BankingRetail payments may be trendy, but transaction banking never goes out of fashion

Retail payments may be trendy, but transaction banking never goes out of fashion

A big prize awaits corporate banks that embrace Open Banking and real-time payments, argues Lu Zurawski, consumer payments practice lead EMEA, ACI Worldwide.

Last week, I was invited to speak at a corporate treasury conference. I am labelled as a ‘consumer payments expert,’ which is not an obvious qualification for sharing stage-time with serious corporate liquidity and cash management folk, but the talk-track was on mobile wallets and Open Banking, so I had some reasonably safe and relevant content to fall back on.

My fellow speakers included the immaculately dressed treasurer at fashion house Chanel, who brought fascinating insights on the spending demands of very high-value consumers around the world. It reminded me that I hadn’t discussed for some time the age-old separation between high value (commercial) and low value (retail) payments operations.

Perhaps the highly mobile global consumers of luxury brands are now helping to accelerate a convergence between commercial and retail payments, and exposing more banks to the acceptance of – once exotic – alternative payment methods.

Although the average conference attendee was not as well labelled as my new elegant fashion house colleague, I was struck by how most attendees – predominantly male – were still so well acquainted with suits and ties. Uncharacteristically, I had anticipated and planned for some dress-code ambiguity, so I was able to mingle without too many raised eyebrows, wearing what I’d like to think would be described as something like ‘post-Fintech-2020-Actionwear,’ or what others might have called ‘suit and tie.’

Dress code dissonance was however a minor sensation compared to the wider realization that the basics of my ‘safe and relevant’ topics may not have been as well understood as I’d assumed. Attendees were certainly very polite and curious about the applicability of new concepts into the world of treasury, but it didn’t feel that Open Banking, alternative payments and APIs were common place in a typical treasurer’s closet.

It didn’t feel that Open Banking, alternative payments and APIs were common place in a typical treasurer’s closet.

I started to wonder unfairly whether the buttoned-up behaviour was reflective of an industry a bit reluctant to embrace the changing fashions in payments. And I started to question recent data that showed the strong demand from corporates for improved liquidity, better credit decisions, aggregation of multi-banks accounts, visibility of real time payment information and so on.

In conversations at the conference, most delegates were keen on the logic of new digital banking services and the benefits of real-time payments. But it still felt like there was an inertia and an assumption that change might not happen so quickly. I wondered what were the possible reasons for this stasis at the point of interaction between corporates and their banks. Is there a rationale for retail banking moving very quickly to digital applications, online statements and mobile payments, whilst treasury still seems to prefer a world of paper and spreadsheets?

I realized I was being unfair. The apparently conservative uniform of treasury has little correlation with the reality of changing complexity of corporate life. And I’m not comfortable with a view that characterises retail banking alone as the innovative driver for digital change. A truer picture needs to show the nuanced reality of two intertwined markets, with transaction banking and retail payments requiring a shared, powerful engine room to power through the services wanted by modern treasurers.

Perhaps too many of us have assumed that the action has all been in the retail banking world. I suspect if we looked deeper into the raw numbers for adoption and for transaction volumes, we may find that digital-only retail banking is still a minority sport. It may be changing at a fast pace, but for every bright pink Monzo account, there’s an awful lot of customers in the UK still clinging to their chequebook. And for all the availability of new payments infrastructure like faster payments, we haven’t exactly seen a seismic shift of consumer behaviour away from the default patterns of cards toward inexpensive, direct-from-account push payments.

I suspect if we looked deeper into the raw numbers for adoption and for transaction volumes, we may find that digital-only retail banking is still a minority sport

The pace of change in commercial banking appears to be even more glacial. But this superficial view overlooks the complexities of modern trade. The innovative trend-setters are looking to improve cash flow, access to credit, to improve efficiency and profitable growth across wide and long supply chains.

Treasurers are very clued up on public policy initiatives aimed at unlocking capital and liquidity within global payment systems. But businesses can be excused for prioritizing their own internal infrastructural efficiencies, before turning toward potential collaborative efforts with their banking partners and exploring new concepts like Open Banking and real-time consumer payments.

Although these trends may appear superficial, it is time to consider their serious impact on the changing fashions of banking. Ten years after the financial services disaster, it is time for banks to accelerate the changes and to make possibilities happen, particularly in the corporate sector. Sure, there is still a need to help move consumer markets toward lower cost real-time concepts. But the big prize for banks surely cannot be limited to a vision of new retail banking fees. A bigger prize lies in helping businesses to get closer to their markets and to share in the improved performance of these companies, and helping businesses to interact with wider mass markets (including consumers) where real-time payments have become the norm.

The apparently conservative uniform of treasury has little correlation with the reality of changing complexity of corporate life.

This requires extra effort at the bank-corporate interface, and not inconsiderable change. And unfortunately, the concepts are not quite as snazzily understandable as retail products like mobile apps and wallets. But that makes the prize for successful corporate bankers even more desirable. Because mastering the complexity whilst being able to curate uniquely customized solutions for businesses will give them a competitive silhouette which is not only noticeable, but memorable.

Back at the conference, my Chanel colleague showed a lovely video about the concept of “Baudruchage” (it’s always great to come back from conferences with at least one extra bit of vocabulary). It’s the process used to seal perfume bottles, still requiring manual effort, wax and string. It’s probably not the most efficient way to guarantee quality, tamper-proof authenticity, but in a world of ever important ‘personalization,’ it’s a vital part of Chanel’s overall brand, service and product.

It’s time for more treasurers to loosen those ties, roll-up those sleeves and become more demanding from their banking suppliers for financial services that span corporate and retail payments

As Coco Chanel once said, ‘in order to be irreplaceable, one must be different.” She may have been referring to clothing, but her sentiments resonate with today’s need for banks to embrace the new real-time fashions and to support new customized services.

It’s time for more corporate banks to gear up for the banking equivalent of this modern service curation, helping more businesses to make their own possibilities happen. It’s also time for more treasurers to loosen those ties, roll-up those sleeves and become more demanding from their banking suppliers for financial services that span corporate and retail payments. Change and unpredictability are fashionable aspects of payments, but it’s important that the basics of quality, reliability and availability are retained as the foundations for new services for the new style of corporate banking, doing justice to the famous Yves Saint Laurent quote: “Fashions fade, style is eternal.”

 

About the author

Lu Zurawski, ACI Worldwide is a regular columnist for The Global Treasurer. Zurawski is a renowned expert in the payment field with nearly 20 years of experience. He has engineered complex business transformation programs and has a strong innovation record, including work on one of the world’s first mobile payment schemes.

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