Sibos 2014: Is Corporate Transaction Banking Almost Here?

The assertion came from Axel Millar, a partner at the firm of Oliver Wyman, who led a panel discussion on the role of corporate transaction banking. This he helpfully defined as “how payments and cash management, trade finance and receivables finance shape the future of corporate banking.” As Millar noted, companies are steadily integrating corporate transaction banking activities and in the process the role of the treasurer is becoming much more strategic and creating demand for more sophisticated solutions.

Banks ignore this trend at their peril. As their lending capacity grows steadily more restricted, institutional investors are increasingly likely to step in to fill the shortfall. So the banks should be playing a greater role as intermediaries, which means becoming better at managing information and providing infrastructures for their corporate clients.

“We have to become trusted advisers in responding to corporates’ needs,” said panelist Susan Skerritt of Deutsche Bank. “DB is treating its products rather as a Lego set by putting the various components together in different ways to meet clients’ individual needs.”

“Given the regulatory dynamics and changes within the banking industry, fewer banks will in the future be able to fully meet the array of credit needs across the corporate environment. This means that corporate treasurers need to think carefully about which bank they choose.” Could there have been a subtle inference that the choice might lead them to Deutsche Bank?

According to fellow panelist George Nast, of Standard Chartered, convincing the corporate world that “transaction banking is sexy” is still a work in progress and “we haven’t quite got there yet,” although there is growing recognition that it can act as a risk mitigant in an era of continuous regulatory change.

Nonetheless, the attractive returns that it offers, added to the fact that it is steadily becoming more technology-enabled, is also sparking more interest in transaction banking.

Poll surprises

The result may well have been skewed by the fact that almost half of the audience at the session were representing the banking sector and less than one in four were from corporates, but when asked ‘Do you think a corporate transaction banking model will be feasible/realistic within the next three years?’ The response was ‘yes’ 75% to ‘no’ 25%.

Another surprise was in response to the question ‘Would you be willing to move to a global transaction banking (GTB)-led relationship without making the giving of credit the pre-requisite for allocating GTB business to a bank?’ With 53% saying ‘no’ and 47% ‘yes’, the result was even closer than last month’s referendum on Scottish independence.

Asked what they regarded as the greatest capability gaps for moving GTB to a more central role within the organization, voting for the five possible deficiencies offered was as follows:

  • Strategic positioning within the bank/corporation: 50%
  • Infrastructure capabilities: 33%
  • Co-ordination and integration with the corporate: 26%
  • People skills: 21%
  • Culture and self-understanding: 10%.

For more Sibos 2014 coverage:

Financial Empowerment for the World’s Poorest
Are the Costs of Regulatory Reform Too High?
Apple Pay, Cyber Risk are Game Changers
Will Banks and Businesses Embrace Bitcoin?

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