Published: February 01, 2012
Diane Reyes joined HSBC as Global Head of Payments and Cash Management in September 2011, building on a highly successful career at Citi. In this article, we are delighted to feature Diane’s views on trends and opportunities for technology in the payments and cash management space.
The most significant issues that we see clients seeking to address remain in the liquidity arena. Although this is not a new trend, there has been a subtle shift over the past year or so. Before the crisis, investment yield was an important priority within companies’ cash investment strategy. The global financial crisis resulted in a seismic shift in priority, as preservation of principal and liquidity became predominant themes, and yield no longer figured as the primary consideration. Over time, we have seen a gradual rebalancing of priorities. Principal preservation and timely access to liquidity remain crucial, but treasurers are now focusing on their ever increasing cash holdings.
Treasurers’ need for yield has developed during a period in which the available instruments has become constrained. The Eurozone Sovereign debt crisis and ensuing downgrades have caused treasurers to re-consider guidelines regarding acceptable counterparties and instruments that comply with investment mandates. Additionally, concerns about the sponsors of MMFs, the challenges of monitoring composition thereof, and the relative cost/return have resulted in a lower appetite for passive investments into pooled assets. In order to achieve the desired return treasurers extended the maturity of their cash portfolio, using an actively managed array of deposits and selective purchases of qualifying securities. The extension of maturity has put heightened pressure on corporate treasurers’ to ensure they have the appropriate visibility and control of their operating cash, so that they can meet their daily requirements while being able to invest on a longer-term basis. As a consequence, more treasurers are using multi currency cash concentration and pooling techniques to enable them to streamline their funding process.
This more proactive approach to cash investment applies not only to our large corporate clients, but also mid-cap companies. Few corporations can boast large treasury departments, so they need to achieve a high degree of efficiency and automation in their cash and treasury management activities so they can focus on decision-making rather than collating and processing data.
Multi-bank connectivity and interoperability, and standardisation of file formats are key to achieving these objectives successfully. Treasurers only want to set up a process once, and then roll it out across their banks. Consequently, initiatives such as ISO 20022 standards for financial messaging, as well as bank connectivity through SWIFT are gaining traction.
For example, while early adopters of SWIFT connectivity were typically large multinationals headquartered in Europe or North America, companies from every region, including both large and mid-cap corporates, are now leveraging lessons learned by these companies and are able to implement SWIFT connectivity quickly and cost-effectively. This reflects a universal desire to implement industry best practices and ensure a global approach to cash visibility and control.
Not only are interoperability and standardisation initiatives positive for corporates, but banks also benefit. In the past, a great deal of resources have had to be invested in supporting a wide variety of customer-specific file formats. Increasingly, investment can be channelled into genuine innovation and enhancing the customer experience.
There is an important, but often hidden investment to be made in contingency planning, for both natural disasters and major economic events. At HSBC, we spend significant time and resources on modelling different scenarios and ascertaining how our customers would need us to respond. As we are all aware, market change can happen very quickly, so we need to be prepared. Additionally, a portion of technology spend has to be dedicated to regulatory compliance and to maintaining and upgrading infrastructure.
Beyond these essential investment priorities, discretionary spend should be invested in initiatives that bring true value to customers. However, not every customer has the same requirements or priorities, so a valuable innovation for one customer may be of little benefit to another. Furthermore, it is rarely in the interests of a corporate customer to introduce a tool in one country or region that cannot be rolled out more widely, as this leads to fragmentation of processes and differences in the way that information is reported.[[[PAGE]]]
Consequently, at HSBC we have a global approach to our solutions and services so that customers can enjoy a consistent experience across the entire reach of their operations. We have a strong commitment to major initiatives that contribute to a positive customer experience, such as corporate connectivity to SWIFT, standardisation through ISO 20022 and electronic bank account management (eBAM). However, we also recognise the value of smaller innovations that may initially appear more peripheral but which can add considerable value.
Since joining HSBC in late-2011, I have been delighted to see so many proactive initiatives that directly enhance the customer experience. Cash and liquidity management projects are often conducted across regions and departments, with different business, requirements, stakeholders and time zones. Achieving a common understanding of the project status and access to relevant project information can therefore be challenging. Often there are different versions of project plans and status reports in circulation, and meetings and conference calls among different work streams and management are often spent trying to reconcile the project position.
I have been very impressed by customers' response to ClientSphere
It is not unusual for banks to have internal project management tools that they use to align project plans and documentation across their own teams. HSBC went one step further, however, by launching ClientSphere, a web-based platform which allows the entire project team, including both customer and HSBC personnel, to share the latest updates, revise project plans, documents and status reports. By promoting a consistent view of information, all stakeholders can work in close collaboration, with the same reference point and common understanding of goals, constraints and deliverables, at whatever stage in the project they become involved, and regardless of location and organisation. ClientSphere was first introduced in Asia but it has now been rolled out and commercialised globally, benefitting customers in all regions. In an environment where banking products have often become commoditised, I have been very impressed by customers’ response to ClientSphere, as it provides a genuine differentiator, and reduces project risk whilst enhancing customers’ experience during implementation projects that can often be complex and challenging.
Mobile banking is another example of innovation that we have rolled out across our customer base globally, but that customers use in different ways according to their needs and priorities. Our flagship global communication platform, HSBCnet now enables mobile access to a range of services such as approvals and payments across all regions and customer segments. For some customers, mobile banking across a full range of services is extremely valuable, such as those with dispersed finance operations. For others, mobile access may simply provide convenient approval or oversight capabilities.
Five years ago, most companies issued quite broad requests for proposal (RFPs) for cash management. At that time, many treasurers were struggling with fragmentation of information and processes which they could really only address by appointing a single bank for cash management either regionally or globally. Today, with greater opportunities for integration, more companies are tendering the liquidity component separately from accounts payable and/or receivable. For example, it may be appropriate to appoint a local bank for domestic payments and/or collections in countries where an extensive branch network is required. At the same time, they are seeking a regional or global approach to liquidity to create economies of scale and allow visibility and control over group cash. For this reason and others, HSBC is focused on providing products and services that are globally adaptable and consistent while introducing technological advancements that enhance the overall customer experience.
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 […]
