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The Integration of Cash and Trade Becomes a Reality

by Markus Wohlgeschaffen, Head of Global Trade Finance & Services, Global Transaction Banking, UniCredit

One of the most frequently recurring themes in global transaction banking is the increasing integration of cash management and trade finance products. A recent case study from one of the largest transaction banks in Europe, UniCredit, and a big multinational corporate has now proved that this is not only possible, but also brings tangible benefits to both corporates and financial institutions.

A best practice example for the integration

A client, in this case one of the world’s leading manufacturers in the pharma and health care sectors, approached the bank for help in rolling out a supply chain finance programme in Central and Eastern Europe. Despite the broad geographical scope of the project, the real challenge was not the required breadth of banking network, but rather the depth of internal integration that the client asked for.

The multinational client had already mandated UniCredit to manage its entire outbound payment flows in the large and heterogeneous region of Central and Eastern Europe. Thanks to the advanced cash management solutions of the bank, the giant pharma company was able to concentrate its numerous payment streams in one single, highly efficient payment factory in its central treasury, located in continental Europe. The centralised unit aggregates all payment instructions from the European subsidiaries, validates them and sends them via a unique electronic interface to the bank. The financial institution then transferred the funds to hundreds of suppliers via the local clearing and settlement systems in their respective countries. Having reached a high degree of automation and maximum efficiency in the management of its payables, the corporate requested the bank to add a supply chain finance functionality to the solution, without interfering with the straight-through process for normal payments.

To realise the customer’s requirement the hurdle of achieving the convergence of cash and trade had to be overcome.