Financial institutions and IT companies are battling it out to win customers with their converged cash and trade products. Liz Salecka speaks to the banks about their offerings.
The movement towards cash and trade convergence also looks set to accelerate at this year’s Sibos.
Dominic Broom, managing director, treasury services, Bank of New York Mellon, attributes this to the culmination of corporates’ growing requirements to mange their working capital more effectively and banks’ desire to mitigate lending risks.
“The working capital management theme is very topical today. Corporates need working capital management solutions and want to improve their SCF management so that they can reduce their dependence on bank debt,” he says.
“Many banks, on the other hand, are facing capital constraints so are looking to review their lending positions, and to get involve in more secure activities – the result being that there is a bit of pull and push taking place here.”
RBS, which plans to launch a converged cash and trade portal at Sibos, points out that its initiative stems from market research.
“We run customer panels across the globe to identify different needs from a trade perspective, and then use our customers’ feedback to fine-tune products. We get their feedback on the features they would like and then develop those features,” explains Adnan Ghani, head of trade finance, RBS. “As a result of this type of feedback, we are now working on bringing together our cash and trade offering in one portal, which will offer access to data on both activities.”
He explains that the combined solution will work as a cash flow product, helping corporates to reconcile payments without the need for manual intervention.
“In a SCF programme, some suppliers will want to take advantage of early payment whereas others won’t. In the case that they don’t, the corporate buyer has to make payments to them, and then reconcile those payments. With our solution, this process is automated, and handled by the bank.”
Misys, meanwhile, believes that as a major technology solutions provider, it is well-placed to capitalise on convergence.
The company is merging its cash, trade and foreign exchange capabilities, which include MTP for Multi-Bank; Misys Cash Portal, an online corporate cash management solution; Misys Web Trading portal, a foreign exchange solution; as well as Misys Loan Portal to offer a converged solution at this year’s Sibos. Back-end capabilities for processing are also being integrated.
“We have really seen the rise of transaction banking, and trade and cash are coming together under one roof. Banks are looking for solutions that combine these capabilities,” says Olivier Berthier, solutions director, transaction banking, Misys.
“At Misys, we can provide a fully integrated solution that combines our cash management, SCF and Forex capabilities – a one-stop-shop that represents the integration of Misys’ multiple capabilities.”
“Banks will need to enhance the capabilities offered by their existing SCF platforms. They need to provide converged solutions, and technology companies can help them to build in that competence.”
Meanwhile, UniCredit is taking a different approach towards its provision of a converged solution.
“We aim to offer a web-based platform, which will be accessible by our customers via a single user ID and password for a range of services,” says Markus Wohlgeschaffen, head of global trade finance and services at UniCredit.
“We are gradually implementing our core banking IT system throughout the major banks, which make up the UniCredit Group. By having unified our back-end systems in this way, we are ready to work on our front-end systems. This is an evolutionary process being undertaken to provide our customers with access to more and more products via easy-to-use, web-based applications.”
UniCredit is also currently enhancing its SCF platform so that suppliers can secure liquidity against their receivables directly, without the involvement of buyers.
“We started with a buyer-centric model, which has run quite well, but such models and programmes are time-consuming to set up,” continues Wohlgeschaffen.
“We are looking at various approaches – using either our direct risk-taking capabilities and/or collaborating with alternative risk takers such as insurers on a single risk or portfolio basis to mitigate the risk involved in supplier financing.”
This year’s Sibos also looks set to see a range of enhancements to existing SCF platforms in terms of the level of integration and automation they offer, as well as improved access to information.
“Our strategic direction is to offer a totally integrated proposition that allows access to third parties (such as other banks), integrated reporting and the automated exchange of data as well as the reconciliation of a range of activities,” says Jon Richman, global product head, trade and financial supply chain, global transaction banking, Deutsche Bank, which launched its integrated financial supply chain management (FSCM) platform at Sibos last year. “The end result will be improved visibility, enabling corporates to better manage their business and their cash flows.
“Improved information management is one of the biggest parts of our value proposition today,” he continues. “Many of our services such as order flows, invoice flows and reconciliation are already automated. We are moving in this direction, although certain aspects of trade generally will be more challenging to automate than others and there will still be a need for paper for a bit more time.”
Citibank, which offers a full suite of SCF and trade solutions, including risk management, cash management and liquidity management through its combined treasury and trade offering, is also moving in this direction.
“We are enhancing our SCF offering, Citi Supplier Finance, in a number of ways – one of which is increased information sharing. This is because we have witnessed increased demand from corporates who want to get a better view of their entire portfolio on a global basis.”
“In our electronic banking solution – CitiDirect – we are incorporating both cash and trade more seamlessly to provide corporates with subsidiaries and offices all over the world, running multiple programmes with a single view of transactions taking place globally. In this way, we can help them to improve their working capital and risk management,” says John Monaghan, director, global trade product management, Citi global transaction services.
He adds that Citi is also seeking to provide corporates with improved access to information on their positions with multiple banks.
