Every Day Should be a School Day in Transaction Banking

As part of a strategy to provide a customer-first delivery model, Andreea Parneci, Societe Generale’s Deputy Head of Global Transaction and Payment Services, believes the bank and its corporate clients should never stop learning from each other. Here, she explains what this involves in practice.

Societe Generale’s shift of strategy, from a product-driven to a client-centric approach, is driving the way the whole organisation is developing. Of particular interest to the treasury community, this model is shaping how the day-to-day business of transaction banking is being offered to clients globally.

For Parneci, the current macro and geopolitical context places the core services of payments, trade, and working capital finance at an inflection point. Indeed, it is moving them away from their long-held perception as individual commodities, towards becoming “more connected and optimised” supporting the strategy of corporates. “Liquidity management is no longer just a technical or operational topic; it has become a strategic issue for many,” she states.

This shift is important because, as Parneci explains, the global transaction banking space can run at a different pace. For international and global clients, a one-size-fits-all product-based approach is no longer appropriate according to Societe Generale: banks must adapt to global trends driving client needs.

For example, she says the ecosystem is heading rapidly towards deeper integration of real-time solutions.  Some geographies have already made a leap forward in the adoption of instant payments, such as in the euro-denominated landscape, thanks to regulatory support and increased homogenisation across the region. Where relevant, real-time is creating a more data-driven view of payments by clients, which in turn supports their push not only for increased process automation but also transparency.

On the trade finance and SCF side, Parneci is also seeing the rise of digitalisation especially among Europe-based clients. This, she suggests, is ushering in calls for increased process simplification, and the drive for much-needed working capital optimisation.

In the wider global context, greater regulatory divergence across the regions can make the delivery of transaction banking solutions more demanding than in Europe. This again requires each corporate to review their transaction banking system in its own light – depending on reach, organisation, and business strategy – so that the right solution may be found with their banking partners.

Increasing complexity within the global transaction banking market consigns the legacy one-size-fits-all product-based model to the history books. While highlighting the value of a banking partner’s global footprint, the capability to respond effectively to market variables at a local and global level and to adapt solutions to the client’s strategy has proven to be a differentiator, says Parneci.

“At Societe Generale, we want to provide each client with a smooth transaction banking experience across the regions and countries in which they operate. This underpins our strategic shift towards a client-centric approach. It also drives our belief in building and maintaining close relationships and trust within our client community, with transaction banking at the heart of it.”

Riding the maturity curve

While the aim is to support all client needs within the transaction banking space, Parneci is keenly aware that there are “levels of maturity” among the bank’s portfolio. An over-sophisticated solution serves no one well. “What we try to do is to assess individual requirements and adapt our approach to each organisation and needs as their activities evolve,” she reveals.

This is a client discussion that Parneci says is a vital component of the bank’s advisory approach. It draws not only upon an understanding of the individual technical and risk framework of each client but also its appetite for progress with real-time systems.

As a case in point, with real-time processing comes real-time risks. The dynamic nature of these elements naturally forms a key part of these discussions, with particular attention paid to operational risk, not least being fraud detection and prevention. The conversation will, she notes, always be jointly steered by the client’s current commercial goals, and where it sees itself in the medium to longer term.

By working with individual clients to quantify the flows likely to be managed through new real-time channels – at least those at a more advanced stage – Parneci says that it begins to mould the direction, and subsequent optimisation, of their liquidity management.

Societe Generale is, she notes, using its regular discussions with clients to build on close client relationships as it seeks to assist them in the management of their liquidity, interest rate, FX, and even operational risks. And given the dynamic nature of commercial life – both at an organisational and macro level – these clients are constantly supported by the bank in the review and adaptation of their ecosystems to changing circumstances.

At the end of the spectrum where clients are just beginning their journeys towards transaction banking digitalisation and optimisation – many doing so country by country – Parneci says it’s important that the bank is not only able to advise them on the build process, but also to remain sympathetic to the speed at which clients wish to proceed. “Long-term, trust-based partnerships is in the DNA of Societe Generale, and our transaction banking business unit is really at the heart of the client relationship,” she states.

Proximity pairing

This drives the concept of “presence”, believes Parneci. Daily calls, if required, and regular meetings, help to shape the proposed solutions. The client review process – with at least a biannual target –  helps to better shape the services offered to meet changing individual client complexities and maturities. With clients spread across multiple sectors and geographies, she believes Societe Generale is tapping into and sharing the fullest spectrum of best practices.

