Italian Businesses Seek Scalability and Efficiency for Growth

A weak domestic economy is forcing Italy’s corporates to look further afield. Although many Italian industries such as car manufacturing and fashion have a long history of exporting to foreign markets, some important sectors have yet to fully exploit their reputations for excellence overseas. At the same time, new technology is paving the way for expansion by improving the efficiency of treasury departments and payments processes – both internally and externally.

Part of this task is eased by the newly-harmonised payments landscape across Europe created last August by the launch of the single European payments area (SEPA). With both SEPA credit transfer (SCT) and direct debit (SDD) payment formats now the standard across the eurozone, the wholesale rationalisation of payments processes across the region is now feasible. On top of this, digital innovations such as ‘virtual accounts’ – where one physical account can be divided into a practically-unlimited number of virtual accounts – can greatly improve account management and liquidity optimisation processes.

As digitalisation and payments harmonisation promise efficiency gains in internal account structures, the same principle holds externally. Newly-developed customer-facing tools can create more efficient and simpler payments processes between corporates and their customers.

One example is MyBank, a pan-European initiative for e-commerce payments – also based on SEPA payment instruments – which is seeing strong support from Italian banks and a growing demand from Italian corporates. Taken together, these digital services drastically cut costs and improve reconciliation processes to near-perfect levels. What is more, they are easily scalable and make outward expansion a much simpler process.

Outward Bound

This is an advantage that many Italian corporates will take to heart. The country’s businesses have a long and storied history of looking outside Italy for growth; a trend that is closely linked to the strong competitive positioning they enjoy through the ‘Made in Italy’ brand. Research by UniCredit shows that the Italian shoe-making industry exports 90% of its total production. Other sectors of excellence include machine producers and pharmaceuticals manufacturers, which export more than 70% of total production.

Yet immense untapped potential remains in other sectors, such as the agricultural and food industries. Despite their reputation for excellence as well as their importance to the Italian economy, much of the production is earmarked for the domestic market with only 30% going abroad.

After years of building cash reserves during the post-2008 economic crises, many of these firms have the necessary liquidity on-hand to fund investments in more regions. New ways of managing internal accounts structures will not only boost the liquidity available to these new ventures, but increase day-to-day efficiencies through more accurate reconciliation and ease expansion in foreign markets with streamlined account management.

Easier Expansion

Indeed, many corporates are beginning to rethink their banking relationships and make strategic decisions about their cash management structures after having achieved full SEPA compliance. In general, this is a process of centralisation, and the main driver is to optimise and cut costs. By managing the entire account structure in one central location through digital systems such as virtual accounts, corporates can open up new capital for investment by optimising liquidity across the whole internal account infrastructure.

Moreover, the benefits go beyond liquidity management. By using a simple online account management tool, corporates can build more efficient and bespoke account structures. Unlike physical bank accounts, they can be opened and closed immediately – and they do not necessarily need to correlate to a legal entity. The ease of building out account structures as corporates expand will be a boon to many Italian companies that are looking to increase their penetration of foreign markets.

What is more, many corporates will find the risk management benefits increasingly useful as they expand into emerging economies such as those of Central and Eastern Europe (CEE). Because the use of virtual accounts drastically reduces the number of real, physical accounts operated, corporates are able to map their exposures across geographies more effectively. The information is all stored digitally, so it is now feasible to have full access to all of this information in every location. In addition, because reconciliation processes are automated in this central location, the man hours spent undertaking previously manual processes can be reapplied elsewhere.

Customers Also Benefit

These benefits can be combined with other tools and extended to customers. For instance, MyBank is an intra-bank electronic infrastructure that streamlines the SDD and SCT payment process for individual customers on e-commerce platforms. Instead of the bank developing its own, bespoke infrastructure for buyers, MyBank allows customers to jump directly from the e-commerce platform to their home banking page with the full payment information already present. All that remains is to authorise the payment. The automation of payment information means that reconciliation rates are almost perfect.

Thanks to its promise to boost the efficiency of payments processes for corporates and consumers alike, MyBank is seeing tremendous take-up among Italian businesses. As a pan-European system based on SEPA payment instruments, the opportunities for expansion into new markets and alignment with systems such as virtual accounts are obvious.

Through new innovations in payments processes like these – making them quicker, more accurate and easier to manage – the advantages of a harmonised payments landscape can be exploited to the full advantage of Italian corporates seeking to enter new markets abroad.

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