Transaction banking Roundtable

GTR and BNY Mellon gathered together a group of transaction bankers to discuss how the business can continue to remain relevant in an ever-changing world, and debate the opportunities that can be captured as well as the equally significant challenges that will be met.


Roundtable participants

  • Dominic Broom, head of sales & relationship management Emea, BNY Mellon
  • Martin Knott, head of trade, GTS Emea, Bank of America Merrill Lynch
  • Richard Jaggard, regional head, transaction banking – Europe, Standard Chartered Bank
  • John Carroll, head of international, Santander UK
  • Arun Aggarwal, managing director, UK, Ireland & Nordics, Swift


Broom: To kick off, how is 2014 shaping up and how is it proving to be different from prior years? Is there a greater mood of optimism in your respective organisations or indeed, more importantly, from your clients?

Knott: From our perspective, we are positive about 2014 and are experiencing strong growth in our GTS business. Our focus continues to be on putting clients at the heart of everything we do and making their interactions with us easier.
In terms of how 2014 is shaping up, and the differences from prior years, the underlying trends are the same, whether you talk about regulation, consolidation, rationalisation, competition or counterparty selection. The big difference is the change in the way those trends are evolving in terms of the pace, cost and complexity.

If you take regulation as an example, we have spent a long time as an industry in discussions around a lot of regulatory changes. What is now happening is that those regulations have landed and they are driving operating models from the banks’ side. Clients are looking at their treasury policies and the regulatory impact on their individual policies. Then the other side is that we still have other regulations to land and this is also driving some product innovation.

Jaggard: From the clients’ standpoint, we are seeing the same theme of searching for growth being played out as it was in 2013, with continued focus on leveraging the faster growing economies. Although there is broadly greater confidence, certainly in parts of Europe and the US, there is still a recognition that the fastest growth is coming out of Asia and increasingly out of Africa. Africa is receiving a lot more strategic focus from corporates who see it as the ‘next big Asia’ and although this is still some years away, it is definitely going in that direction.

As a consequence, we are seeing clients looking to replicate the same standards of connectivity and, ultimately, their expectation is that they are able to execute to the common treasury standards in these new markets with their banking partners.

Another focus for our clients is the ongoing regulatory changes and challenges for the corporates’ banking partners and its impact on their banking relationships. As an ex-treasurer, that client/bank dynamic has changed enormously over the last five years and continues to evolve. For example, corporates are far more careful nowadays in how they select their counterparties, including their banking partners. Corporates now have multiple banking providers since there is an awareness that no one bank can provide everything the corporate may require on a global scale. This will also impact the way banks are paid and rewarded for the services they provide.

The other good thing is that we are seeing more stability in terms of margins, something I am sure the industry welcomes.


Broom: John, would you say the environment is pretty favourable in the UK?

Carroll: Yes, I would reinforce both the regulatory and the global market aspects Richard mentioned. One thing I would also add – and Santander is probably a classic example of this – is the reinforced focus on transactional banking, vis-à-vis the investment banking side. It may be a bit different for others, but there has clearly been a real focus here. Santander itself, over the last year, has developed an international business area which previously was not a holistic model. The reason is quite simple, which is that we have the presence and benefit of 14 banks around the globe, and we can see that in normal economic times, international clients are four times less likely to go bankrupt than domestic clients. And, as bankers, we all know that you can do more business with a growing international client.

So there has been a lot of focus on that, and I am sure that will be the same in other banks as well.

It would be important to set the context for where Santander is in terms of the UK. We are in a rather strange position, whereby we are a challenger bank. Santander is making a real focus on SMEs and larger corporate markets and this is where we are witnessing a real pick-up in activity in the UK.

Aggarwal: I am the non-bank here, serving all you guys. We have all the information, which pretty much corroborates what you are saying. 2014 has so far been very good. The pickup is faster than last year. We are up on payment volumes by about 10%, on messaging volumes across the board a bit higher in securities, because apart from payments there are a lot of status messages, notifications and confirmations, which have grown even faster. This all plays to some of the points about regulatory drivers. As you say, it has landed: it is happening, so people are starting to pay more attention to those drivers.

