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Will transaction banking please step forward?

22 March 2011 2 comments

Craig Ramsey

Head of Real-Time Payments

ACI Worldwide

The provision of payments is a fundamental function of banking, practically as old as money itself. But since the introduction of cheques more than 350 years ago, the payments landscape has been evolving continually, due to changing customer requirements, competition, legislation and technology.

The speed of change has increased in recent decades, putting more and more pressure on the banks, but the function of making and receiving payments has never really had its time in the limelight. But now things are changing, with a renewed focus on payments and the revenues that can be generated from what is a stable and relatively predictable business line, with growing volumes. However, legislation such as SEPA is driving down the per-transaction revenue that can be generated, so to be successful and stand out from the crowd, banks need to apply their expertise on their customers and the market to create propositions that add value to basic payment processing.

One key example of this is in the corporate payments world. For businesses, payments are of little interest in themselves, they are part of a bigger picture of transactions being completed, and also the wider liquidity position of the organization. Banks need to find ways to add value to their customers, for example by making payments easier to initiate and available at short notice; by providing real-time reporting and management information; and by offering a consistent payment experience globally – and many banks are looking externally for an experienced partner to help with this process.

Anything that banks can do to add value to their corporate customers, and build a relationship that is more akin to a partnership than a customer/supplier, then the greater the opportunity for the bank to continue to run its payments function as a revenue generator.

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Comments: (2)

Ketharaman Swaminathan Founder and CEO at GTM360 Marketing Solutions

23 March 2011

Cross border small business payments is an area where banks could really add a lot of value. More than being a tool to complete a transaction, payments could actually make or break a transaction, especially when it comes to low value high volume products and services. With regulators in certain parts of the world (ex: India) clipping the wings of PayPal and other alternative payment providers - for all the right reasons IMO - this is an area that offers an excellent opportunity for transaction banking businesses of banks to step in and acquire a new revenue stream.

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Enrico Camerinelli Supply Chain Blockchain Personal Coach at Aite Group

24 March 2011

Interesting debate. TB does not stop at payments, though.

Wat follows is an article I posted in September 2009 on the Celent (my company at that time) blog:

SCF is dead. Long live GTS

Two years ago at SIBOS most of my interactions were around the topic of what was SCF (Supply Chain Finance). Banks were truly interested to know more about it.

Last year, at SIBOS in Vienna, the conversation was on what banks had ready (or almost so) to go to market with their SCF products and services. The questions were about pricing and what technology was best.

This year, at SIBOS Hong Kong, SCF was “missing in action”.

Apparently the term is not so “catchy” any longer. Major cause, in my opinion, is because SCF has been always confused with Supplier Finance (i.e., invoice-centric, post-shipment, payables financing). This has relegated the entire area to a subset of Trade Finance, at the very best at the same level as LC’s (letters of credit).

When I was almost there to surrender to frustration (SCF is one of my preferred areas of coverage – read my reports Supply Chain Management: A Source of Corporate Liquidity and Business Models for Supply Chain Finance Services) to my rescue came the panel with the heads of Global Transaction Services (GTS) from Citi, HSBC, BofA, Deutsche Bank.

Well, what they were taking about as the “next big thing” was, guess what?, Supply Chain Finance services. They just used a different tag: GTS.

This is not to say that GTS is a new invention. What is new, I feel, is that the services under the GTS “umbrella” (cash, trade finance, payments, FX) will be ever more offered in bundle, to cover the financial supply chain needs of corporate clients.

Bottom line for banks

SCF is not (only) supplier finance
GTS is the name of the game
Internal organization, knowledge of business processes, and technology investments are the pillars

Bottom line for corporations

Start comparing banking offers under the light of their ability to cover the larger spectrum of the procure-to-pay and order-to-cash processes

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