Corporate Finance

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The Treasurer's Voice: Connectivity We look at how corporate treasuries and shared service centres (SSCs) are connected with their banks and the outstanding challenges that remain.

The Treasurer’s Voice: Connectivity

by Helen Sanders, Editor

In this month’s cover story, ‘From London in 2012 to Basel in 2013’ we highlight the fact that one of the important outcomes of Basel III is the development of relationship banking. Relationship banking should not be seen as a fuzzy concept of going out for lunch every so often and asking after each other’s children. Instead, it reflects a closer way of working, based on the full spectrum of a corporate’s, and a bank’s needs, not simply the delivery of particular products and services. For a relationship banking model to work, corporates need to communicate effectively with their banking partners. Furthermore, in addition to exchanging information efficiently, this data needs to be integrated with internal systems to automate financial processes such as reconciliation, cash positioning and payments. These all rely on an effective connectivity strategy. In this edition’s Treasurer’s Voice, we look at how corporate treasuries and shared service centres (SSCs) are connected with their banks and the outstanding challenges that remain.

Treasurer’s Voice participants

Over 140 companies participated in the Treasurer’s Voice over a four-week period between June – July 2012, of which 50% represented organisations with a turnover of $1bn or more. All regions were included, with 40% from Europe and 41% from North America. Forty per cent of respondents were finance directors/ CFOs, group treasurers or regional treasurers. A further 37% also held senior treasury positions, while most of the remaining 23% were responsible for treasury technology. These statistics reflect the high quality of the findings, with people who are responsible for, or who have a good level of understanding of bank connectivity issues responding to the survey.

Connectivity background

Until relatively recently, corporates in most countries (with the exception of France, Germany and Belgium) had relatively little control over how they communicated with their banks, and were effectively beholden to their banks in terms of the tools they were provided with. This often resulted in a proliferation of banking systems, which frequently used different formats. This led to increasing difficulties in creating a single view of cash and inefficient processes for payments and reconciliation, as well as high costs to maintain multiple systems.

There were a number of multibanking initiatives before SWIFT opened its doors (albeit not very wide initially) to non-financial corporations. Some of these are bank-neutral, such as FIDES (Switzerland), Isabel (Belgium), EBICS (originally Germany, now also France) and ETEBAC (France, now superseded). Treasury software vendors such as SunGard, and a number of banks themselves also launched successful multi-bank channels. While these tools continue to have market traction, they also paved the way for the introduction of SWIFT Corporate Access by demonstrating to banks that their relationship with corporate customers could be enhanced rather than eroded by communicating through a bank-neutral, multi-bank channel. Furthermore, it became increasingly clear that the use of different formats by banks and system vendors was detrimental to corporate efficiency, which also had the effect of damaging corporate-to-bank relationships. This in turn led to a variety of standards initiatives, the most successful of which has been ISO 20022 based on XML, which is now becoming a recognised industry standard.

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