Five-Star Cash Managers 2017
CENTRAL & EASTERN EUROPE:
BANK OF CHINA
In conversation with the world’s leading cash managers, it is often all too easy to focus on their relationships with their biggest multi-national clients. But that ignores the fact that the vast majority of companies operate on a national or regional level.
More than 30,000 non-financial corporations took part in Euromoney’s Cash Management Survey of 2016. The overall global rankings in that survey, published in October, naturally tend towards the banks with the biggest client bases. HSBC, Citi, Deutsche Bank, BNP Paribas – these are the clear leaders in global transaction services.
But for most of those 30,000-plus clients, a global network is not the principal driver of their choice of cash manager. Quality of service is the key to winning their business. And when it comes to asking clients to rate their cash managers on this basis, the results look rather different: step forward instead the likes of Bank of China, Itaú Unibanco, UBS, UniCredit and Commerzbank.
As part of the 2016 Cash Management Survey process, Euromoney asked clients to rate their cash management providers for the quality of service they offered in 20 products and services. These qualitative rankings represent by far the most thorough and in-depth insight into the quality, rather than the scale, of services that the world’s leading cash managers provide.
The amount of data generated by the qualitative part of the survey is enormous. In order to create a more usable guide to which cash managers provide the highest quality of service by region, Euromoney has created its ‘Five-Star Cash Manager’ rankings.
The 20 qualitative categories from the survey were combined into five groups: Infrastructure & Connectivity, Products, Services, People & Relationships and Risk & Risk Management.
The relevant granular scores across the 20 categories for every bank in each region are then compiled into an average score for each of the five groups.
To qualify for a star in a group category, a bank had to achieve two things: it must have received a minimum of 3% of the votes in that region (if there were 5,000 votes in the region, at least 150 clients must have ranked the quality of its service there); and its score in each group must have been within 5% of the top score in that group (if the top score in the group was 6.00, to achieve a star the bank must have scored 5.70 or higher).
Banks that achieve a star in all five categories are recognized as a ‘Five-Star Cash Manager’ by Euromoney in that region.
Five-Star Cash Managers
The list of winners is short: in Asia, both Bank of China and ICBC win five stars; in western Europe, the winners are UBS, UniCredit and Commerzbank; in the Middle East, five stars go to ADCB and Citi. In Central and Eastern Europe (CEE), Citi and UniCredit achieve top marks again; and in Latin America, five stars are awarded to Itaú Unibanco and, once again, Citi. No bank wins five stars in North America.
Contrast this with the regional top three overall rankings by region in the October survey: (in order) in Asia these were Bank of China, HSBC and ICBC; in western Europe, Deutsche Bank, HSBC and Citi; in the Middle East, HSBC, Citi and ADCB; in CEE, Citi, UniCredit and HSBC; and in Latin America, Citi, Itaú and HSBC.
Of course there is some overlap between the two sets of rankings. Citi noticeably scores highly in both sets of rankings, whereas HSBC (the global winner in this year’s overall non-financial corporations ranking) does not reach five-star status in any region.
What are the reasons for these disparities? And what makes for the best quality of service in cash management? Do more focused cash managers, operating mostly with clients in or from one country or region, have an advantage in specializing their services to meet these clients’ needs?
The survey results certainly show that companies operating in different regions can have different priorities.
For corporate clients in western Europe, the critical factors are speed and quality of response to enquiries, competitive pricing and fees and a demonstrable understanding of the business. Less essential are the quality of pitches, mobile capabilities and ancillary business.
The element they have in common is the deep understanding of what is affecting their local clients the most.
When Euromoney questions these top-rated banks about their regional strategy, a recurring theme is the ability to customize processes to respond to regional needs.
Oscar Mazza, Latin America sales head, treasury and trade solutions, Citi, says: “In Latin America, it is important to stay close to the regulators and be able to react quickly. Information needs to be communicated to clients quickly to allow them to change. The bank needs to know how much it can do in terms of notional pooling or managing liquidity in each country.”