For us, from a Swift perspective, that has opened up a very significant opportunity in terms of additional services. So a lot of effort has gone towards supporting the financial community to meeting the regulatory challenges. We have seen a very fast pick-up in our sanctions screening service, sanctions testing service and KYC registry, which is about to launch this year. This summer we will have the first of the pilots, so that is moving very nicely. There are a few more services in the pipeline, all basically seeking to alleviate the burden which the community faces.

One aspect is the cost burden, but also from an operational perspective, the other aspect is the regulatory risks. Often the risks are only as good as the weakest link. So one of the things that Swift is doing, which is hopefully helpful, is offering our sanction screening services aimed at the small and medium-sized banks around the world, who are often the weakest links in the chain. The bigger players have already invested heavily and are anyway further improving the quality of their screening activity.

We are also bringing a lot more corporates into Swift, and gradually moving down into the mid-sized corporates. We started with the big multinationals and we now see more and more mid-sized corporates and financial institutions really searching for us to facilitate international reach.

Key drivers include the good old issues like security and reliability, which are especially pronounced with things like cyber-crime. The greater security you can get through Swift’s best-in-class systems is something that is appealing to a lot more people than just the traditional big bank community. From our perspective the view is positive: it reflects a generally more positive scenario in the industry.


Broom: All of us work for institutions that sit atop large, international networks. Are you seeing shifts in commercial business flows compared to previous years and also, as a result of that, shifts in behaviours? To pick an obvious and much talked about example, do you see changes in terms of settlement currency that corporates are choosing to use when transacting? Also, are regulatory changes and challenges driving behaviours?

Aggarwal: The data that we see, which you probably see from us, as we publish a regular renminbi (Rmb) tracker, shows the Rmb has been growing. It has become a much higher traded currency for international trade. The growth is high but it is still a relatively small amount and from our perspective we do not see a massive turnaround in the currency mix for the next few years. Our prognosis is still that this is a slow burn; it is not about to jump into being a true reserve currency.

However, we are definitely seeing the growth in terms of south-south trade. Africa is doing very well from a traffic perspective, which is reflected in both payments and international trade messages. So there are shifting patterns.

Jaggard: The internationalisation and liberalisation of the Rmb continues to be a big trend. According to Swift, CNY ranked seventh among global payments by value in March 2014. With the recent regulatory relaxation in China around cross-border intra-group sweeping, we are seeing lots of interest from corporates and MNCs. It was first permitted last year, starting from one-way sweeping from China to overseas, and now two-way sweeping is possible in the Shanghai pilot free trade zone. We have been working with our clients to establish their cross-border two-way sweeping structure connecting their onshore and offshore cash pools, enabling them to include China in regional and global liquidity structures. This has contributed to the overall CNY payment traffic growth. This is a major step forward in getting greater cash efficiency for treasurers.

The Rmb trade settlement redenomination rate grew from 20% in Q4 last year to 24% in Q1 this year. We are seeing that even in Africa there is a lot of trade flow denominated now in Rmb, simply because it is more sensible.

We are also seeing this trend in Europe, where European MNCs are doing business with China. We are providing advisory support to clients on Rmb-related developments and how they cannot just integrate China into their global liquidity management solutions, but also how to put in place an overall more effective working capital solution.

Carroll: We are still seeing very low volumes, but if headlines equated to trade then it would be substantial amounts. However, it is clearly coming.

Aggarwal: The wider question is the backlash against the US regulatory stance: is that going to drive a wider shift to more euros or maybe anything else? There is an emotional backlash, but I personally do not expect a massive shift away from the dollar. I think that will continue to be the dominant reserve currency.

Carroll: Particularly for the clients. The banks may be a little bit more sensitive but the clients drive how you have to operate. The clients still prefer dollars.

There will be a gradual trend away but nothing more substantial.

