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Banks Starting to Embrace Concept of Financial Supply Chain Management

Globalization is driving banks to examine new ways to cater to corporate clients, including financial supply chain management.

Integration and Connectivity Are Key

Despite SWIFT's efforts, there is no standard way of implementing financial supply chain management; there is no one key technology. Rather, integration is what really matters. "It's about integration and collaboration of technology," says Deutsche Bank's Sugirin. "We see integration as the key because it all comes down to the seamlessness of the connectivity to trading partners."

Wachovia's Ward confirms the importance of systems integration: "Customers deploy different technologies. Although traditional ERP systems are popular, some are using homegrown solutions. We focus a lot of time on integrating our solutions with clients' ERP solutions. The one common element is probably the move to Web-based technology."

Oracle's (Redwood Shores, Calif.) Ashwin Goyal, VP, financial services industry strategy and marketing, says that although banks recognize the importance of integration to their financial supply chain management efforts, achieving it is not cheap. "The cost [of integration] is very high," he comments. "It's done point to point."

Goyal notes, however, that as technologies such as payments hubs evolve, the costs of linking corporates and banks will come down. Adoption of messaging and exchange standards also will help things along. "Standards won't be set by any one entity. Banks and corporates have to come together for this," Goyal says. "The technology piece is in place. The question is around arriving at standards."

KeyBank's Hazapis points out that the people element also is a road block to successful corporate/bank integrations. "A lot of the ideas for financial supply chain management involve eliminating, modifying or reducing resources in the treasury management offices at our corporate clients, and this is a challenge for them," she says.

In the end, both corporates and banks need to resign themselves to the fact that the new kind of collaboration enabled by financial supply chain management is the key to their mutual survival. National City's Schurr says this is especially vital for banks as use of letters of credit declines. "As the world moves away from letters of credit, a revenue stream goes away for the banks," he observes. "This is about preservation. Banks make the payment at the end, and we want to provide other value-added services to clients."

"If banks don't effectively deliver a strategy on this, they'll be disintermediated," warns Accenture's Winston. "Banks' treasury management operations are at risk if they can't figure out how to be more open in the supply chain. If banks don't facilitate the part of the supply chain around the movement of paper and checks, they will be relegated to settlement entities, a low-value area. The winner will be someone who can bring a seamless infrastructure to facilitate payment exchange between parties. Banks will have quite an opportunity here."

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