Payments modernization, intensifying regulation and new risks are pushing treasurers to demand new efficiencies. Is open banking part of the solution?
As the pace of business activity accelerates and cybersecurity exposure becomes an ever-greater concern, banks are under competitive pressure to devise treasury and cash management solutions. Technology appears to hold the answer.
“Treasury departments need to put a specific focus on cash management and its optimization,” says Fernando Díaz Hernando, head of payment services and supply chain finance at BBVA Corporate and Investment Banking. “Cash flow visibility and accounts-position control are key to optimize financial flows. Control over cash will allow corporates to build more-accurate projections, organize budgets, control expenditures and maximize financial flows.”
Treasurers are caught in a vise, says Mark Buitenhek, head of transaction services at ING, named this year’s Best Bank for Cash Management in Western Europe: “As strategic advisers and with the advent of new business models, they need to balance their limited resources between investing in digitization, innovation and protection against ever-increasing risks.”
At the same time, he adds, treasurers are grappling with rapid change, including a negative-to-low interest rate climate, rising regulatory costs and challenging geopolitical circumstances. Banks help by providing efficient all-in-one solutions. “This includes virtualization of their account landscape, which improves availability and control over liquidity,” says Buitenhek.
Open banking initiatives are a nexus for banks’ efforts to meet clients’ increased need for control of their cash. Application programming interface (API) technology has helped BBVA develop open banking solutions such as One View, which allows customers to get online consolidated reporting of all their bank accounts and corporate cards, not only at BBVA but in any Spanish banking entity, says Díaz. Clients can make payments and obtain confirmation without logging into multiple banks’ websites.
BBVA participated in the development of Bizum, the Spanish mobile payments initiative based on instant payments. “Both PISPs [payment initiation service providers] and Bizum [a means of payment], are efficient digital ways for corporates to improve collections in their treasury management and offer their clients the use of new remote payment methods against their current accounts, instead of cards,” says Díaz.
The ultimate efficiency would be to harmonize cash pooling across Europe; but Erik Zingmark, head of transaction banking at Nordea, Best Bank for Liquidity Management, says this goal is still some way from being achieved. “The different cash-pooling methods available mean that companies with operations in different geographical locations often find themselves in a situation where they have two or three different ways of managing their liquidity through cash pooling,” he says. Banks can assist by providing global cash-pooling solutions aimed at optimizing the overall liquidity position as far as possible, Zingmark advises. “Standards, real time and legal/tax harmonization will support this ambition.”
EU regulations, such as the revised Payments Services Directive (PSD 2) and the Single Euro Payments Area (SEPA), have succeeded in simplifying some cross-border transactions for treasurers, says Díaz, enabling them to manage cash across Europe more efficiently. Reduction of risk exposure is another goal of regulators. It falls to banks like BBVA to help treasurers and IT departments adapt to new requirements, such as strong customer authentication in remote payments and account information systems.
The interest rate trough is another risk-related challenge. As banks in Europe begin to apply negative rates on deposits, Díaz notes, companies that hold lots of cash find themselves more exposed. “This means that treasurers should explore alternative investment solutions to secure some return on capital, while maintaining a certain grade of liquidity,” he says. “Building solutions based on open banking and APIs will be key to change and ease our corporates’ operations.”
WESTERN EUROPE WINNERS
|Best Overall Bank for Cash Management||ING Wholesale|
|Best Bank for Liquidity Management||Nordea|
|Best Bank for Payments and Collections||BBVA|
|Best Provider of Short-Term Investments/Money Market Funds||BNP Paribas|