Knott: I agree; it is a trend that is here to stay and it will gather momentum. It is not a trend that will reverse. I agree, in terms of the reports we have seen in the press about the move away from dollars to euros triggered by specific market events, is a short-term reaction that will not change the fundamentals. For us, trade will continue to be dollar-denominated for a period of time.


Broom: Absolutely. We are seeing pretty strong global growth this year in dollar commercial payment flows, the bulk of it being linked to trade finance. Similarly, there are very strong movements in treasury settlement flows.

I have quizzed other financial institutions around the region around things like Rmb use. Most of them have taken initial steps and have opened up Rmb accounts with their Chinese bank correspondents, but to date, transaction flows are fairly limited, unless they are working with clients who have particularly strong linkages into more Rmb prevalent zones, such as Southeast Asia.

Knott: Those trends are absolutely going to be driven by the trade flows and the clients, and the client’s desire to hedge or not hedge that FX position, if they feel that is the way to go. It has to come down to the clients and the way they are exporting and importing.

Carroll: We carry out a number of studies, and they all confirm the same thing: while there is a gradual move towards emerging markets, in the UK, clients will still go for the safe markets of Europe and a bit further to the United States. Although growth trends are clearly in the other markets, for example, a recent study we carried out showed that UK exports to China, Chile and the UAE grew faster than those to any other countries last year. One thing we are trying to do is give clients the tools to show them that it is not as difficult as they think it is, and to try and get them to go away from the safer markets, not ignore Europe and the United States, who are clearly still key, but to broaden their mind-set. That is one of the key challenges – demystifying and taking the fear out of exporting to unknown markets.

Jaggard: Also the tipping point will come when the clients can see the commercial value of switching to Rmb. Some of it, from what we can see, is driven by recognition by companies that if their supplier wants Rmb, they will be better off invoicing in Rmb, and getting a better price, as the supplier has eliminated their currency risk and so will not pay the bank fees and the hedging costs, which are implicit in a non-Rmb price for a Chinese supplier. Equally, many corporates now have supply chains which extend to or from China and so they have natural offsets with Rmb, which a regional treasury is increasingly able to manage given the recent liberalisation. Working with our UK banking partners, we also see the importance of working with SMEs to educate them about these developments and its benefits so that SMEs can be more comfortable trading outside of the eurozone.

Aggarwal: The infrastructure for the mass usage and hedging of Rmb is not there. It is not a CLS currency as yet. We all know how long it takes for that to happen. It could take at least five years before the Rmb is truly a part of CLS. I am a little sceptical in terms of the pace of growth. Personally, and from a Swift perspective, our perspective is a slow and steady growth rather than a dramatic increase.


Broom: Recent consultation with government in the UK, driven through the British Bankers Association, has highlighted concerns that regulators seem to have about trade finance. I would suggest that those of us who are long-term practitioners in that field have felt that our ability to control and have a good understanding of trade flows, was much more evident in those flows, than in the world of commercial payments. To date, I have not heard of institutions being specifically singled out over trade finance activity, other than instances where there have been attempts to mask destination or origin of good flows. What is the feeling around the table?

Jaggard: The critical thing for me is that we have the right regulation, rather than more regulation. One of the things we need to do is to make sure that there is a connectivity and relationship at the right level between regulators, the banks and right through to the clients.

If we can get that right, and there has been a huge amount of progress, going forward, it will mitigate some of the unintended consequences of some of the regulation we have seen.

And if you can get that right, it means that you reduce the amount of discussion and back and forth around regulation. So you can implement them faster. Also, if you get that relationship right at a domestic and global level, which is no doubt a challenge, then you also mitigate the possibility of having an uneven playing field for a period of time.

GTR: Our July/August cover story refers to misinvoicing and money laundering.

Knott: The responsibility, from a banking perspective, really comes back to knowing your client, what they do and what they are exporting. If you get that level of relationship right with the client, then you truly are adding value. The way you do that is by having the broadest, deepest client relationships.

