Can You Have Your Corporate Cake and Eat It?

The subject of “Innovation in Financial Services” seems to highlight a real and present danger that many senior bankers are struggling with... i.e. how to achieve the “plumbing” and innovate simultaneously, in particular around the corporate financial supply chain...

Did you make it to SIBOS this year? Well, the good news was that SIBOS focused a great deal on new services to corporates around the financial supply chain.

The bad news, however, was the comments by corporate representatives at SIBOS that banks “must develop a deeper insight into treasury back office and IT processes if they want to play a bigger role in the financial and physical supply chain”. As Linda Smith from JPMC pointed out in her blog, “this does not imply we have the trust to migrate our customers to new SEPA products and the further innovative solutions expected to provide banks with the hoped for revenue streams.”

Meanwhile, Finextra recently published a market intelligence report entitled “Practicalities of building a SEPA Payments Business” that revealed some interesting findings regarding bank migration and delivery, customer adoption, expectations of core services and also potential value added services.

While at SIBOS, I spoke to a number of senior bankers who expressed a common concern that their IT budgets were being spent on delivering the “plumbing” and that, while this was of course important, they would rather spend a bit more in order to include innovation and enhanced customer experience and therefore revenue generating services.

This view seems to be borne out by the Finextra survey. With 60% rating a single channel (SEPA and non-SEPA payments), and 52% rating reformatting of non-SEPA messages as either most or 2nd most important value-added service, aren’t these just features of “plumbing”..?

In comparison, only 26% rated corporate cash management, and only 16% rated electronic invoicing as either most or 2nd most important value-added service. But aren’t these the areas where innovation and enhanced customer experience and therefore revenue generating services come into play..?

The European Association of Corporate Treasurers (EACT) estimates that the introduction of electronic invoicing has the potential to reduce supply chain costs by up to €243bn across Europe. This sounds to me like an area where corporates have already worked out an ROI for investment in an enhanced service offering from their bank(s).

So how does a bank achieve the “plumbing” and innovate simultaneously..?

* WARNING * what follows contains some technology mumbo-jumbo…

Corporate Financial Supply Chain Services

Key here is to achieve a two fold revenue enhancing effect without impacting existing systems:

• Delivering new innovative and extended corporate services
• Increasing the number of services taken-up per corporate customer

Picking a vendor with mature experience in physical supply chain integration will assist faster development and deployment of differentiated offerings and SLAs per corporate customer.

Such a solution should have the ability to accommodate connectivity through any protocol and/or format, e.g. SMTP, EDIINT (AS1, AS2), FTP, FTP/S, HTTP, HTTP/S, ebXML, SOAP, JSP (Webforms), EDI / XML, SSH, and Connect:Direct, dramatically improving adoption rates of services.

In addition, standard ERP adapters to the likes of SAP, Siebel, Oracle, etc… would allow the bank to facilitate new physical and financial supply chain integration service offerings.

Corporate Customer Experience

Customer satisfaction can be increased significantly through:

• Quicker on-boarding and simplified management using standard customizable wizard driven user-interfaces
• Improved proactively monitored service levels
• Flexibility to accommodate customer protocols without dictating technology requirements

Look for a solution who’s capabilities are exposed as services and orchestrated as processes enabling customised and adapted transaction flows, for example: Data bulking and de-bulking to aggregate and split invoicing or payment data as required and deliver automated least-cost routing selecting the lowest-cost carrier.

Customised predefined web forms with role based security allow Web-based self-serve portals to provide corporate customers with views into their transactions as they flow through the bank – answering the “where is my..?” question without contacting the bank.

Internal Visibility & Control Hub

A solution that supports a choice of query, reporting, and OLAP tools will deliver speedy and cost-effective reporting and online visibility. This, combined with complete historical and real-time visibility provides for:

• Rapid exception detection and resolution
• Comprehensive management reporting and compliance

• Normalized data communications between internal / external protocols / formats
• Centralization of common services create a “change it once” environment to expedite and reduce costs of regulatory and standards changes

Process efficiencies can be achieved with unattended 24x7 operations together with the ability to monitor SLAs and pre-empt bottlenecks through early warning alerts systems thus reducing risk and potential penalties.

The wider the range of standard back-end application adapters and the greater the ability to build APIs to replicate legacy connections the better, as this helps accelerate change management and avoid modifications to core systems.

Such an approach means that existing and/or target architecture can remain undisturbed as translation between applications, networks and platforms is achieved using adaptors that simplify application integration. SOA and web services allow seamless and rapid integration with other SOAs and ESBs.

De-risking Technical Implementation

If an integration platform with the above characteristics is chosen, providing both internal (EAI) and external (B2B) integration solutions, then its component based architecture will allow a strategic integration platform to be implemented for one tactical project, or phase, at a time with the opportunity to leverage the same engine for future integration projects.

By using the latest technology as a platform, scalability and load balancing, security, and transaction management will be provided. With a business process-centric architecture at the core, utilising a robust BPML, seamless and incremental migration from legacy to new applications and major reductions in implementation costs will be achieved. Lastly, if XML is used natively throughout the solution then this will facilitate rapid integration to other systems.

It's not a secret recipe, but it is one that requires some innovation even in he phase of selecting the right vendor... and so, to come full circle… maybe by thinking a little out of the box and implementing the right new connectivity solution it is possible to have your corporate cake and eat it…