Having the right connections is everything. That's especially true in liquidity management for global corporations.
In order to efficiently manage cash levels for individual business units around the world, large corporations require instant access to information about their external banking relationships and from their internal enterprise systems around the globe. "Integration is still a very difficult thing to do these days," said Ann Cairns, Global Solutions Head for Citibank e-Business.
That's why Citibank has joined Abix, the Alterna Bank Information Exchange, which helps corporations to view a snapshot of their global cash position by drawing information from multiple countries, banking relationships and enterprise systems. "We're a very powerful combination with Alterna," said Cairns.
Even a global banking giant such as Citibank can't do everything for a global firm. "A corporation doesn't use just one bank around the world," said Cairns. "It uses a lot of different providers to give them the flexibility and footprint they need in different marketplaces."
Furthermore, large corporations have a diversity of enterprise systems on their side. "Typically, they have these ERP systems installed in multiple sites, maybe in different versions," said Cathy McGrail, vice president of Abix, for Alterna Technologies, based in Calgary. "Alterna provides integration and connectivity between all of these different corporate platforms, through the Internet in a secure and very robust manner, to the multiple banks on the other side."
The software, Alterna's "Auros" liquidity management platform, includes multilateral netting, reconciliation and intercompany cash flow management. "The Auros platform in the middle provides large multinationals with everything they need to optimize cash," said McGrail.
However, the tricky part is connecting the banks to the Auros platform. That's where Abix comes in. "It completes the STP straight-through processing and financial supply chain loop by connecting all the banks," said McGrail.
When a bank joins Abix, Alterna creates a "pipeline" between that bank and Abix. From there, Abix connects to Auros customers, which currently include pharmaceutical giant Merck and the International Air Transport Association (IATA), an airline industry trade organization. For Abix member banks and the corporations alike, this can be easier than doing making the connections directly. "Alterna has been working with multiple banks and multiple ERPs over a long period of time, and we have a library of extensive interfaces," said McGrail.
Although eventually there might be an industry standard to connect banks and corporations, it's not something that's on the horizon. "Trying to get multiple banks to standardize would be a difficult thing to do in the near term or the middle-term," said McGrail.
Rather, Abix offers a reusable solution. "Once you've created a pipeline into a bank like Citibank, it may not be the pipe that you've created into Bank of America, but you can reuse it into multiple clients," said McGrail. "We try to work with each bank to create reusability."
"We're inviting the banks - not only the ones we work with today, but any bank that's interested in positioning themselves in the payments business of the corporations - to join Abix," said McGrail. "Once the pipeline is there, the reusability ensures that new corporate clients are not having to pay for development of interfaces, as long as they choose a bank that's already pre-connected into Abix."
From a strategic standpoint, some banks may balk at the prospect of ceding control of the information delivery platform to a third-party. However, Citibank doesn't see it that way. "People have asked me, 'Why would you go onto this multibank platform?'" said Cairns.
Cairns' answer is simple - Citibank wants to compete on content, not on delivery systems. The bank would rather emphasize its transaction capabilities around the world than on its ability to connect to a corporation's enterprise systems. Abix helps Citibank to work with its customers on the platforms of their choice.
So while a multibank platform may permit a corporation to switch financial services providers at a lower cost, the expected benefits to Citibank will exceed the risk of losing customers. "It's not like the consumer market in North America where it becomes harder to differentiate one provider from another," said Cairns. "When you get a corporate account, you get credit lines, liquidity and a lot of detailed information that can be unique to banks in terms of what they actually provide."
"Apart from risk management, credit lines and so on, is the ability to have good service and the ability to have responsive service around the world," said Cairns. "You want to be able to talk quickly to someone who understands what had happened there."