Carroll: That is a key point from our perspective. What we are seeing across many of the banks is that it is very hard to be a completely global bank; you cannot know every single client in every single country. In the case of Santander, we are clear that we will be a strong local domestic bank in forwarding markets and we operate on a very strong relationship model. However, this doesn’t mean that we can’t help our clients in specific activities in other markets.
You need to be physically present in Watford, Sheffield, Leeds, Fortaleza: you need to be in those markets and know what is going on, otherwise you’re not in a position to lend money to those clients. That is simply how you do it. On the other side, the question becomes, who can you then trust? Clients have to work with banks who they trust know their customers, and that is a different scenario.

Aggarwal: It is a really tricky field, is it not? The United States, in particular, is using the banks as a reinforcement tool. Knowing your clients – how far down the chain do you go or can you possibly go?

There is a big differentiation between trade finance and trade, a huge amount of trade is now open account, which is basically a payment. So there is no trade finance relationship. We do not have all the information that you would have in trade finance documentary credits. So how far can you go? There is the idea of enhanced payment information, which is one of the things we are involved with in a number of places. The UK is looking very hard at advanced payments information, remittance information and maybe the use of ISO 2022 messaging to capture a lot more information about the payment. That would help, but is there not a limit to how far you can know the end source or usage of the cash?

Jaggard: There are probably two areas to look at this: number one, as Martin is saying, know your customer. If it is a corporate customer, there is probably a better grip in terms of what their business is, where they are doing it and what sort of people they are going to be dealing with. That is probably more containable in many ways. The bigger challenge is on correspondent banking, where you are dealing with a bank that has customers in its own right. The challenge then is to ensure that the standards you have and that the regulators expect of you are also being applied through the correspondent bank. That is where there has been a lot of work done. Many correspondent banks understand this and have an understanding of the context for the questions they are being asked, and are geared up in terms of their own compliance and their monitoring standards.

It will be good, as a global business conducting trade and supporting trade internationally, to have global standards from a regulatory standpoint and for those to be transparent. That would make it easier for the participants, be they corporations or banks.

Carroll: It is a concern, I think we all agree, that international trading is going to be the main driver for growth, particularly for developing countries, but also for companies in developed markets who want to grow. Yet, anecdotally, I am hearing a lot of reduction, in terms of the number of correspondents. There may be some that are definitely not meeting the standards. There are probably some where you think: ‘Okay, I will try and make the effort. I am going to spend time to do all the KYC on that.’ However, there are also certain other peripherals in the markets where you’d start to question whether it is worth spending all that time to do it? And I will say: ‘Okay, no.’ Certain banks which may be genuinely compliant are going to miss out on the benefits of international trade by being locked out of this process, and that is a real concern. If you can get something from Swift, that would be fantastic, to make us all feel comfortable. That is where some pooled resources will work for all of us. That is the biggest challenge at the moment for all the banks.


Broom: There has been a significant increase in emphasis in the last half decade or so. The recognition from financial institutions of all shapes and sizes, from whatever part of the globe, is that this is an area where collaboration is a must. There are plenty of areas where we rightly need to compete, but getting KYC best practice sorted out through efforts such as those led by Swift, but also at the national, regional and global level, is absolutely critical. Whereas a dozen years ago it was almost as if one was being accusatory if you went in and discussed KYC and compliance procedures with a partner, now people actively want to talk about it. I have been in Italy for the last three days and the questions from a lot of very well-reputed regional Italian banks are: what is the reaction to the latest news in the compliance space, what are we, as a global institution in the payment space, doing in that regard, and how can they collaborate with us to make sure?

Aggarwal: You are right. It is collaboration and it is the only way it is going to work. Certainly the KYC initiative that we have, which is focused on correspondent banking, seems to be proving that. Everybody is very welcoming to the idea and wants to participate. Hopefully, through that mechanism, we will start to put some standards in place as well.

There have been attempts to put standards in place but it has not really stuck. However, through our service, we will aim to achieve a level of standardisation as well as adding value through a lot more information flow, which will help to validate some of the statements and claims that are made in terms of who is doing business with whom, supported by volume analysis and transactional analysis.


