Cash management debate: The march of progress

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CH, Lloyds TSB Lloyds has a UK, European-centric corporate base, with cross-border requirements. We’ve served that through a range of overseas networks, branches and alliance partnerships. We’re not on the ground, and that historically has inhibited access to local clearing. Sepa, however, enables us to provide a more holistic European payment solution and compete even more effectively with those banks which operate "in country".

RW, Kimberly Clark I have difficulty in getting information on European bank charges, and that should improve. Sepa should streamline our processes. It makes it possible to move from one bank to another if we’re all using the same standards. Any payment message you send, to any bank, will be the same message, the same format. We’ve decided to go with one bank across Europe, but you’d have the choice to go with one or with a multitude.

SC, ING It is an opportunity to harmonize our back offices into one big Sepa engine and create economies of scale. A European standard will create tremendous potential for innovation. Some banks see consolidation as a threat but this is a sourcing issue. The threat is that Sepa is moving too slowly. The European Central Bank raised the point that the coexistence period will be too long. It could be argued that while the overall business case for Europe is positive, there’s not much in it for the banks. We will be impacted by the PSD [Payment Services Directive] on float and revenue, and the 2560 on prices. Prices are coming down and we have to create a healthy payments business model together. But first we must try to reduce this coexistence period.

GT, FMS Everybody agrees that there’s a lot to gain for corporates if the Sepa objectives are met. But are they being met? That’s the biggest threat. The domestic markets are not moving. Sepa is going painfully slowly. There are still problems domestically because Sepa is not providing the level of satisfaction of some local instruments.

RuW, Citi Sepa is a very good opportunity. We’ve had interconnectivity with ACHs [automated clearing houses] over the past 15 years or so, while with Sepa there is the possibility to cut off those multiple connections and go through one platform. This will allow us to economize on cost and complexity. Citi is physically present in 22 Sepa countries, and while local capabilities will be maintained, Sepa will become a key solution for the euro markets we are in. From a technical consolidation point of view Sepa is therefore very positive but I agree that the transformation process is too slow. Sepa is trying to move from a fragmented market where we don’t have the same tradition of how to make payments, nor the same guarantees or languages, to a harmonized area, which could be compared to the US payments market. This is a big cultural shift. I therefore hope there will be a push from European authorities to set an end date by which time euro countries have to decommission credit transfer and direct debit schemes – maybe 2015. Without that we will never have the guarantee that this endeavour will come to full fruition.

SC, ING Without an end date, there’s no start date.

GT, FMS We need an end date but also to create the conditions for reaching the objectives. There are lots of independent players, and you can’t boss them around. We need to create some mechanism for working together.

SC, ING The project has some fundamental problems. If we agree that without an end date there’s no start date, where’s our incentive for self-regulation? The project was politically instigated. They did not ask consumers, corporates or banks if it was a good idea.

AR, Deutsche Bank Sepa is an opportunity because it is accelerating trends within corporate cash management through, for example, centralization, standardization and automation. Corporate treasurers are still compelled by the need to increase risk management performance, coupled with finding cost-saving opportunities. Sepa provides the opportunity for structural change within corporates, and can be a catalyst. We see opportunity in the fact that Sepa is no doubt accelerating the consolidation of transaction providers in the market. This is stemming from the fact that margins are being squeezed coupled with the increased costs required to invest into the infrastructure to comply with Sepa. As a result, it is a game of transaction-processing "scale". Banks are re-evaluating the business model to maintain their participation in the transaction-processing space. In many situations, banks are also considering piggybacking off the big transaction-processing banks that have already invested double-digit euro millions to build Sepa payment engines. We’re fortunate, we’ve got critical mass, but this is an opportunity to capitalize further. Sepa will continue to drive consolidation in the market.

CH, Lloyds TSB Lloyds, although not a global bank, sees the same opportunities. We can be the conduit, be the provider for our clients. Will we always provide everything directly? Maybe not. But it’s about providing our customers with the most holistic solution which is right for their business. So we both see the opportunities to do that, albeit in slightly different ways – at the end of the day, its all good news for corporates.

JL, J&W Associates How do we achieve the Sepa dream?