Client input further derived from the bank’s regular advisory board meetings is an invaluable frontline source of information, confirms Parneci. “The aim is to have brainstorming sessions with our clients around new products, and new asset classes, and explore how these can be used now or in the future. This is perhaps one of our strongest demonstrations of our focus on relationships.”

While most clients are keen to find the right products to optimise their transaction banking experience, it has become increasingly apparent that many are also seeking guidance on how best to navigate the multiple sources of disruption and risk they face in their day-to-day operations.

In particular, notes Parneci, the guidance sought centres around establishing both immediate business continuity, and the longer-term resilience of treasury. Again, she notes, Societe Generale’s response is founded on strong partnership, trust, and the sharing of experiences.

Of course, the bank has its own internal economists, analysts, and local and regional experts, each of whom helps to develop its knowledge bank. Regular calls between top management across EMEA, APAC, and Americas will table observations on the client frontline experience. A cross-border payment issue, for instance, may be investigated to discover any wider potential impact for clients across all regions, tying this in with an exploration of how the bank’s own SG-FORGE stablecoin could assist in cross-border payments.

The aim of these discussions, comments Parneci, is “to anticipate challenges and to maintain the constant flow of exchange, sharing with our clients any new use cases we discover within our solution set”.

Stronger together

Many Tier 1 banks talk of service integration underpinned by their own digital-first development model. While laudable, the ability to ‘leave no one behind’ is perhaps more challenging than it seems. With clients spread across a wide spectrum of digital maturity, Parneci reiterates the need for “proximity with the client”.

Having already stated that Societe Generale has no interest in a one-size-fits-all solution, she believes that the capacity to collaborate with clients at an individual level, to deliver “what’s most efficient for them”, is the key to progress.  

This collaborative process has three stages. The first is to discover the organisational fundamentals: the client’s current situation in terms of its structure and governance, and its financial set-up including its funding, liquidity positions, and its payments processes. For the bank, this is very much a case of ‘know your client’, explains Parneci.

The second phase is to establish the challenges being faced by the client. The bank has access to a range of financial data points in this context, but this must be augmented by the client’s own perspective, including data that reveals how the internal structure and systems are helping or hindering progress.

The third part of the discovery process requires the client to establish from where it derives most value. Revealing this may ultimately suggest that all that is required are a few simple improvements in basic volume processing, where the provision by the bank of a payment factory-style POBO or COBO arrangement could be the best enabler. Where more complex needs arise, or where no current product exists, Parneci says Societe Generale is open to sourcing or even building a new solution.

“It’s a matter for us of being flexible and agile while staying close to the client,” she explains. “It’s also incumbent upon us to leverage both data-driven and qualitative approaches. That means we’ll use whatever information is available to us to build an accurate picture of what our clients are doing and planning.”

Moving into a new territory or launching a new product or production facility, for instance, may steer the bank towards offering its client a new solution. Indeed, because of its direct engagement, Parneci says the transaction banking unit is often the first to know of such developments and often acts as a “cross-sell vector” internally.

Learning to be successful

“The challenge for many clients is to manage financial efficiency with long-term resilience,” comments Parneci. “Within this understanding, sustainability can be defined as a form of resilience so we are committed, across all functions, to helping our clients achieve their ESG goals.”

At the sharp end of this discussion is the provision of tools, such as sustainably-linked supply chain and trade finance, and ESG-focused loans and investments, that support client outcomes. By adopting the International Chamber of Commerce’s Principles for Green Trade Finance, for example, Societe Generale is able to aid clients (and their suppliers) with their environmentally sustainable projects, such as the generation of renewable energy, or in converting to more sustainable practices.

The overarching objective, explains Parneci, is to integrate and evolve sustainability and ESG-led solutions within the day-to-day interactions of global transaction banking. By doing so, it supports clients in their push for increased resilience.

Within the grand scheme of how all businesses interact with each other and the world, there is one underlying truth to which Parneci adheres. “The role of the treasurer, and the forecasting of transactions, will always be essential to the proper functioning of global organisations.”

And just as the arrival of the internet changed forever how people communicate and conduct business, she says the arrival of instantaneity in banking, and especially payments, could have the same extraordinary impact. “This calls for adaptability and agility in how we as a bank develop and deliver our solutions.”

But she knows, too, that Societe Generale’s client-centric approach must be founded on a two-way conversation. Indeed, in an increasingly complex and challenging commercial environment, successful global transaction banking must see bank and client each playing both roles as student and teacher.