Published: August 01, 2011
We have become accustomed to reading about the banking needs of large multinational corporations that are increasingly seeking a regional cash management banking structure to diversify risk. Less is typically said about the requirements of mid-market companies that are also seeking to expand their geographic footprint, but may have different priorities when it comes to appointing a cash management bank. In this interview, Helen Sanders, Editor, talks to Judd Holroyde of Wells Fargo to consider the banking needs of US corporations extending outside of their domestic market.
Why is this topic of particular interest to Wells Fargo?Our strategy is to continue serving the needs of our US clients as they grow their business both domestically and internationally, as opposed to seeking a new client base amongst European or Asian corporations. This difference makes a distinct impression on the way that we do business. In particular, we recognise that our clients want the products, channels and service quality to which they have access outside the United States to be familiar and consistent with those in their home market.
As the largest commercial bank in the United States focused on mid-market companies1, we are very aware of the changing needs of this segment. While the largest multinationals already have a long-standing international presence, and indeed often rely on business outside the United States to drive growth and profitability, this is now a growing trend amongst mid-market companies, too, that historically have relied more on the domestic market. Fuelled by the global financial crisis in particular, mid-market companies recognise that their greatest potential for growth will be outside the United States and are therefore pushing ahead with expansion initiatives.
The lack of scale and resources compared with their larger peers is a particular challenge for mid-market companies. For example, while a FT-100 company may establish regional treasury centres with regional or even in-country cash management banks, smaller companies lack the infrastructure to achieve this and rarely have the resources to manage multiple banking relationships. Consequently, these companies typically prefer to stay with their primary cash management bank and seek its help as they approach new markets. It is important that treasurers and finance managers can not only access products, channels and services with which they are familiar, but that they can benefit from advice and guidance from a bank that understands their business and the markets that they are entering. [[[PAGE]]]
We have a client-led approach to international growth, and we have established a strong presence in the markets in which our clients are particularly active. For example, we have a strong, long-established business in Canada, reflecting the importance of trade flows between the United States and Canada, the world’s largest trading partners. Outside the Americas, we are active in key client markets including the UK and other parts of Europe, and we have a deposit, lending and trade business in China. With eight operating branches already established outside the United States, we are actively targeting new growth markets as our clients’ needs evolve.
We deliver cohesive solutions leveraging our comprehensive range of products, channels and services adapted to each local market.
We deliver cohesive solutions leveraging our comprehensive range of products, channels and services adapted to each local market. We go beyond supporting the relevant file formats and message types required in each market, such as BACS payments in the UK, to supporting the appropriate work flows. This allows local users to benefit from local standards and conventions, while the head office maintains consistent working practices, terminology and reporting across their domestic and international business.
Many international banks have expanded their geographic footprint through acquisition of local banks, which results in fragmented product and channel offerings that degrade the consistency of the global experience. Our international growth has been more organic, leveraging a single, integrated global platform built on innovative, modern technology. Because we don’t face the same legacy issues as many of our competitors, companies have a different experience working with us.
In some situations, our clients require more extensive presence in specific global markets than we currently provide. When that is the case, we tap the resources of our worldwide correspondent banking network. From hundreds of banks, we select partner banks for their ability to meet our clients’ local branch needs and deliver a consistently high quality of service.
For mid-market companies seeking efficiency and global visibility in expanding their geographic reach, the interoperability of solutions, channels and internal systems is critical. This is an issue of technology and reporting, but also of products. For example, transfers between different currency accounts are treated at Wells Fargo as book transfers rather than cross-currency payments, enhancing the convenience of our solutions considerably.
In addition to transaction and information channels, a relationship with a bank that understands the business, including its infrastructure, culture, ambitions and constraints is essential to an expanding company. In an environment where many transaction services are effectively commoditised, Wells Fargo is differentiated by the quality of our relationships and the strength of our services, both at a headquarters and local level.
Some of our clients are interested in leveraging SWIFTNet as a bank-neutral communication channel, and we are very supportive of this approach. However, these remain early adopters with little widespread interest in SWIFT amongst mid-market companies at this stage. Cost and integration effort remain major obstacles. For example, the cost of AllianceLite is prohibitive for many companies, and the cost of integration can be significant. Consequently, we expect most treasurers and finance managers of mid-cap companies to continue relying on proprietary bank channels for the foreseeable future.
Note
1 Defined as the percentage of companies with revenues of £25-500m citing Wells Fargo as their lead banking provider, Greenwich Associates, 2010
How Thought Leadership Can Reduce the Cost of Sales by Patrik Havander, Havander & Partners A focused attention on the costs incurred by the global sales and marketing processes is becoming increasingly important for corporate banks and their transaction banking departments. While the client/bank relationship remains vital, research has shown that in fact relationship selling […]