“To facilitate this, Citi is working with partners on both the origination side of SCF as well as the distribution side. This is both technology-related as well as business-driven.
“We expect this year’s Sibos to see a lot of dialogue on the multi-bank needs of corporates, and look forward to supporting some of the Swift standardisation initiatives – particularly around trade.”
JP Morgan is also pursuing initiatives geared at improving information flows. “We are continuously integrating the solutions we offer to our clients in both trade and SCF in a move to improve our clients’ information flows at all levels,” says Bertrand De Comminges, head of the global trade advisory team in Emea, adding that this is critical for large multinational clients.
“These structures also facilitate risk and working capital management. Our aim is to help corporates accelerate their capital flows and working capital management, while benefitting from improved visibility in their supply chains.”
RBS, meanwhile, plans to announce major automation enhancements to its MaxTrad trade and SCF platform.
Ghani explains that, whereas in the past, suppliers had to fill in documentation and sign it before onboarding, this process has been automated so that they can accept terms and conditions online.
“Supplier onboarding has always been a challenge. It used to take a long time to onboard different suppliers in different countries so we have found ways of making it easier for suppliers to join a programme,” he says.
Another of its major new launches at this year’s Sibos is MaxTrad DigiSuite, which will enable corporates to scan in trade documentation and send it in digitised format to RBS, instead of having to deal with paper documentation that has to be taken into a trade branch.
“Working with this system, corporates will be able to digitise information, and send it across in real-time,” says Ghani. “As long as you have a scanner, you will be able to digitise information and send it across the world in minutes.”
In another move aimed at taking the legwork out of managing trade documentation, UniCredit is launching a new service for financial institutions – the Single Point of Entry concept.
This aims to eliminate the need for banks to deal with several correspondent banks in Western Europe and CEE when issuing letters of credit and guarantees. Banks will be able to send all their documentary credits to UniCredit’s offices in Vienna – to then be forwarded to the relevant branches of local subsidiaries in the region.
”The service will eliminate the need for banks to maintain relationships with several correspondent banks. Instead, they will have one distribution channel through UniCredit for Western Europe and CEE,” explains Wohlgeschaffen.
“A Korean bank whose beneficiary is in Romania, for example, will be able to send documentary credits or guarantees to us in Vienna, and we will then forward them to the closest branch of the beneficiary.” GTR
Third party providers bite back
The continued movement towards trade and treasury convergence has led to questions over the future role of standalone solution providers. BNY Mellon’s Dominic Broom points out that large corporates are more likely to seek out the full range of transaction banking management services offered by banks than standalone solutions.
“It’s horses for courses really – depending on a corporate’s requirements, but it is difficult to divorce the provision of financing from the processing,” he says.
Converged solutions are seen as a lifeline for corporate treasurers, who face increasing pressure to maximise liquidity, improve risk management and meet their companies’ working capital needs because they provide improved visibility into all these areas.
“This could put third party technology providers, which offer just a single cash management or a single trade finance solution, at a disadvantage as corporates are looking for a broader product range today,” says Citi’s John Monaghan.
CGI Technology is a solutions provider which introduced cash management and accounts receivable capabilities into its Trade360 (formerly Proponix360) solution last year. According to Kitt Carswell, senior offering manager, CGI, time will catch up with independent solution providers as banks continue to provide larger, more integrated solutions, and many of them may end up being bought out by larger organisations that want their capabilities.
However, Raphael Barisaac, director, customer account management, head of trade finance products, Surecomp, which provides trade solutions for banks, does not believe that trade and treasury convergence is a priority for corporates.
“If you ask a CFO, he will be most interested in his cash balance. Trade will come much further down the list – and is not seen as a necessity – or something companies should put money into.” He adds that Surecomp’s solutions come with full integration capabilities into banks’ own systems as part of the package.
Meanwhile, Arthur Vonchek, CEO, Bolero, which offers an open multi-bank platform for trade finance services to corporates, believes that convergence is being driven largely by the banks which are “seeking to cross-sell various transaction banking products and services to corporate customers”.
“We are seeing greater convergence – but not in the way that most people think. This is largely at the banking end – with many banks looking to converge their global transaction banking products and services,” says Vonchek, whose company is launching full electronic document presentation at this year’s Sibos.
Phillip Kerle, CEO, Demica believes that only time will tell whether corporates really want converged solutions. He explains that it would be difficult for third party technology companies to build in new and complex capabilities, such as cash management, but points out that Demica’s Citadel outsourced SCF solution was originally a treasury product, meaning that the solution could be restructured to offer both cash and trade.
“Corporates like us because of the flexibility that we can offer,” he continues. “Third party providers of SCF solutions enable them to easily move and switch their bank funding providers as and when they want to,” he says.
Meanwhile, Bob Kramer, vice-president of working capital solutions, PrimeRevenue, dismisses suggestions that third party technology providers are hindered by the current focus on convergence.
“We issue quarterly software releases and are constantly upgrading the technology,” he says, remarking that his company has built new configurable business rules into its platform and has enhanced features like applying offsets and creating reserves. GTR