Treasurers must have greater interaction with their sales and marketing teams under Europe’s revised Payment Services Directive (PSD2), argues Dick Oskam, head of transaction services, ING Wholesale Banking.
The regulation, effective from 2018, will change the cash management landscape significantly, Oskam told GTNews at this year’s EuroFinance conference in Barcelona.
Over the last decade, payments and cash management have been focused on payment fees and interest rates but PSD2 will bring a third element in, according to Oskam.
“Data will become the centre of gravity for the banking business model. That process will start with PSD2 next year,” Oskam says.
“We can say we want to use data but if consumers are not willing to share data then PSD2 is not going to be hugely successful”
“Useful data often goes between the bank and corporate’s treasury. Payment data gives a wealth of information to a company that can be used by the marketing and sales department.
“That requires the treasury to start interacting with those departments – they will need to have a better understanding of the requirements of their sales and marketing departments,” he says. This does not mean treasurers are not already communicating, but collaboration can be difficult if treasury is already working at maximum capacity, Oskam explains.
“I’m constantly impressed with the amount of work and responsibilities treasurers have with such few resources. That is not going to change,” Oskam adds.
PSD2’s biggest challenge
Under PSD2, the biggest challenge that governments and banks face is that the general public does not know what PSD2 is about, Oskam argues.
“We can say we want to use data but if consumers are not willing to share data then PSD2 is not going to be hugely successful,” he says.
“Both governments and banks need to explain what PSD2 is about, what it means to consumers and how the central function of banks (which in my view is trust) is going to be retained. Consumers need to feel comfortable with banks managing their data. The most important factor is that consumers are in control. They own and control their own data– not banks or any other parties,” he adds.
Centralising cash means capitalising data
Oskam is an advocate of centralising the treasury function via virtual bank accounts.
Last year, ING launched ‘Virtual Cash Management (VCM)’ – a cross-border digital cash management solution for corporates operating in Europe.
“Where clients have already invested a lot into payments on behalf subsidiaries, this system also enables collection on behalf of subsidiaries,” says Oskam.
“The VCM centralises all of a business’ cash in Europe in one bank account. It also enables you to fully centralise your payments across Europe, your payment on behalf and collections on behalf and then route them through the virtual IBAN bank account,” he explains.
By keeping all cash and in and outgoing payments activity in one unit businesses can reap a lot of benefits in terms of foreign exchange (FX) management, interest rates and also data, according to Oskam.
PSD2 and open banking regulations will enable corporates to request their main bank to operate some non-core bank accounts on their behalf.
“We can initiate payments through APIs with another bank but we can also get real-time data on non-ING bank accounts. That means that a client is able to full make use of all the data that their business generates across Europe and across third-party banks in one single place.
“I think PSD2 will eventually enable our clients to optimise and develop new business models to service their clients. That is what this all about,” says Oskam.
Can you trust your bank with foreign exchange risks?
It seems that many treasurers rely heavily on their banks for advice when it comes to hedging foreign exchange (FX) risks.
When asked whether this was wise, Oskam said he does not see this as problematic: “Nobody can predict FX perfectly. It is predicting the future which is a difficult thing,” he says.
However, he argues that the VCM solution is the next best thing as it gives treasurers the opportunity to concentrate all of their currencies in one single location.
The master account is then located in a stable AAA-rated country such as the Netherlands or Germany.
This enables treasurers to better facilitate their FX position rather than swapping or hedging exposures.
For example, “we are ensuring you can use the dollar exposure for subsidiaries that need to make dollar payments,” says Oskam.
“I am not going to claim that we can predict FX rates better than anyone else but I think this is the best way to manage your position,” he adds.
While GDPR and Europe’s revised Payment Services Directive (PSD2) are not contradictory, the fact that the regulators and many banks work on them in silos is problematic, AccessPay executives argue.
In the years following the financial crash, we have seen record fines for those firms failing to achieve regulatory standards. The cost of non-compliance now outweighs anything that might be gained from cutting corners. This means there has been an increasing demand for technology solutions that support compliance, and with it the creation of a whole new specialist sector.
As companies work to grow their businesses, many turn their attention to opportunities overseas. However, international expansion is not without its challenges – particularly where corporate treasury is concerned.
One of the biggest challenges banks and corporates face is identifying their customers so they can comply with Know Your Customer and other regulatory requirements. GTNews spoke with Know Your Customer Limited co-founder, Richard Barrett, about the complexities of KYC and how technology can solve these problems.