Cash management poll 2008: Results
Cash management: Cash captains see their ship come in
Citi: the $6.5 billion start-up
Emerging markets: challenges remain
Financial institutions: uncertainty breeds competition
Crunch time is looming not just because of declining revenues. More important is the relentless technological demands of the industry as a result of new regulations such as know-your-customer, anti-money-laundering, Sepa and the EU’s Payment Service Directive, Basle II and Target2 (an interbank payment system for the real-time processing of cross-border transfers).
"We recognize now that it’s smart to buy from best-in-class providers – although it was a painful process for us to accept the model," admits Francesco Vanni d’Archirafi, global head of treasury and trade solutions at Citi, who says the logic is clearly compelling. "It takes years to develop new products, and time to revenue is one of the crucial metrics in this industry."
At the same time as the financial and technological pressure to use third-party provision is mounting, the age-old objections are being overcome. "Bank clients have long since realized that their end clients don’t know who’s on the back end," notes Vanni d’Archirafi. Moreover, even if they do know, they don’t care, according to Nicholas Diamond, EMEA treasury product delivery executive at Bank of America: "Clients are now more open to their bank’s outsourcing or operating joint venture because that’s the way they do business themselves – non-core activities are now outsourced."
Michael Cannon, head of payments and cash management, Europe, at HSBC, says that a new model is emerging as third-party provision grows. "In the future, payments will continue to flow through banks – a bank’s franchise is about payments, risk management, settlement and processing," he explains. "But increasingly, products will come from third-party providers. Of course, there will be instances where technology investment by banks can add value but there is no point in duplicating what vendors are doing."
