robin Bridge, regulatory reporting director, Logica Global Products Business (GPB) in an interview with gtnews. "When a reporting requirement changes, it is just a case of dropping into the framework product a new set of metadata that describes the new reporting requirement."

Logica plans to deliver IBRA in two forms:

1. A preconfigured solution for the UK, Ireland and Germany, where the product comes with all the metadata for the current reporting requirement in those countries.
2. Customers can also license the proprietary methodology and toolkits to develop and deliver their own reporting solutions using Logica's architecture.

IBRA can be implemented as an independent regulatory reporting system, deployed as an application service provider (ASP) or used on a software-as-a-service (SaaS) basis.

First published on www.gtnews.com 

Complexity and Lack of Standards Hinders E-invoicing Take-up

09 Mar 11

As many as 40% of larger businesses across Europe are shying away from electronic invoicing (e-invoicing) because of a perceived complexity and lack of standards, according to research from information management firm Iron Mountain and YouGov.

The survey was conducted with 200 senior business people who work in large commercial companies (over 250 employees) and have responsibility for invoice payment. Fifty respondents were interviewed in each of four countries: the UK, Germany, Spain and France.

A fifth of respondents from France and a third of those from Spain felt that the current situation around e-invoicing was overly complex and confusing, and that this was a barrier to implementation. Just over a third (36%) of respondents from the UK and Spain said they would introduce e-invoicing if there was a standard format, rising to 40% for respondents from Germany.

The research also shows that many finance leaders across Europe believe their invoice management costs and processes to be fit for purpose, even though at least four in 10 of them have no idea how much it costs to process a single invoice.

The overall 'cost of finance' - defined as the total cost of processing an invoice including staff, IT systems and storage - is considered to be acceptable by 80% of respondents in France and Spain, rising to 100% of those from Germany. UK respondents are more cautious with only 44% saying the cost of finance in their organisation is acceptable.

This compares against the fact that 40% respondents from the UK, Spain and Germany - rising to just over half (52%) of those from France - did not actually know how much it cost to process a single invoice.

It could be argued that people in a managerial role should not be expected to track the minutiae of financial processes in their organisations. However, all but 2% of the most senior respondents (rising to 8% for the UK) were readily able to supply the number of days it takes their organisation to process an invoice.

In an interview with gtnews, Bettina Wonsag, general manager of the new business process management (BPM) division at Iron Mountain, said: "Businesses are failing to exploit potential cost saving opportunities within their accounts payable [A/P] service, or are blissfully unaware of the cost savings that could be materialising. We found that 96% of invoices are still done manually and 93% arrive in a paper format. The hesitation in implementing e-invoicing is as a result of a lack of standardisation across Europe and a perceived high implementation cost."

She believes that the business case for moving across is based on removing paper from the process but also having information available to them to quickly or accurately make a decision.

To help businesses tackle invoice management, Iron Mountain has launched new BPM services to tackle rising costs of managing invoices. Capable of handling as many as 60 billion A/P transactions per year, the services will be supported by a custom-built processing facility in Bratislava. The new services will allow efficient processing of inbound invoices in multiple data formats whilst enabling seamless integration into legacy enterprise resource planning (ERP) systems.

The new services offer secure, transparent and structured document management, from processing and automation, to storage and retrieval, and includes A/P-specific services that help organisations take control of their largest document-centric process.

First published on www.gtnews.com 

Consolidation in Nordic Payments

25 Jan 2011

On 9 September 2010, a new Nordic payment giant, Nets, was formed as a result of the merger between Norwegian Nordito, which is the parent company of BBS and Teller, and the holding company of the Danish company PBS.

Q (gtnews): Why did BBS and PBS merge to create Nets in September last year?

A (Susanne Brønnum, senior group vice president of cards, Nets): The Nets merger is symptomatic of the payments landscape across the world. There is increased consolidation because of the need to grow and absorb new costs from the Payment Services Directive (PSD) and the single euro payments area (SEPA), as well as new compliance initiatives from the Payment Card Industry (PCI). At the same time, the banks are trying to reduce their costs, due to some extent to the financial crisis. Therefore, they want to obtain economies of scale by outsourcing payments to large companies.

For all these reasons - the need to grow but also for the economies of scale that our clients desire - we decided to merge the two big processors in the Nordics: Norwegian Nordito, which is the parent company of BBS and Teller, and the holding company of the Danish company PBS. All together there were 10 different companies/subsidiaries as part of the merger, which made it a significant challenge and achievement. The merger gives us the leverage and size that will make us attractive to more international customers. In addition, existing customers and shareholders will also benefit.