Keeping an eye on impending changes can greatly benefit all parties. Isaac Thomas, head of transaction banking, wholesale banking, ADCB, explains the bank has been able to respond to new rules imposed by the regulator and explain to their clients the best course of action: “There was a law released by regulators for real estate purchases in Abu Dhabi, and we got involved quickly. In talking to the regulators in Abu Dhabi and taking steps to create awareness of the changes, we took poll position in the process.”
Thomas says from the bank’s experience, the hands-on approach is valued by the Middle Eastern customer base, but requires taking the initiative: “Clients appreciated being given feedback and creating awareness of the policies in the industry. In many instances it is a proactive approach.”
As well as knowing the environment, understanding the type of company the clients are trying to run means products and services can be specifically engineered. Simply put, it means being able to adapt beyond the generic product suite. A representative for Bank of China says: “Bank of China has relatively strong competence in offering customized services in accordance with the customer demand and is able to provide individualized and customized services under standard solutions to flexibly meet the customer demand.”
Even if a corporate is regionally focused, it does not necessarily mean it was established there. Both CEE and the Middle East are becoming attractive for hosting shared-service centres (SSC), with international companies setting up operational hubs away from home.
UniCredit, for example, has tailored its procedures to meet the needs of the CEE market. For international companies moving into CEE, it has created a cross-border account opening, which allows accounts to be opened in all the required countries, using just one document. Furthermore, the European Gate system provides one point of entry to all accounts. File formats are automatically converted to meet the requirements of each individual country.
Colin Moreland, cluster head for Europe, TTS, Citi, says: “The type of clients based in CEE are changing. A number of MNCs [multinational corporations] are setting up SSC in the region. What is happening now is similar to what happened elsewhere 10 years ago. Companies are looking towards the highly educated staff available at a lower cost to working out of western Europe.”
To keep pace with these changes, banks in these regions are having to review the services they offer. Emre Karter, Citi’s TTS cluster head for MENA and Turkey, says: “Companies are demanding a regional account management structure in the UAE. Historically these processes were run out of Europe, but now they are shifting towards the emerging markets hubs.
“Technology is playing an increasingly important role, especially as clients optimize their treasury operations through establishing shared service and treasury centres. UAE is an emerging hub for these centres.”
China’s ICBC has focused its attention on helping corporate clients looking to operate in its vast and disparate home market. Weng Weiyong, deputy general manager, payments and cash management, ICBC, says: “We have built the integration system in our bank in order to connect our branches as a network, which could help us to provide the best service for our customers such as collections and payments, especially within China.”
But what if the clients are outward-looking? Bank of China has the banking network to support clients on their journeys out into the international markets. A representative at the bank says: “Bank of China has established correspondent relationships with over 1,600 banks in 179 countries, which has laid a solid foundation for the bank to provide banking service for multinational corporations worldwide.”
Crucially, this two-way exchange with the correspondent network has translated into big wins from global MNCs basing operations in the country. It also provides a footing for the bank as it looks towards its own international expansion: “In recent years, Bank of China has won cash management bids including GE, Airbus, Volvo, UTC and Bosch. For the region strategy, Bank of China has become the leading bank for cash management service on the Chinese mainland. For the next step, Bank of China hopes to seize the Asia-Pacific market, and the final target is to become the first choice for the customer in global cash management.”
For outward-facing companies, this is where having a global banking partner is helpful. Citi’s Karter says: “The treasury centres that are operating out of the region are not only covering the Middle East and Africa, but often include Asia and beyond. Some clients are managing their entire emerging markets out of the UAE. Working with an international bank like Citi allows them to benefit from our services in multiple locations.”
Knowing your client
Clichéd as it may be, having a top-rated cash management offering in any given region comes down to one factor: knowing your client.
