Treasury services — the broad group of services including cash management and liquidity, payments, payables and receivables, and trade finance that banks offer their corporate customers — has proven to be a resilient and dynamic foundation for bank growth that has withstood the challenges of the financial crisis and resulting new regulation. But that success also has raised the stakes for banks by increasing competition, putting pressure on pricing and profitability, and — most important — raising the expectations of corporate customers for their banks to provide more transparency, interactivity and innovation.
This was the theme at the recent SWIFT Operations Forum in New York, where participants emphasized that collaboration and information sharing are hallmarks of the new corporate banking and payments environment. As Christopher M. Foskett, managing director and global head of sales, J.P. Morgan Treasury Services, noted during the conference's opening panel discussion, "We're looking at banks forming new partnerships and supporting each other in ways they haven't."
Banks need to be realistic about what customers want from them — and it's not always bells and whistles, said Ather Williams III, managing director, head of global payments, global treasury solutions, Bank of America Merrill Lynch. "Clients care less about channels — they want the payment to get to where it needs to be," he said. Accordingly, the industry needs to "rethink the infrastructure," Williams added. "It's straight-through but fragmented — it's a bit of a mess." But while there is a need for more standardization, that can be a double-edged sword for banks, he noted. "A balance has to be struck. Standardization can become commoditization."
Williams elaborated on this issue in a conversation with BS&T after the panel session, explaining, "There's fragmentation in the payments infrastructure. Every country has its own clearing [system] and formats. When you look inside each bank, even though they all run on the same sets of 'rails,' the infrastructure is very different. So attempts to standardize are not easy."
Regarding the expectations of corporate executives for simplicity, Williams noted: "When [a company] sends a comprehensive payments file, [the corporate treasurer] just wants it to happen. We're focused on providing a seamless, easy environment [that runs] outside of the U.S. as easily as in the U.S. Our job is to make it simple."
The reality is that corporates want more than simply transaction processing proficiency and speed, although those attributes remain critical. However, the "next big thing" will be about adding insight and intelligence. "The industry has done a great job on STP [straight-through processing]. There's still some work to do, but for the most part the vast majority of our processing is now paperless," noted panelist Patrick Walsh, managing director, global head, client technology services, Brown Brothers Harriman & Co.
"There are new possibilities and challenges," he added. "We see the growing complexity in our business. Are we moving into the post-STP era? We need to define the next generation of STP — STP.0, more intelligent, iSTP — beyond transactional, more horizontal. It recognizes that the trade or settlement is part of a larger transaction, a more intelligent and integrated form of STP."
Yvette Bohanan, director, payments product executive, Bank of America Merrill Lynch, concurred with this forecast. Banks can play a role of enabling "intelligent payments and intelligent commerce — intelligence all the way back into the organization. That's where banks have to step up. You're not afraid of commoditization if it helps you get to differentiation," said Bohanan, who recently moved into Williams' group from BofA's retail banking organization.
She pointed out that what's most important to consumers regarding different banking channels is security, convenience, choice and control. Similarly, Bohanan added, on the business banking side, "You have to have the right experiences in each channel to give corporate treasurers a choice."