E-payments: Responding to the Customer as King

The continuing after-effects of the 2008-09 financial crisis are forcing companies to re-evaluate how they manage their business and, in turn, they expect more from their bank. Expect the issue to be well to the fore at Sibos 2014. Everyone agrees that the crisis was a massive blow to the financial services industry, but as banks worried about how they would fill the gap that was left in the lending market, their corporate customers were entering receivership in their thousands. Even the majority of those that survived still struggle to keep afloat, as margins continue to be cut.

Corporates moved from having a strong, single relationship with their account manager to being passed around a call centre on the other side of the globe. It is no wonder that bank ratings declined and new market players started to emerge. Indeed, the insights from 220 treasurers at major corporates in Temenos and International Data Corporation’s (IDC) 2014 survey, entitled ‘ePayments: what do corporates really want?’, demonstrate that as many as one in four respondents had already investigated alternative providers to banks for making payments. So unless banks start to focus on the customer, this statistic is set to increase.

Moreover, it’s not just new players that corporate banks need to be worried about. Larger corporates have the ability to start to operate their own internal banks and borrow from themselves. They could even run a payment from a local subsidiary, as opposed to through a bank, where an FX fee is involved.

Realising Payment Service Profitability

Recent market developments include an increase in the development of supply chain finance (SCF) products to support corporates in terms of cash management and liquidity services. This has not only led to corporates expecting value-added services, but can also demonstrate to corporate banks that there are more rewards to be reaped.

For example companies – particularly multinational corporations (MNCs) – face big challenges in managing thousands of suppliers across the world in many different currencies. A key market opportunity for banks is in the provision of finance for early payment of suppliers, allowing companies to extend their payment terms while sustaining liquidity. With an agile payment system, banks can build upon this need through new fee-based products. The products can be quickly and easily offered to customers to support dynamic payment management. With this level of control, banks can allow their corporate customers to decide when they want their payments to go out; to process them immediately or when they require; or enter and store the transactions for a later date.

Survival of the Simplest

It is not only products to support their business that will help banks deliver customer retention and profitability. As businesses become leaner, the need to justify spend grows and this includes bank fees. Transparency and clarity on pricing is essential, but all too often the systems that banks operate are overly complex and have many different facets. This makes it impossible to understand the costs for individual corporates and therefore harder to justify the associated fees. With an advanced payments hub, banks should be able to offer services that enable corporates to see the associated costs and understand what their transactional charges are. These services could be offered to corporates at an additional fee, or to support retention.

Customer Views add Value

One major benefit to banks is the ability to bring their disparate payment systems from all their regional banks together. This is a significant benefit to international corporate customers, enabling them to deal with a single entity for all payment types. Enterprise payment hubs, in particular, can provide a consolidated view of a company’s assets, including incoming payments and accounts payable. This can provide insight on overall liquidity or payment needs, payment flows, and payments to be expedited or delayed. In fact, the lack of a single consolidated view of all electronic payments and issues around accessing multiple systems were illustrated as areas where corporate treasurers felt they experienced the most amount of pain.

A universal solution also improves customer service. From a single point of contact, banks can handle any issues quickly and efficiently. Bearing this in mind, banks need to now look at running an advanced, universal solution or risk future customer dissatisfaction.

Making Big Data for Payments a Reality

In recent years, payment systems have allowed bank clients to look up current and previous balances with detailed and graphical summaries of individual and consolidated corporate accounts. This functionality can be used to support liquidity management, including understanding surplus/deficit values; viewing the last ‘n’ days balance summaries; average balances; interest rates on accounts and overdraft limits – all through intuitive dashboards.

A payments hub with predictive analytics takes this a step further, with the functionality to anticipate liquidity events over coming months and allowing decisions to be made. These tools can be marketed to corporate clients to support new revenue streams along with client retention.

Regulatory Change Affects Customers too

It’s evident that more could be done to support corporates when regulatory changes are made within a bank. Changes such as real-time payments and initiatives such as the single euro payments area (SEPA) and the UK’s Faster Payments (FP) scheme can add real value to a corporate and their customers, but all too often this opportunity is realised too late in the process.

Richard Gous, former head of payments at UK telecommunications group BT, illustrated this point: “The roll-out of FP saw the largest ever bank corporate migration in the UK. Real-time payments meant that BT could offer our customers the ability to instantly see if their bills had been paid, providing the reassurance that they wouldn’t be cut off that month.

“Yet despite this opportunity, banks didn’t consider the benefits to corporates and therefore we were behind the curve in being able to offer this service. It takes time to change back end systems to enable a feed like this; we could have offered this service from day one if we’d been involved in the FP roll out and I’m sure we weren’t the only business to benefit late in the day from real-time in the UK.”

So attendees at this year’s Sibos can expect these topics to be covered off and more. The opportunities through new payment services for corporate banks and their customers are huge. It is now time for banks to work together with their customers. Temenos designs solutions by banks for banks; perhaps the banks could consider designing with customers for customers?

A Broad Canvas

Sibos 2014 offers at least 15 sessions that review customers’ needs. They include the author’s own session, which presents the findings of her company’s recent electronic payments (e-payments) survey to corporate treasurers. Continuing this customer focus, at least one of the other sessions – on virtual currencies – will cover their potential benefits (and risks) to the international corporate customer.

These benefits can include removing the need for foreign exchange (forex) charges to pay overseas staff and even relieving the company’s need for a bank account and its associated transaction fees. This could be, for example, via virtual funds being stored electronically and traded for other market currencies through online FX portals, thereby ultimately minimising storage and transaction costs. However, the issues of poor liquidity; the risk of no formalised market; security vulnerability; and the inability to hedge risk exposures need to be covered within the agenda, in order to get a real picture of the impact of this new currency to businesses.

This year’s Sibos could distinguish itself as the year when finally there is unanimous agreement that the customer is really king.


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