“To be effective you need to know the client and the way they run their operations based on their internal scorecards,” says Mazza. “Using that information, we can present them with solutions, not just sell them products.”
Another transaction services banker calls it “business empathy”.
For example, in emerging Europe there is a move towards gaining operational efficiency through working practices. Sebastian Kucharek, CE5 TTS head, Citi, says: “There has been a growing focus when it comes to optimization of working capital. We are seeing increasing interest from companies wanting to manage their supply chain by the introduction of a solution that on one side allows the client to improve payment terms on the buyer side and on the other side provides access to liquidity for suppliers.”
Moreland adds that helping clients to streamline their treasury operations has proved very effective: “Consolidation is allowing businesses to be more efficient. There is more focus on working-capital solutions than there has been in recent years.
“Supplier finance and other products in the trade business are being used more to optimize cashflow by allowing businesses to extend days payable outstanding, obtain early payment discounts offered by suppliers, or help their suppliers secure lower cost of funding.”
Mazza says Citi tackles Latin America by approaching each client segment separately: “We have in-depth client knowledge. There are teams divided into segments and sub-segments to cover industries. Each industry requires a different type of solution. You need to know the client to know the best kind of solution.”
However, this does not mean working in a fragmented manner. ADCB approaches clients as a collective. Thomas says: “We come across to the client as a single team, not from the individual product perspective. We respect the differences between each of the different roles but it’s about collaborating and delivering solutions for the clients.”
In western Europe, having a single, focused point of contact works most effectively. Marc Kirchhoff, global head, transaction services international, at Commerzbank, says: “Commerzbank’s dedicated relationship managers are key to our success. They are our corporate customers’ first port of call, providing crucial financial advice and information about the cash management products and services most suited to their needs.
“Relationship managers also provide the vital link to the on-the-ground expertise and insights into risk customers expect when expanding their business to unfamiliar markets, by utilizing Commerzbank’s global network of correspondent banking partners.”
Gaining the trust of a client needs more than just having a consistent point of contact. Thomas at ADCB says: “The bank will look at all feedback we are given. If a client complains that something is not working, we have to turn it around. It is not just about products or changing processes, it is also how we can better integrate solutions or make commercial discussions work for them.
“If we have done something wrong, we have to be honest about it. We have to be able to show we can go back and improve. Clients appreciate the transparency and honesty. We can turn a complaint into an opportunity.”
Kirchhoff adds that Commerzbank’s western European operation is also receptive to feedback: “From our client relationships, we look to gain a long-lasting and close partnership. The discussions we have with them are valuable in helping us to identify current cash management topics and where we need to improve ourselves in the future.”
Managing expectations is also important. A banking partner needs to be able to tell its client that there are things it cannot do. A client that has been operating in one region may enter a new one with an unrealistic set of expectations. If they stay with the same banking partner, the systems could look the same, the logins could be the same, but the actual process they can use are suddenly different.
Mazza at Citi says: “We have to be able to manage client expectations. What we are able to do for them in Europe will not be the same as in Latin America. Not all countries can be integrated into a notional pooling scheme.”
Understanding the capabilities of the available infrastructure can also mean asking clients to scale back ambitious plans. Implementing the newest technology is the priority for many banks, but what constitutes new in some regions is very different to elsewhere.
Commerzbank has been able to leverage the advanced nature of treasurers operating in western Europe with smartphone-enabled imaging software. Kirchhoff says: “With the addition of the new photoTAN scanner feature, treasurers can authorize and release payment orders using their smartphone. By scanning a barcode-like image with their smartphone camera, they can reveal all the essential transaction data and sign off the order – enjoying the highest levels of two-factor authenticated security.”
Such an offering would not find an audience in every region. ADCB’s Thomas says: “Compared with the US and Europe, there is still a lot of work to do to improve standards of technology used in the Middle East region, and the relationship when working with fintechs. There needs to be an awareness of what is happening globally and apply it locally.”