Nets ownership structure:

* Nordea 20.0%.
* DnB NOR 18.2%.
* Danske Bank 16.1%.
* SpareBank 1-alliansen 11.7%.
* Danmarks Nationalbank 9.7%.
* Other banks in Denmark and Norway 24.3%.

Q (gtnews): In terms of the business strategy, will Nets remain focussed on the Nordics markets or look to expand into other regions?

A (Brønnum): We are based in all the Nordic markets - Sweden, Norway, Denmark, and Finland, as well as Estonia. We believe that there is room for expansion in our home markets, particularly Sweden and Finland. That is one ambition. The other is to expand with our customers into the northern European market.

In the payment card market, we have set ourselves the goal of becoming the second biggest processor in Europe - we are number five today. Therefore we plan to attract more international clients outside the Nordics market. It will be very challenging and exciting to move from being a Nordic - and, to some extent, a community - processor into being an international service provider. It is a journey we are currently undertaking.

Q (gtnews): What deadline are you working towards to accomplish this?

A (Brønnum): It is a three-year timeframe, so our goal of becoming the second biggest processor in Europe and number one in our home markets should be realised by 2014. Both are ambitious goals but I feel confident that we can achieve them. Although there are many complementary services because both PBS and BBS have been active in the payments and card space for more than 20 years, there are also products and services that are different in each market, so now we can cross-sell and sell into other markets as well. Part of the synergy is to be able to sell more services in various markets, as well as cross synergies in consolidating platforms, products and services.

Q (gtnews): How has the payments landscape changed with regards to SEPA and the PSD?

A (Brønnum): In the past few years we have seen a consolidation of processing companies due to the crisis and clients’ need for economies of scale. All sides are pushing for lower prices but in order to absorb costs of compliance - SEPA and PSD - such companies need to process a large number of transactions. On the other hand, an increasing number of banks and financial institutions want to outsource specific services, mainly because they want variable costs instead of fixed costs. In addition, some have realised that the types of services around payments and cards is not core business for them, so they would like to outsource these to a competent service provider to allow them to focus on their core competencies.

In the Nordic market, banks’ interest in cards is moving beyond them solely being a means of accessing a bank account towards them as a means of creating revenue. They are looking to differentiate themselves through developing cards as a specific area of the bank. We have already seen some new products being trialled in the marketplace, and there will be many more in the next few years from Nordic banks.

Q (gtnews): Is there a growing trend of integrating corporate cards into cash management and treasury? Are banks releasing products for this?

A (Brønnum): There is still a lot of work to do as banks have only begun to tap into the corporate procurement/purchasing market. Some banks are looking into the card market as a tool for attracting corporate clients, whereas most banks are using cards solely as part of a package. Banks need to see cards as business drivers - fundamentally as a credit limit and what client relationship opportunities that opens up. They need to plan how they can integrate cards into the corporate package much better than they have to date, by making specific cards for specific segments or size of business, etc.

On the purchasing side, there have been a few trials across the Nordic market and I believe that we will see much more in the next couple of years. Much of the drive is linked to electronic invoicing (e-invoicing). Governments also have a part to play - i.e. the Nordic governments have been engaged in initiatives such as digital signatures to make the interface between government and business much more digital. Governments could help the purchasing market by allowing all invoices on a purchasing card.

Q (gtnews): What were the hot topics in payments in 2010?

A (Brønnum): I think there was - and still is - a lot of SEPA fatigue. Everyone knows that SEPA is here to stay, and the whole debate is about the third debit product - will there be a third European scheme or not? This is quite an interesting topic but it is not being discussed at industry conferences.

The Nordic market has all four SEPA scenarios: Finland is a euro country and so by definition part of SEPA; Sweden is not a euro country but has opted into the scheme; Denmark is a EU country but not a euro country, so out of SEPA; and last is Norway, neither EU nor euro. Nets operates in all four countries and is able to support SEPA services in all the different markets for our banks.

The PSD, on the other hand, is a EU regulation and not a euro one - which is a bit confusing. The PSD has already been added into Danish and Norwegian legislation and came into force on 1 November 2009. Sweden transposed in August 2010. As you can see, there are many differences even in the small Nordic region.

There are some interesting developments in the card arena. For example, Finland is currently moving from its domestic brand, Pankkikortti, to Visa or Mastercard. That is a significant change in Finland. And Estonia has just migrated to the euro as of 1 January 2011, which was a significant project for Nets as it owns the Estonian card processor Pankade Kaardikeskus (PKK) - now Nets Estonia.

First published on www.gtnews.com