Do you think technology makes it easier for a tier three bank to deliver the same sort of services a tier one does?
That’s a really interesting question; does technology make it easier or not? I’m a believer in technology as a tool, it’s not the answer in itself. I think you have to look at each example.
For example, Saudi Arabia is a very traditionally country in bank terms that deploys front to back STP trade finance through us [Finastra]. It’s really hard to gain adoption because corporates want to bring in the paperwork to the bank because that’s how they’ve always done it and they’re not necessarily even that trusting of the technology to do it. So, those banks have invested in modern technology, but it’s not actually helping.
However, I think ultimately, yes it will make it easier, but it’s got to be the right technology positioned properly.
I’ve been speaking with people who trade in cash, particularly cash liquidity, and even though I work for a technology company I say to them, ‘let’s not talk about the technology, what are your business pains, what are the processes you’re struggling with, let’s actually do that, let’s not solve a problem we don’t understand,’ so let’s understand the problem and work out how to get there.
I’ve been in this part of the industry for a fair while now and one thing is clear, we must try to understand the customer, because if you don’t understand the problem what are you fundamentally doing? You’re just hoping.
You have to challenge those customers as well because sometimes corporate treasurers will tell you what they think the answer is. ‘No, no, no, tell us what you’re actually trying to achieve,’ so once you think you’re at the bottom dig a little more.
Well I quite like the approach of being inquisitive like a child, ‘why?’ If you keep asking why it’s amazing where you can go with a conversation.
Given what you’ve said there, what are the main problems to be solved?
I wasn’t so much bothered about what their biggest concerns are today, I was more concerned for tomorrow or the three-year view. I mentioned real-time data and payments, but the real key point was around liquidity solutions with virtual accounts.
Virtual accounts is becoming more of a topic of conversation with corporate treasury, and it’s almost but not quite for the internal bank, it’s sort of a halfway house that people are looking at.
But again, fundamentally it’s about enriching data. Virtual accounts is just adding a bit more data around your current data, a bit more metadata. But I think one of the real challenges that banks and treasuries have is reconciliation.
Take receivables reconciliation, for example. When you’re looking somewhere between the low end 30% straight through processing (STP), up to, if you’re very lucky, 60-70% STP. We’ve been playing with some ideas about how we can drastically improve that, but it’s all about data still. Data is almost a bit of an odd topic now because everybody just thinks, ‘OK, mine the data and look at all this goodness we can get,’ but again without understanding what the problems are, we don’t know what we’re trying to fix.
Is it true that whatever size organisation you are, there’s an issue with data?
Well, there’s volume and there’s cleanliness of data as well, which is a problem because of the complexities of the banking and treasury system.
One of the things I believe is that a treasurer in the corporate world wants a 360 degree view of their relationship with the bank. So, real-time data access is crucial. I also think, depending on the size of the bank, that they should be looking to become the TMS of choice for their corporate client – that will really help to drive this 360 degree view.
‘We’ve got all your data around payments, let’s use that and we’ll run the forecasting and the analysis and so on, and we’ll start doing industry comparisons for you as well. Let’s compare what your time to cash is compared to other companies in your industry sector, start anonymising some of that payments flow, etcetera.’
But it does come back to the fact that banks have got to decide, ‘am I just a transactional provider, am I going to build that relationship, or am I going to really go for it and use our own back office scale to help you run your business better?’ That’s the real big money question.
Click here to read part one, where Tyler talks about Open Banking, payments and technology.