Banks shift technology focus from speed to experience
The rationale behind technology has evolved over the last couple of decades. Where in the 1990s investment in technology was principally about increasing the speed at which transactions could be executed, and thereby saving cost, recent enhancements have been more about improving functionality and the customer experience.
Such investments still continue apace. JPMorgan, for example, launched its new Access global cash management system in Europe at the Eurofinance conference last week. It is migrating existing clients onto the new platform.
Access brings new services, such as FX, onto a single integrated platform that incorporates trade execution, confirmation, settlement and reporting. That allows clients to increase efficiency, for example by aggregating currency payments with a single rate. The European launch follows earlier launches in the US last year and Asia in July, to complete the global rollout.
“We made the strategic decision four years ago that we needed to redesign the platform around the clients,” says Lloyd O’Connor, managing director in treasury services at JPMorgan. “Traditionally clients have had to learn to navigate banking terminology, or [learn to] ‘speak bank’, to use our systems. We wanted to think of clients more as consumers, who like things to be fast and convenient, so we redesigned the system with that in mind.”
Drawing inspiration from social media and other consumer-centric online technologies, JPMorgan Access not only simplifies the client experience, with videos and other educational aids to assist clients as they learn new processes, it dramatically enhances the possibilities for client feedback, says O’Connor.
JPMorgan is the latest bank to announce enhancements to its transaction-banking platform, but it is by no means alone. The top GTS banks have all invested heavily in their technology platforms in recent years.
The increasing expense of remaining competitive in the transaction banking business is helping a small group of top tier banks tighten their grip on transaction banking and treasury services. Smaller banks, or those for which GTS is not a core offering, struggle to justify the investment required to keep pace. But for those that do invest, the rewards often outweigh the costs.
“Banks need to be easy to deal with. Banks that have invested in their trade finance infrastructure have always benefited even more than the business case they made for that investment suggested,” says Ray Zabarte, head of trade finance product management at Barclays. “A lot of technology advances in trade finance are about information and transparency, giving clients more information.”
Much of this falls under the umbrella of ‘anytime, anywhere’, the idea that clients should have access to all bank services from a number of machines – phone, tablet or desktop – wherever or whenever it is convenient for them.
“Currently you can see CFOs checking prices of many financial products on their phones. In the future there will be more information available online,” says Zabarte. “In trade finance, for example, confirmation pricing is not available on market pricing tools – there are logistical challenges as price can vary considerably according to geography and commodity. Technology can overcome that, but we need to be imaginative.”
Banks have not been the only ones investing in technology. Corporates have been investing in their own systems. “As the sophistication of corporates has increased, the nature of their relationships with banks has changed,” says Bruce Proctor, head of global trade and supply chain finance at Bank of America Merrill Lynch.
Many corporates access Swift directly, says Proctor. “The large corporate market has continued to move away from letters of credit. However, what many still do need is help with reconciling invoices, handling purchase orders and matching documentation with the physical shipment.”
Many corporates are turning to open account relationships but still want bank assistance with back office functions. This is in itself a challenge, as banks must cater to clients at both ends of the technology sophistication spectrum.
“Technology in the rapidly evolving trade and supply chain space needs to be flexible so that it can connect multiple parties and enable them all to gain efficiencies,” says Jon Richman, head of trade finance and financial supply chain for the Americas at Deutsche Bank. “It needs to meet the needs of large, sophisticated clients as well as their smaller trading partners across the globe.”
Deutsche’s own solution has been to model its offering on the smartphone apps its clients will be familiar with from their personal smartphones, allowing them to access the specific functionality they need, without bothering with bits that are not relevant to them.