26 November 2014

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Neil Gray - SWIFT

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The squeeze continues for banks and corporates

18 July 2014  |  1361 views  |  0

There is no doubt that in order to remain competitive and thrive, banks are no different from any other business in that they need to grow, whether that is by increasing the number of customers or the profit that each customer generates.  But this is not the whole story.

Since the reality check of 2008, there has been much finger pointing at the financial services sector. This in turn has led to a succession of regulations and directives as well as hirings, firings and cost cutting exercises. Given on-going regulatory pressures the sector remains under close scrutiny from all sides.  Market commentators can be particularly savage about the failings of individuals and financial institutions - there is now no place to hide. 

However, there is no disputing that we need our financial institutions to support manufacturing and industry in general, thereby smoothing the path to growth, continued economic recovery and financial stability. They need to rise above all of this and provide banking services which will enable them to retain and grow their customer base in a profitable manner.

The very essence of banking, including moving money from A to B - safely, securely and in a timely fashion, sounds simple enough but we know that there is rather more to it than at first meets the eye.

It’s now 2014 – more than 300 years since the Bank of England first opened its doors.  Yet, with all the collective banking experience, all the innovation and technological development that has ensued, it can still take a corporate months to connect to its chosen bank and begin transacting.

Bear in mind that for corporates today - with mergers and acquisitions as well as globalisation often leading to multiple banking “partners”, all typically offering a multitude of different services ,  they have the headache of ensuring they continue to receive the best service and value for money from their various banks. Switching banks can present not just a technical nightmare, but a legal and contractual one too.

Technology plays a vital role in the entire end-to-end transaction process so that myriad financial transactions can be matched, processed, settled and reconciled on demand.  At same time, in all of this it cannot be forgotten that ‘money in’ less ‘money out’ equals my financial position. So what is the answer?  Decisions to acquire, merge, divest and invest are based on the financial health of a business. And in a complex web of businesses, often on a global scale, it’s not always that easy to know exactly where the business stands at any single point in time.

If we all used the same technology, the same process, the same regulatory controls and measures, the same currency it would all be so easy, wouldn’t it. But of course that is not the world we live in.

So the challenge for technology is clear. There are many ideas and innovations evolving at an ever-increasing pace, designed to meet the demands and needs of businesses. We are on a treadmill that sometimes feels it’s going faster and faster and faster.

But what I often find makes a corporate’s blood boil is that even if they get to grips with the many technological challenges that they actually have control over, when trying to establish a connection to their chosen banking partners in order to receive various banking services, it can feel like they are then faced with a nearly insurmountable hurdle.

The contractual and legal aspects of moving accounts are not as simple as they are for the individual - although anyone who has ever tried to move from one bank to another over the years may argue it’s never been that simple for the consumer either. 

Corporates aren’t too naïve to recognise that it’s always been in the banks’ interests to make it easier to stay with the incumbent provider.  However, when it comes to mitigating risk (including not putting all your eggs in one basket) and to having the ability to maximise the value for money you get from your service provider - your bank, then a corporate is right to ask for customer service in all aspects of its bank relationship.

Consumers have campaigned for a very long time to be able to easily move from bank to bank and from utility company to utility company so they can take advantage of the best deals.  Corporates just want the same deal – ok, it’s on a larger scale, but it’s absolutely the same premise.  It’s their money and they rightly want to maximise its value for the sake of their business, their shareholders and ultimately for their own customers – you and me.

 

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Neil Gray

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Senior Manager Corporates Business EMEA

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SWIFT

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London

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