Banks Look to Consolidate Payments, Cash and Trade Silos

17 Sep 2008

More than three quarters of the banks surveyed in the recent survey from Misys and Finextra Research said they were looking to consolidate payments, cash and trade into a single function under the banner of transaction banking, but the delivery of a joined-up service is not there yet. According to the research, which polled over 100 banks in 32 countries, respondents were looking to provide a more efficient service to its corporate clients by breaking down these legacy silos.

The research found that a majority (57%) have already taken steps to restructure their organisations, bringing together trade services, cash management and payments services as a single offering. A further 19% have plans in place for specific transaction banking units within the next 12 months.

Despite these changes, 45% of respondents - including half of those who have already restructured - believe existing customers rate their services as no better than average, suggesting either that the new structures have yet to bed in or that other difficulties prevent them from reaching their potential. "It is still early days in terms of the consolidation of these disparate silos," said Edward Taylor, global head of public relations at Misys, in an interview with gtnews. "But the pressure is on because corporate clients are demanding more from their banks. Corporates are not seeing enough improvement in this service offering."

IT complexity is seen as the biggest obstacle to transaction banking plans ahead of 'domination of global banks', cited by 55% and 40% of respondents respectively. At the top of the list of technical problems that banks say their customers want them to solve are greater integration with corporate systems and delivery of cross-border, multi-currency cash pooling services.

Adding new products and services to satisfy existing customers and widening their appeal to the smaller customers are the top priorities for 39% and 33% of respondents, respectively. Offering new cash pooling offerings are particularly effective, with banks already seeing an average 14.4% increase in business as a result.

Although nearly half of banks in the survey said their overall 2009 IT budgets had been frozen, average spending on development of cash management systems and services is expected to increase by 8%. As the primary delivery platform for new services, the online channel is the main focus of IT spending. Cash forecasting, invoice and payment reconciliation and real-time payment tracking feature prominently in online investment plans of a third of respondents in the next 12 months.

In other news, Misys has launched a global cash pooling solution so banks can offer advanced cross-border cash management services at a low cost. The solution enables banks to offer international cash pooling services to corporate and institutional customers, across multiple currencies, borders, banks and time zones.

David Shilling, business analyst, core banking at Misys, explained to gtnews that this product was designed to address three problems faced by corporate treasurers of multinational firms: tracking cash in multiple accounts in multiple countries; automating money transfer according to rules defined by the corporate; and allowing the bank to offer a virtual account so that the money does not have to physically move.

Designed to co-exist with other back-office systems, the solution delivers the flexibility banks need to both define innovative pooling products and operate in multiple regulatory jurisdictions, whilst minimising operational costs the company says. Misys Global Cash Pooling uses a rules-based approach for processing standard SWIFT format statement messages, applied to a hierarchy of shadow accounts, to construct a full picture of balances and movements between accounts in the cash pool - either within one bank or across different banks.

Working with an international bank that was the sole pilot, Misys took three years to develop this product. "The previous version was only for domestic cash pooling, which is much simpler since it is possible to treat the cash as one lump sum. An international scope is much more complicated because there are many different regulations, for example tax restrictions, and complex calculations that companies face when cash moves cross-border," said Shilling.

First published on www.gtnews.com