Broom: Transaction banking has, for a number of decades, been a pretty reliable source of revenue for financial institutions, whether in favour or out of favour with executive management.

Is that, in your respective institutions, bringing about the right level of investment? What is that investment in? The question I have been asking many people as we look to secure future revenue flows for our business, which underpins so much of global commercial activity, is: are we charging for the right thing? Are we in danger of not keeping up-to-date with where our customers perceive the value to be and charging accordingly?

Jaggard: We are fortunate in that this is a great business for banks to be in. It provides enormous value for clients and will continue to do that, while it is a reliable revenue stream with attractive balance sheet returns given its relatively low capital allocation.

The investment needs have changed dramatically though. The whole technology agenda is becoming more and more sophisticated at the same time as standards are becoming more open. That brings productivity benefits for clients, but it does mean that the technology agenda is not something you can really differentiate on, unlike five to 10 years ago. You have to look much more at the quality, range and consistency of services that you provide, recognising the value that clients derive both from information as well as the associated settlement flow. Whilst the client experience remains critical, so increasingly is the need for technology investment to support the changing regulatory agenda.

Carroll: There are probably three real competition trends. In terms of the mass market for corporates, you have an increased focus from all the competitors on transactional banking: particularly with Basel III, investment banking is a lot less attractive so transactional banking is precisely what you want. Then you have two other aspects; one is that you will have – not in 2015, but in 2018/19 – a real increase in alternative funding or shadow banking. We are already starting to see it. It is a little bit like the Rmb; it is still quite small, but certainly that trend is happening.

The third part is technology. What existed four or five years ago and what will exist in four or five years are completely and utterly different. From a bank perspective, you need to offer something that is genuinely different, because companies will say: ‘In 10 years’ time, why will I stay with you?’ It has to be something that is beyond the ordinary and adds value.

What we have decided to do is use technology to our advantage. So we have developed a Trade Portal. If we look at our own corporate clients, there are two reasons why they trade more, or just trade in Holland or France, for example. One is the knowledge: they don’t know where the best opportunities are, and would not know how to trade elsewhere. For example, if they have never traded outside of Southampton, or they have only traded in France, they would not know who to start to speak to in China, India or Mexico. The portal can help companies by providing them with details of importers of their product in key markets – company names, phone numbers and addresses.

Not so much for the BPs and the BTs who are going to be looked after, but particularly for the sub-FTSE 150 and sub-FTSE 200, it completely changes the dynamic. So you can now start to focus on those markets, and we also tell you how to execute, how to set up a company, etcetera. So that is the knowledge factor.
The other part is fear: how will I get paid? How do I actually know that the other person will pay me or is trustworthy? So our advantage is that we are essentially a corporate, commercial and retail bank around the world. We have five million corporate and commercial clients, so we have developed something on the back of the portal called a Trade Club, which will link all of our global clients together. We are using technology to be able to connect our clients.

We are not specialised in this so have hired a third party. It is the ‘Shoreditch’ of Paris, who is out there and they develop this product for us. We need to embrace technology and use third parties who can help us provide something which reinforces essentially what we are, a bank with five million clients we want to connect, but make it from something that can get the clients interested and engaged in. We want to support and help them grow; and we are doing so by providing this connectivity between our clients, with them having the comfort and knowing that on the other end there is a ‘real’ client that banks somewhere else.


Broom: You make some enormously valid points there John. What amazes me about technology companies in particular, is their ability to persuade us to pay money for something that we did not even know that we wanted. Banks and financial institutions in general have been pretty bad at adapting their charging models. We tend to carry on charging for activity in ways that we have been charging for ages; perhaps because we do not have the right people ‘in-house’ to help us work out how we can promote things and charge for things differently. Between now and 2020/25, there is going to be a huge shift as a tech savvy generation, which has been brought up doing personal banking entirely electronically and, who have never stepped foot in a branch or even phoned a call centre, look to manage their corporate and commercial banking needs. There is likely to be a good degree of filtering up of knowledge and behaviour change.

