Delivering Domestic and Regional Excellence in Cash Management

An Interview with Carlos Gutiérrez Salán, Global Head of Cash, Santander

Latin America is a priority for Grupo Santander, with 10% market share and over one-third of the group’s attributable profit. By the end of 2009, Santander had over 37 million customers in the region with an ongoing strategy of investment. The strength of Santander’s cash management offering was recently recognised in TMI’s Award for Innovation and Excellence in Cash Management in Latin America. We were delighted to talk with Carlos Gutiérrez Salán, Global Head of Cash at Santander, about doing business in Latin America.

Santander has a long and successful history in Latin America: how would you characterise the bank’s capabilities in the region?

Santander has the largest franchise of any international bank in Latin America with the largest number of branches in the region. Our comprehensive presence, and the depth of our network in the region, is a significant competitive advantage delivering considerable value to our customers and providing full banking services throughout the customer’s value chain, from their customers to their suppliers. While in developed regions such as Europe, it is easier to serve customers using electronic means from a central hub, this is far less the case in Latin America where local branches play an essential role, particularly as the use of cash and cheques are so prevalent. We are able to compete and often exceed local banks in the availability and proximity of branches to our customers, as well as in the quality and suitability of our services. In addition to delivering local services in the markets where our customers need us, we have focused on building regional solutions to complement our domestic capabilities.

What features of the economies in Latin America would you highlight as we move into 2011, and why should corporates be focusing their energies there?

Latin America is clearly a major growing region with considerable potential for multinational firms across all industries. To leverage this potential, companies will firstly need to decide what sort of investments they need to make in the region to manage the demand for their products and services, and secondly, how they will fund these investments. These decisions are particularly challenging in Latin America due to the diverse and complex regulatory environments in each country. Consequently, companies need to consider to what extent they are able to operate on a regional basis or on a multi-local basis. To do this, an experienced banking partner with expertise in each market, and a regional approach to developing cohesive solutions is essential.

What key issues do corporates seeking business success in Latin America need to overcome?

Clearly the main issue that corporates face in this region is to deal with diverse regulations in each country. In addition to that, they have to live with  the difficulty of transferring cash across borders, making it very challenging to construct liquidity management solutions, as illustrated in many cash and treasury management conference programmes, where a frequent topic of conversation is ‘trapped’ cash,  i.e., cash that is held in-country that cannot be repatriated or used to finance activities outside the country. Finally I would also remark that low bankarisation levels imply heavy usage of manual intensive instruments like cash or cheques thus requiring great capillarity from bank partners to properly assist corporates.

We provide transparent, detailed information on accounts in all countries so that regional or group treasurers have complete access to data.

Latin America is evidently not a single region but a diversity of countries, each with its own culture, economy and regulation. How do you help your corporate customers to manage this diversity?

There are a variety of ways in which Santander is providing its expertise to its corporate customers in Latin America. Firstly, we help them to create the greatest possible efficiency and transparency over their local operations in each country, as well as providing the products and services that they require in each market. Secondly, we have been actively building regional cash management solutions so that our customers can benefit from cohesive solutions across the region, in addition to specific local capabilities. For example, we enable payments to be centralised through regional hubs, so that customers can send us a single payments file, which we then filter and reformat to end up making local payments in each of the relevant countries. Furthermore, by enabling payment files to be transmitted from the company’s ERP directly to the bank, our customers can leverage their investment in technology platforms and shared service centres effectively.[[[PAGE]]]

In addition to that, we provide transparent, detailed information on accounts in all countries so that regional or group treasurers have complete access to data and can therefore make informed decisions based on an accurate and up-to-date view of information.This is particularly useful for data on collections, which are typically managed in-country, while payments are increasingly managed centrally. We have a commitment to common formats and standards so that we provide data in a way that can be integrated easily with internal systems and used for automated reconciliation and account postings.

We have also organised our customer services so that as well as benefiting from local in-country expertise, treasurers and finance managers have a single point of contact for their activities across the region, working with individuals who understand their business and can help to devise solutions that address both local and regional requirements.

To what extent are you seeing shared service centres (SSCs) emerging in Latin America and how is Santander supporting this?

We typically see that US corporations have the most experience of implementing SSCs and therefore are seeking to introduce the same benefits of centralisation, efficiency and economies of scale that they have achieved in other regions. European corporations have also gained considerable experience in SSC implementation and therefore are also increasingly introducing centralised processing in Latin America. Based on the efficiencies that these companies have achieved, treasurers and finance managers in Latin America are becoming more familiar with a shared services approach, and are starting to explore the opportunities for their organisation.

What changes have you seen amongst your corporate customers in Latin America in their cash and treasury management?

Many of the changes that companies headquartered, or operating in Latin America have sought to introduce since 2008 are similar to those in other regions. One trend I have already mentioned relates to centralisation, as companies seek to reduce costs, increase efficiency, control and security, and leverage technology investments. Before the financial crisis, US corporations in particular had rationalised their banking partners to the extent that they may have had one regional banking partner for Latin America, plus a few local banks for collections and other in-country activities. Now we are witnessing a greater emphasis on diversification, with companies of all types seeking to extend their banking panel in order to manage their counterparty risk more effectively. A related trend relates to bank communication. Until recently, the primary mechanism for corporate-to-bank communication for large corporates was host-to-host connectivity. Today, treasurers and finance managers are increasingly migrating to bank-independent SWIFT connectivity, so they can connect to all of their banks, current and future, through a standard, single channel.

What do you think the key issues will be for corporates in Latin America (both headquartered in the region, and foreign multinationals operating there) over the next couple of years?

The challenges of dealing with diverse regulations and the difficulties of mobilising cash cross-border will continue to be amongst the key priorities for corporates and banks. Working with a banking partner that has the breadth and depth of branch network, experience in developing local and regional solutions, and detailed knowledge of changing regulations is essential to success for any company seeking to leverage the potential in Latin America, reduce regulatory, legal and financial risk, and ensure sustainable growth.

To what do you attribute Santander’s success to date in Latin America, when some other banks have been forced to pull back their services?

Being a successful bank in Latin America requires local knowledge and solutions, cultural fit, respect derived from a long-standing presence in the region, and an extensive branch network. Santander’s objective over many years has been to build a meaningful market share in each region in order to satisfy customers’ domestic as well as regional cash management requirements, as opposed to establishing  a minimum presence that has been the root of some banks’ strategy. With a significant market share in many Latin American countries, Santander fulfils a critical role in the domestic as well as regional market infrastructure, and it would be neither feasible nor desirable to retrench or reduce this commitment.

What are the key elements of your future Latin American strategy?

We are proud of the success we have achieved in Latin America, illustrated by the recent TMI Award for Innovation and Excellence in Cash Management in the region.Our customers have been very positive about our strategy, and we will continue to invest in developing local capabilities, so that we continue to be the bank of choice in each market. Furthermore, we will build further regional capabilities, integrating all countries into our regional payment hub and enhancing the provision of bank account balance and transaction information across all markets.