Transaction Services Survey Reveals What Corporates Really Want from Banks

Against the backdrop of the credit crunch and recent market uncertainty, corporates are concerned about the reliability of bank transaction services. A robust corporate-to-bank relationship is vital and banks must demonstrate a comprehensive understanding of their corporate customers’ expectations and requirements for transactions services. The recent gtnews survey, commissioned by VocaLink, highlights what corporate treasurers really want from their payment services providers in the current financial climate.

What Matters Most in the Selection of Payment Services Providers?

The survey asked respondents to prioritise five key considerations from a choice of nine when selecting a payment services provider. Understanding the needs of the treasury function was highlighted as the most important selection criterion. This clearly indicates that corporates expect payment services providers to demonstrate a true understanding of their business needs.

Understanding business needs

In the current financial crisis, corporates are facing higher risks than ever before and they are raising questions around the financial viability of their businesses. Principal concerns include liquidity, the availability of credit, guarantee of payment (both to and from the business) and the ability to reach and be reached by their own customers. The payments industry needs to develop and address all of these concerns through the tools and products it offers.

A good example of this is mitigating counterparty risk, i.e. guaranteeing that a transaction will be completed at both ends of its lifecycle. In the UK, the Faster Payments Service, launched in May this year, has substantially reduced the chances of an error occurring in the time between the transmission of a payment, its execution and the arrival of funds. Faster Payments removes risk by reducing the time of the transaction to a matter of seconds and by putting in place assessment models so that the bank can guarantee the money at both ends of the transaction. From the end-user’s perspective, this increases security and reduces counterparty risk, which is more in tune with today’s business requirements. Significantly, Faster Payments also increases the flow of funds and liquidity within the economy, as money is transferred quickly allowing it be reallocated and used immediately.

Another important way that banks can support their customers is by helping them manage their own payments more effectively. VocaLink helps banks to do this in the UK, running the Bacstel-IP1 service for the Bacs Scheme, and in Europe with a payments capture service. Both services are offered by banks to allow corporate customers to submit payments according to their own schedule directly from their ERP system into the bank’s system. One factor that is not visible to corporates is that they are not just submitting payments directly into the bank’s system but also the VocaLink system. This service is white-labelled and VocaLink accepts the payment directly from the corporate and processes it on the bank’s behalf. From the corporate’s perspective, this provides far greater control and visibility in terms of payments management, as well as advanced reporting functionality. From a bank’s perspective, this service significantly reduces cost and risk.

The drive towards standardisation through initiatives such as the single euro payments area (SEPA) and the Payments Service Directive (PSD) is another reflection of how the industry is adapting to meet the business needs of corporates. SEPA provides the framework to allow corporates to submit payments via a single channel for delivery across Europe – eliminating the complexity of using several different systems that have to interact according to different country and payment scheme requirements.

The introduction of SEPA is a significant industry development that needs to be supported by applications that help companies derive tangible benefits. A payments capture service, for example, allows corporates to benefit from standardisation within the industry by facilitating the consolidation of banking activities and to establish a single, standardised channel and reporting and cash management operation.

Transaction costs

Corporate respondents selected transaction cost as the second most important factor in the selection of payment services providers. The ability to use a single payments channel with one bank across several countries, as described above, will enable the bank to charge corporate customers based on total business volume – not just one part of the business in one specific country. This will ultimately mean better value for money and economies of scale for corporates.

Speed of transaction processing and cut-off time

Cash and liquidity are important considerations for corporates. It is, therefore, not surprising that the speed of transaction processing and cut-off times were noted as the third and fourth most important selection criteria. Real-time processing and clearing functionality will also help to reduce the dependency on debt and overdrafts – a strain that many corporates are dealing with right now.

What Do Corporates Value Most?

The survey asked respondents to select their three most important features, from a list of six, to understand which ones are most beneficial in terms of a payment services provider. Two features tied for first place: 51% of all respondents cite real-time payment tracking and the ability to meet all needs from a single bank relationship to be of most benefit to their organisations.

Figure 1: Which Services are Most Beneficial to Corporates?

Until now, it has been almost impossible for an individual bank to offer a range of payment services across multiple geographies and multiple business areas. This is due to the high number of payment schemes (over 50) throughout Europe and the complex legacy systems environment that delivers them. SEPA creates an environment where standardisation and pan-European harmonisation will make it much easier for banks to offer a consolidated proposition.

