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Financial Supply Chain

In the world of international trade, the process of exchanging payments, information and documents between buyers, sellers, banks, and other involved parties is becoming increasingly important for financial institutions. This community aims at presenting views and innovative ideas related to this financial supply chain space.

So good, it's a waste of time

08 September 2008  |  5622 views  |  0

So good, it’s a waste of time: why banks and corporates need a common language

If a colleague were to appraise your work with the words “this is so great, it’s a waste of time”, you might be offended or at least mystified. In Hebrew this expression is a compliment, but it doesn’t work in translation to business English. Learning the quirks of the language, understanding the jargon and appreciating the differences in idiom from one language to another are among the biggest challenges to non native-speakers working abroad.

Linguistic differences also explain why the divide between banks and their corporate customers remains as wide as ever.

Language as the basis for successful relationships

The world of trade finance has witnessed a dramatic restructuring of the traditional bank-corporate relationship. Until recently, banks did not feel it was their business to get involved in the financial supply chain and offered little more than online tools to initiate transactions and enter details. These facilities had value for the banks but little value for their customers.

Now, more than ever, banks operating in the trade finance arena need to be able to understand their customers’ requirements and willing to adapt their services accordingly. Using the same professional jargon could be a good start.

Enrico Camerinelli, a senior analyst at Celent who has written a study on the complicated relationships between banks and corporates, and has recently presented at one of our customer conferences, gave us an example of this language gap. According to his study,  terms frequently used in the financial world like  WCM (Working Capital Management), ACH (Automated Clearing House) and RTGS (Real-Time Gross Systems) mean absolutely nothing to corporate operation people; and terms such as FTL/LTL (Full/Less than truck load) and EOQ (Economic Order Quantity) don’t mean much to their peers in the financial world. Bear in mind, we’re still supposed to be in English.

As Camerinelli puts it in his research paper Business Models for Supply Chain Finance Services: “There is a clear role for banks to play in helping corporate clients make better supply chain decisions. Banks, however, need to understand supply chain management as a set of processes interlinked and interdependent with their financial services. Only through a granular understanding of the basic principles of the client’s business will banks be able to bring significant value and become more partners than providers…Banks will have to take a very different perspective on supply chain management and develop a common language to discuss its impact on financial measures.”

Technology vendors as translators

Technology can improve how corporates interact with their banks on one side and their customers on the other. It can define common processes that meet the needs of all parties and it can also help define the common language – the business English – of the three-way relationship.

This new language can either replace existing terminology with jargon that everyone agrees on, or provide built-in translation that effectively allows all concerned to keep talking in their own dialect.  To put the language to work, new functionality needs to be added to basic input mechanisms to enable custom reports to be produced from extracted data. Corporate treasurers might be able to use forthcoming payment details to identify cross-selling opportunities such as financing requests and forward-rate contracts.  Business and technical barriers to integration have already come down in many cases, replacing the old silos with a much more dynamic environment.

As Enrico Camerinelli puts it: “Technology allows banks to increase automation, workflow and visibility, dematerialise documents and integrate with their clients. Banks can differentiate between themselves according to their ability to manage the risk attached to different levels of visibility…Technology is a key enabler, but not a goal in itself.”

Most technology vendors would heartily endorse that view. Some might struggle to come to terms with the irony that after years of generating incomprehensible jargon of their own, technology vendors are now helping banks and their biggest customers learn the art of plain speaking.

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