Cash management: Third-party provision finally takes off
White labelling and third-party provision have been a perennial red herring in cash management but the credit crunch might finally be the spur to them taking off. By depressing bank revenues and consequently putting pressure on technology budgets – often the first thing to be cut in tough times – banks will simply have to operate differently in order to stay in the market.
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.