Knott: To John’s point, we talk about transaction banking being a technology business, but it is a people and technology business.

I agree with your point. You have this generation of banking users who have grown up on retail banking, who are potentially the next leaders of business, and their expectations will grow from their personal experiences of banking. They will demand and require different things and different ways of doing things. So the translation from retail to business is inevitable.

If you think about that, the question mark around hiring the person from Shoreditch is: is there a new generation of people required to take transaction banking into the next century? Technology is a core part of our business, what is key is how you deploy it.

The second thing is how do you integrate that new technology within your existing platforms? How do you drive real benefit from it? The third and most important area is whatever technology we deploy, aside from the requirements for compliance and regulation, it has to improve the financial lives of the clients we serve. Those are the challenges. If we go back to competition, technology has enabled some disintermediation, but in the same way we are talking about an increased focus of collaboration between banks, it is a real opportunity for us to increase our focus on technology providers and businesses.

Aggarwal: To take up some of those points, we have an innovation drive, like many people do, and we have a vehicle called Innotribe, where we facilitate an innovation challenge. We see a lot of technology start-ups which are technology for technology’s sake. Therefore, frankly, they have no clue at all how it would work in the real world and how it relates to the financial systems. So a lot of that is going nowhere. However, there is a famous book, The Fortune at the Bottom of the Pyramid, which studies many entrants at the low value end of an industry that will eventually migrate up. We are seeing that in payments. Even Western Union, PayPal, etcetera have gone in at the bottom end and are gradually moving up into the SME world and will keep moving up that pyramid. That is a challenge for the banks.

The banking world has been regulated and protected. You have to be regulated to hold money, but only to hold money. All the information flows and everything else that goes around that does not have to be regulated and this is where shadow banking is really powerful. Yes, ultimately, you may have to have a bank account with a regulated bank, but that is it. If that is where it ends up, the outlook for the transaction banks is bleak. However, the opportunity is there, I agree. It is all to play for.

A key question is how is a payment packaged up? Is a payment a business in its own right or is it just an adjunct to a retail or a commercial activity? In which case, is it better chunked up with the retail and commercial activity? Can you really separate it out and have a business on its own? So what you are doing is very interesting, but equally in the other direction, your Alibabas are going the other way. They have the retail commercial transaction and are plugging in the banking bit. So who wins? That is fascinating.

Jaggard: The challenge for us goes back to the point that as transaction bankers we would look at settlement as being the way we deliver value and therefore the basis for the way we charge. Arguably, that is our legacy as banks: we are safe depositories that have access to clearing systems to allow the exchange of value.

The disruptors will recognise the value of the information that we already have and using it in a different context from how we see it today. We are very good at processing very high volumes of transactions for many different counterparties across many different geographies, but what we are less good at doing is standing back to understand the bigger picture from these flows, and how the additional value we can draw out would benefit our customers.

The opportunity, from a technology development standpoint, is to understand the micro and macro trends from looking at the overall data sets. This is where we can really increase our own effectiveness, as well as providing value to clients; the challenge is the technology to handle the data and the analytical ability to develop the insights for our clients and ourselves.

Carroll: It is not just about banking but, essentially, about the whole international journey, from identifying the initial client to executing. As a small and medium client, that is where the real differentiator is, because they are currently not being looked after by anyone.

Jaggard: The other thing to mention on this is if you think about the big bug bear for treasurers or financial professionals typically, it is understanding their future cash flows. We are great at telling them what their historical cash flows are. However, if you think about the amount of information we have, we can probably give them some analytics based on what has happened.

That, to my mind, is a good example of where the value of understanding your forward cash position is huge for clients. We have a bigger role to play in helping them improve their forecasting. The opportunity ahead of us lies in good information appropriately targeted and realising the value of that.

Aggarwal: The information requirement is predicated on in the first place digitising that information. One of the challenges the trade finance world still faces is that too much information is in good old-fashioned portfolios of paper. Therefore, the digitisation of trade is key and we have worked on this a bit, in particular through our bank payment obligation, which people are piloting. It is a digitisation of a piece of the lifecycle. The digitisation of the whole life cycle is the thing that is needed.

