Cash Management in Australia: Connecting East and West

We are all witnessing unprecedented changes in today’s global economy. As the US struggles with record debt levels, the EU works to manage the largest challenge since the economic zone was formed, while Asia continues to build on its economic strength led by China and India.

Australia enjoys the enviable position of being a developed economy that is well connected throughout the Asia-Pacific region, as well as drawing on its strong historic ties with Europe and America.

I believe that Australia is critical to the future growth of all countries that make up the region. As a regional leader, Australia offers a depth of experience and innovation in global economics and banking, together with local connections and knowledge in these countries. In particular, Australia can bring key banking services to developing economies in Asia and the Pacific Islands.

With the global financial crisis leading to the evaporation of capital sources that were previously readily available to corporations, funding vehicles that had seemed limitless were suddenly and dramatically reduced. This resulted in many corporations ‘slamming on the brakes’ and now looking to access new markets – particularly in the Asia-Pacific region.

It’s challenging treasurers and chief financial officers (CFOs) globally, leading to a dramatic change in various approaches to cash management.

Corporations are renewing their focus on sound financial management to leverage and optimise their cash flow, as well as working diligently to maintain profitable buyer and supplier relationships. It’s demanding both corporations and banks to deliver innovation and efficiency in payments, collections and liquidity management. I see this as a great opportunity for corporations and banks to come together and excel.

Australian Banks Collaborating and Innovating

The Australian banking industry is dominated by four domestic banks that weathered the financial crisis, as a result of efficient regulation and strong cash management practices. It’s a fiercely competitive environment with many players, including domestic and international banks and other payment service providers, driven to continually offer innovative products in the market. In many ways, Australian banks are playing catch-up to the international banks that have established sophisticated capabilities across a broad geographical footprint.

Key banking regulators and industry bodies have, and will continue to have, a crucial part in the Australian banking industry. They’re trying to drive innovation while the payment suppliers lead the way, leaving banks somewhere in the middle. This puts banks in a good place to collaborate with each other in the development of a world leading payments and cash management industry.

Some of the key innovations in the history of the Australian payments and cash management space include over-the-counter (OTC) bill payments, drive-through branches, high-tech payment networks and telephone/internet banking solutions for both consumers and corporations. Australia also remains connected to global finance and banking innovations, such as the SWIFT network.

Of particular significance is the BPAY scheme launched by the Australian banks in 1997, providing one of the most sophisticated consumer collections infrastructures in the world. It has delivered significant cost savings and driven the rapid decline in consumer cheque payments. This infrastructure allows payer information to travel with the electronic value exchange, allowing sophisticated payer identification to be automated by the receiver. The scheme has seen linear growth for the last 14 years and is making significant inroads into the business-to-business (B2B) payments market. It has also allowed rural areas to access the broader economy.

At the same time, Australia participates in global card schemes to connect a geographically dispersed economy and overcome the traditional limitations of bricks and mortar banking infrastructure. Such schemes have been very successful in Australia due to the incredibly low credit card interchange fees charged. However, Australian regulatory bodies, including the Reserve Bank of Australia (RBA), are now trying to find a healthy balance between innovation and regulation. They’re showing concerns about the impact of new contact-less card innovations from global card schemes on domestic solutions.

Leapfrogging Into the Future

Although Australian banks are coming to the game slightly later than the international banks, it does provide them with the opportunity to surpass them and not simply catch up given the advanced technology choices we have today. This technology can revolutionise the banking experience for both consumers and corporations.

However, one of the key challenges for Australia over the next few years is the ability for banks and regulators to move forward together and quickly on the innovation front. There have been a few false starts and not everyone agrees on what must be done. What’s clear is that a domestic-only approach will not meet the needs of consumers and corporations, as they source and distribute their goods and services from an increasingly global market.

Payments and cash management solutions must provide connectivity. They need to facilitate the connection of consumers, corporations, banks, buyers and sellers across geographies. They must also respond to the growing demand for ready access to reliable, valuable information to make proactive business and financial decisions.

Conclusion

Looking at the vast opportunities within the Asia-Pacific region, Australian payments and cash management providers can lead the way in sharing best practice, driving innovation and maximising the returns. By bringing simple and effective services to developing economies, and at the same time, offering technologically sophisticated solutions to corporations operating in advanced economies, they can connect the new engine of global economic growth.

Moving beyond the region, Australia is already connecting east and west. Australia has economic, social and political ties to every major western economy and is strongly positioned to help them access growth markets in Asia and the Pacific Islands. The Pacific Islands are quickly growing in value and providing corporations with broader reach within the region.

Many local, regional and global corporations have recognised this and are looking for partners in the payments and cash management space to connect their business to opportunities in the region. That’s why Australia and its leading financial institutions are at the forefront of taking sophisticated payments and cash management practices into the region.

With a focus on innovation delivery, and the strength of our geographic connectivity, Australian banks are definitely up for responding to the challenge.

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