Transaction banking clients faced many challenges in 2023, mostly as a result of the rapidly shifting interest rate environment. That made it vital to have a banking partner that could supply reliable advice on liquidity management.
It also demanded innovation and quick thinking, as well as sophisticated and user-friendly online and mobile solutions. For continuing to achieve all this with aplomb, Bank of America wins the award this year for North America’s best bank for transaction services.
The bank already has an impressively interconnected offering in its transaction banking business, but in 2023 it took another step forward organizationally with the decision to bring together its global transaction services franchise with its enterprise payments unit to form global payment solutions (GPS), under the leadership of former enterprise payments head Mark Monaco.
The combined group is able to deliver a better payment experience for all clients, the bank argues. The business pulled in $11.4 billion of revenue in 2023, up 10% year on year.
Key solutions included consolidating cash between regions to help mitigate currency exposure; national pooling using surplus balances to reduce the need for short-term debt; cross-currency cash sweeps including multibank sweeps; intensified use of the cashflow forecasting functionality that was introduced into the bank’s CashPro cash management platform in 2022; and supply-chain solutions that enabled customers to extend payment terms and increase working capital.
In addition to all that day-to-day work, there were also one-off situations to navigate. And none was more disruptive than the March 2023 chaos in the US regional banking market as several institutions collapsed.
Again, this was a period that played to BofA’s strengths as a resilient counterparty. Its GPS team was critically involved in managing payments in and out of the failing banks by their former clients. It was also able to move rapidly to onboard many onto BofA’s own systems within days so that they could continue essential functions like payroll and rent payments.
CashPro continued to clock up landmarks, most notably in the number of what the bank calls “billion-dollar days”, days on which the total value of payment approvals is more than $1 billion. In fact, 2023 saw 220 two-billion-dollar days, up from 180 in 2022, and a remarkable 19 days where payment flows topped $5 billion.
There were even 11 days where payment flows exceeded $7 billion, something that had never happened before.
Within GPS, the bank has also been busy deploying its $3.6 billion budget for new initiatives. In 2023, this included the introduction of the same technology that powers BofA’s virtual assistant Erica into the CashPro environment, as CashPro Chat.
The artificial intelligence-driven offering dramatically improves the ability of treasury teams to locate specific transactions and to get support within the app.
In Canada, the bank rolled out its business-to-consumer payments solution, Global Digital Disbursements (GDD). In that market, the solution makes use of Interac, a Canadian payments rail that serves more than 300 financial institutions in the country, as well as linking to 97% of Canadian consumer accounts. Inevitably, BofA clients can access GDD through CashPro.
The newly combined global payment solutions business pulled in $11.4 billion of revenue in 2023, up 10% year on year
One good illustration of the bank’s work in 2023 is its collaboration with Cytiva, the former GE Healthcare Life Sciences business that was acquired by Danaher Corp in 2020. When the acquisition had been completed, Cytiva had to build a full treasury function of its own.
Two things quickly became clear. A lot of processes were largely manual, but one issue that stood out in particular was that many intercompany invoices were being settled only after a considerable delay, sometimes more than 30 days, creating FX risk.
Second, if that was tackled, then there would also be considerable scope for reducing the roughly 37,000 FX transactions that Cytiva was carrying out every year and the resulting $5.6 billion gross FX exposure. What it needed was a multicurrency netting programme, with all business units’ payables and receivables being netted off in one settlement per cycle.
Cytiva came to BofA with these problems and a preferred solution was identified, but the real challenge was putting a netting solution in place that was practical despite there being only a small treasury team at the client. For that reason, the netting solution had to be customized carefully.
The bank put in place an automated workflow for Cytiva that included a weekly netting frequency, meaning that risk was reduced from the previous monthly cycle. But increasing the frequency requires even more automation and so BofA brought in Centralis, a third-party treasury administrator, which helps to ensure that the weekly cycle is possible.
The last piece was BofA providing four-hour guaranteed FX rates, meaning that Cytiva is able to calculate its positions using the same rates that it can execute with in the market, removing any mismatch that would need to be addressed after the event.
As a result of the project, Cytiva cut its FX volumes by 94% and was also able to claw back 40 employee hours every week.