In addition, even if a bank only operates in one country, working with a payments partner such as VocaLink means it can offer payment services to a variety of countries through the use of our services and functionality. Furthermore, VocaLink will be able to develop common service propositions that work in many markets rather than just one. If you consider the services on offer in the UK and then compare these to similar bank services in another country, they are fundamentally different because of the local schemes and infrastructure in place. Standardisation across Europe has enabled us to develop propositions on behalf of banks and deliver them at a low cost. We are already working with banks that want to expand their reach – not just in terms of getting a payment from A to B, but also in terms of offering value propositions to corporate customers that are relevant in more than one country.

Transaction tracking in real-time

The survey also reveals that, in the area of real-time payments tracking, corporates want increased visibility over their payments (particularly cross-border), such as information on when beneficiaries will be paid and the status of payments. Business operates in almost real time so it is reasonable to expect the banking industry to facilitate a corporate’s business in real time. Corporates want to be able to track their payments accurately with the ability to be absolutely certain when a payment is going to arrive and therefore know at any given time their exact cash flow position.

Currently, a company that is operating multiple currency accounts with multiple banks has (at best) a 70% accurate view of their liquidity position. The ability to offer real-time payments tracking is an incredibly valuable service at a time when credit is in short supply. Internationally, we believe the industry’s focus will be a real-time clearing service and the further development of payment capture services, which provide corporates with an interface to view the exact status of all payments.

Invoice and payment reconciliation have been on the agenda for years so it is not surprising that is this is the third most important service selected by 45% of the survey’s respondents. As an industry, until recently, we haven’t had the capability or standards in place to support invoice and payment reconciliation, as it is not just the payment that needs to be tracked but, more importantly, the accompanying information that is significant. Increased standardisation has improved our ability to attach more information to a payment and therefore offer invoice and payment reconciliation capability. Coupled with the ability to offer real-time payments tracking, these services will provide corporates with the ability to interrogate their data and produce management information based on it.

Connectivity is key

Around 35% of the corporate respondents said that standardised corporate-to-bank connectivity is important. SWIFT is a fundamental player in this space and our relationship with the co-operative in terms of being able to offer standardised connectivity, and the ability to tap into any bank and on behalf of any bank, is crucial in being able to offer single channel services. At SIBOS in Vienna this year, for example, we entered into a strategic partnership with SWIFT, which further supports our proposition of a single channel for submission of any payment from our clients to any of our other clients using the SWIFT network.

In addition, in the UK, using the Bacstel-IP model, over 100,000 corporate users are actively submitting payments into our system. This model has proven to be an attractive proposition for corporates and has saved the banking industry on average £200m a year in terms of reduced processing overheads. This, in turn, has enabled banks to offer other value-added services to their customers. SWIFT is a key enabler of this service and its network will underpin our efforts to rollout the model across Europe and internationally.

Easy ERP integration with banking partners was highlighted by 34% of the corporate respondents as an important service and 14% pointed to format conversion services. Corporates need simplicity without dealing with multiple formats, and they also want a system that is compatible with how they run their business and existing systems. Providing a payments system where corporates can submit their payments in the format they currently use and understand is of massive value. For instance, VocaLink offers a routing and conversion service that can translate any format (assuming the data that has been submitted is compatible) on behalf of the corporate and send it on ensuring that the payment will be received and accepted.


Payment services providers must demonstrate a deep understanding of the current and strategic business needs of corporates through the services they deliver. It is clear that corporates want their payment services providers to build applications that will support their business strategies, such as real-time payment systems, advanced direct debit services and payment capture capability. These are areas where VocaLink has already invested significantly to help banks provide corporate customers with relevant and immediate business benefits – enabling them to grasp opportunities arising from industry developments, such as SEPA.

The survey highlights consistent themes around standardisation, reconciliation and real-time reporting, as well as the fact that corporate treasurers want more real-time payments information and a single line of sight along the payments value chain. There is no question that payment services providers need to be innovative and anticipate the needs of corporates. It is this understanding that will determine which payment services providers are best placed to offer the services that their customers will require in the current economic climate and beyond.

1BACSTEL-IP is a registered trademark of Bacs Payment Schemes Limited.


Related reading