You can't fool Mother Nature, especially when it comes to treasury systems.
While dial-up scripts and import-export files provide the illusion of straight-through processing, corporations are clamoring for the real thing, said Dorothy Rule, head of global treasury solutions at Citibank e-Business. "What corporations are looking for from their banks is real-time execution and straight-through processing on both information and transactions."
Citibank, with help from SunGard Treasury Systems, aims to give them just that. The bank plans to implement SunGard's eTX, a software "hub" for users of SunGard Treasury Systems platforms. By connecting to eTX, a corporate treasury department can make software changes or updates at the hub, rather than at the client.
"We've made it such that it's independent of the data setup of the client," said Graham Taylor, executive product manager of eTX for SunGard Treasury Systems. "We don't have to go out to the client site and upgrade the eTX connection or software."
Citibank generally stays out of the software development business, preferring to connect to customers through software company intermediaries.
"We've always looked at kind of a 'two-stop shop' approach," said Rule. "You're looking to us for information, execution and the best services on the product level, which the vendors can't do."
Furthermore, the largest corporations aren't looking for software from their banks. "The Fortune 2000 tend to want to manage the treasury applications themselves," said Taylor. "They want the management of the treasury system independent of the banking relationship."
Providing cash balances is only the beginning. "Once you know your cash position, then the natural evolution that a cash manager goes through is, 'OK, do I need to borrow or invest? What currencies do I need?,'" said Rule. "We can provide a way to say, 'You have a million dollars to invest, and these are the options that Citibank could offer you.'"
Other vendors that Citibank has deemed strategic in connecting to its corporate customers are alterna, Integrity Treasury Solutions, SAP Treasury, Selkirk Financial Technologies, SimCorp, Trema Group, Wall Street Systems and XRT.
SunGard Treasury Systems licenses corporate treasury management software both directly and through white-label agreements with banks including JP Morgan Chase. Through acquisitions and partnerships, the company has built up a client roster of approximately 1,400 treasury departments, with over 7,000 installed user interfaces.
Each SunGard client typically has relationships with four to five different financial institutions. Citibank usually is one of them.
"We've had to go out 800 times and customize an interface into Citibank," said Taylor. "Each time we do that interface, it's a custom development."
As a result, a small army of skilled consultants was needed to deploy, test and upgrade treasury software. Inevitably, the release of new software caused bottlenecks and delays during the installation process. "Clients have asked us to find something more optimally efficient, so that they don't have to rely on our consulting resources to go out there and update them," said Taylor.
Describing a recent implementation at one of its corporate clients, Taylor said, "They were taking about six to seven hours to do their bank reconciliation in the morning. Now, with eTX, it's taking them about a minute."
Straight-through processing benefits banks too. "Immediately, if Citibank connects to our client base through eTX, they have an opportunity to get business out of the other 40 percent of our client base," said Taylor. "They can say, 'I can get straight-through processing through Citibank that other banks can't give me.'"
But while the connections may be in place through eTX, potential new customers will still have to persuade banks on the other side of the hub to take them on as clients. "Knowing your customer is still a critical factor for a bank," said Citibank's Rule. "It's really critical that we're not supporting companies that we don't know."
Certain applications could operate through the eTX hub using a "market model" rather than a traditional banker-client relationship. Indeed, SunGard has been in joint venture talks with the major foreign exchange portals, including FXall, to enable corporations to obtain real-time currency quotes from several potential counterparties.
Corporate foreign exchange policies often require cash managers to go out into the market to get appropriate rates. "Multibank portals provide that automatically for the customer, without them having to make three phone calls or get on an individual bank's platform," said Rule.
FX portals also offer the potential for better price discovery, in that multibank FX platforms can produce an observable, real-time clearing price for a specific currency pair. Consequently, if an FX exchange gained a certain degree of prominence and order flow, it would resemble a stock exchange, with all of the attendant benefits.
"Regardless of who you go to, you know what price you're going to get when you go to buy or sell a stock," said Rule.
That's hardly the case in the FX market today. Published currency rates rely upon a survey-based method which aggregates trades conducted by 14 of the largest FX players. However, with the leading portal, FXall, the target of antitrust investigations in the U.S. and Europe, it's not clear whether the stock exchange model will prevail in the foreign currency markets.
Regardless of how the FX market shapes up, corporations stand to benefit from faster straight-through processing with their existing banks, while also maintaining the potential to extend linkages to other online exchanges as they gain traction.