Then, the value that can be generated is the information analysis that comes off the back of that digitisation.

Carroll: I would be interested in what your vision is, how do you think it is going to take up on increase, what is currently holding it back?

Aggarwal: Do not get me wrong, we have a number of people piloting and a number of people have set up the system so they are able to do it, some around this table.

We are still seeing relatively small volumes and piloting more than mainstream activity. Enablement of the systems, in an age of investment shortages, is always a problem. However, the other point is that the true value of it will come when you really talk about linking in all of the freight, goods delivery information and everything else: the end-to-end lifecycle. We have not got there. We would love to do more but it is not about Swift; it is about the banks and customers coming together. It is a massive opportunity for collaboration.


Broom: Is the next step to bring in some of this shadow banking challenger-type activity onto Swift, for us banks as Swift owners to embrace, in order to secure our own future?

Aggarwal: In a sense, it has started because corporates are in. Our corporates do not have quite the same power as the banking owners, who are the shareholders, but they are starting to play an influential part in the governance as well. Then, the non-bank financial institutions are playing a much bigger part, so the buy-side firms are becoming quite big and we have a number of hedge funds joining Swift. All the challenger banks are joining. So we are seeing this wider community growing and we are definitely a lot more inclusive.

The idea of multi-banking is really now the norm at a much lower level of client than it used to be, so people are looking for access using industry standard channels. That is growing the community very rapidly, so the numbers are growing fast. Eventually, it might lead to a change in the governance structure, I do not know.


Broom: To round things out, let us take a look at our business and where we think it might be at the end of the decade, both from a transaction banking market perspective and within your own institutions. We have talked about some changes we see underway and already where we expect elements of our industry to be six to 10 years hence. If you are to be allowed the luxury of gazing into your crystal ball, what key differences between how we process transactions, how we collaborate with each other and our clients, and how we charge for our services, would you expect to see between now and six to 10 years’ time?

Jaggard: For us, we have to extend transaction banking in two directions: one is financial inclusion. It is probably particular to us given the markets we are in: the economic development of these countries is going to depend, to some extent, on the extension of the banking system. Establishing branch networks and so on is not the only way forward, the greater use of technology, particularly in terms of mobile, is definitely a big trend which provides financial inclusion. This is happening at the moment in retail banking, for individuals and at the corporate level for collections, payments, advices, etc. It will allow much greater extension of transaction banking in some parts of the world where the banking structure is not yet fully developed and may not need to be developed, given the march of technology.


Broom: Picking up on that point of financial inclusion, which I could not agree with more; I would almost take it a stage further to what I would call financial engagement. Even in developed economies across most of Western Europe and North America, if we look back at our grandparents’ generation, what savings they had was probably held 100% in banks. If you look at our parents’ generation, most of whom are probably retired, a much smaller percentage of their savings are held by banks.

We were talking about liquidity earlier on, and this all has an impact, just from the percentage of global wealth that resides in major banking institutions around the world. It has a direct impact on the liquidity that banks can put into play in the sorts of spaces we have been talking about. Ultimately, it means that we need to be more inclusive in terms of the partners that we engage with within transaction banking supply chains. But linked to that, Richard’s point is exactly right; the value that we as established, regulated entities within this space will have to offer, is to be the marketplace, to bring those different participants together and to jointly ensure that it is well-managed, well-regulated and that all participants are adequately protected. What is the key to that? It is the data.

Knott: I also think it is important that whatever we do should be in response to the clients we serve, number one. Number two: we should also not forget that we provide core and fundamental services to clients, payments receipts and visibility over cash. However, I would echo Richard’s comments. Technology is going to play a key part, not just in terms of how we deploy and integrate it but how we connect technology inside and outside the bank for the benefit of the client. There is also, and we have talked about the next generation of business leaders, a need for the next generation of transaction bankers to be at the same level of understanding as those future business leaders who have grown up in an environment where social media, immediacy of information and execution are fundamental.