North America: Modernising a mature transaction banking market
The North American banking and treasury market is highly evolved but technology offers many routes to further sophistication.
The transaction banking market in North America already offers sophisticated products and services. But clients and competition means there is a constant need for the next innovation and taking that next step means developing new platforms. The race is on to create a fully digitized method of corporate banking.
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Michael Fossaceca, head of Citi treasury and trade solutions, North America, says: “In the US, we are operating in a mature market. We work with our clients by providing core services but we also go beyond by providing them with data and analytics to help them make better-informed decisions.”
Clients have an expectation of ever-more sophisticated ways of using technology. So providing an efficient tech onboarding process, or being able to offer them good mobile banking services, are no longer things that will set a bank apart.
When competing banks can all offer equivalent services, corporates will start to look for some further proficiency that sets a particular provider apart from the crowd.
Citi’s clients can now manage several accounts from one access point, through its CitiDirect BE platform, which was leveraged off the development of Electronic Bank Account Management (eBAM). Documents can be submitted electronically, so the process of opening and managing accounts is now paperless in Citi’s US and Canadian branches.
The shift to a digital approach for making and receiving payments means banks now have a wealth of client data available for analysis, with a granular level of detail. The challenge lies in using that data to its full extent.
We work with our clients by providing core services but we also go beyond by providing them with data and analytics to help them make better-informed decisions
Michael Fossaceca, Citi
Corporates are looking for benchmarking against their competitors, so Citi has established the treasury advisory group to help its treasury and trade clients to analyse flows, and identify opportunities to see best practice in their business and use of working capital.
“We are using technology the way it is meant to be used, and this is an exciting time,” Fossaceca says.
Clients have brought their internal enterprise resource planning (ERP) platforms up to the most modern structures. Now they want to leverage off those large investments that they have made in their tech infrastructures.
And it is not only the multinational corporations that are now using globally-connected ERP systems and adopting internal payment structures. Companies further down the chain are looking to find even greater levels of efficiency.
Jon Richman, head of trade finance and financial supply chain, Americas, Deutsche Bank, says: “In the supply chain finance space, the ability to structure large programmes and to provide extensive cross-border coverage with efficient supplier onboarding are becoming the key differentiators – more so than the technology platform.”
New entrants to the market are pushing the pace of change in the tech space, innovating at a rate that banks find hard to replicate. What the banks can do, however, is step up to the table to assist them in their business development needs. Banks are approaching it as an opportunity both to access the newest developments in payments technology, and possibly to onboard the next multinational tech company while it is still at the incubator stage.
“We are seeing the emergence of more fast-growing technology companies,” says James Volkwein, Deutsche Bank’s head of trade finance and cash management corporates, Americas. “What they all have in common is incredibly lean structures. What they need is transparent help and support with obtaining financing.”
The move to a tech-based operating method brings with it a fresh set of challenges, most prominently the threat of cyber-attacks, alongside the older problems around foreign exchange risk and fraud.
In the past, fraud would have related to individual transactions, but now the industry is learning to contend with the risk of entire databases being replicated.
Any corporate looking to step up its tech provisions will talk to its bank for advice on how to prevent it from becoming the next Target or Sony.
“We’re actively helping clients with cyber security by providing education so they understand where they could have gaps in their systems,” says Galen Robbins, head of global transaction services for commercial banking, business banking and small business, Bank of America Merrill Lynch (BAML).
The bank has also been investing in building up its systems against the evolving threats by creating a client-centric online platform to help address concerns about the digital threat. “One highlight is our new fraud prevention portal, which provides clients with a library of helpful information and resources, including whitepapers, webcasts, a podcast series and videos,” says Robbins.
As it develops new technology for corporates, the US is adapting its use of everyday technology, looking at ways to reduce the costly dependence on paper-based operations.
“Businesses are looking to improve efficiency and security in their payments to other companies and to consumers,” says Dub Newman, head of North America global transaction services at BAML. “As an example, non-repetitive payments to consumers have been causing difficulties for companies in several industries.”
BAML’s digital disbursements have taken a step to cutting the dependence on cheques. The mobile payments platform enables corporates to make payments direct to recipients, and without the need for detailed back account information. No longer having to send out or process cheques has brought about a 75% reduction in the cost of the payments.