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How to manage vanilla treasury payments against the backdrop of regulation

How to manage vanilla treasury payments against the backdrop of regulation

Finextra spoke to ING’s head of transaction services Americas Tibor Bartels at AFP 2019 about his experience working with both US and European treasurers and chief financial officers and whether regulation has helped with cash management or has been a hindrance.

Day to day, Bartels focuses on what he refers to as “plain vanilla payments, cash management, liquidity management or working capital solutions” and explains that most of his clients are US companies that view the bank as their European strategic partner.

“That’s where our sweet spot is. The US market is completely different than in Europe as you only have limited clearing systems and one currency. Whilst in Europe there are multiple countries, currencies and cultures making it more challenging for treasurers to build operational business for their companies,” Bartels explains.

From a regulatory perspective, this can have an impact on the harmony of legislation. Bartels says that when legislations are first introduced, banks should agree on one payment method. In reality, different central banks have varying interpretations of Europe-wide regulations, and this is where treasurers come in because they have to make the adjustments.

Using PSD2 as an example, Bartels explains despite “one harmonised legislation, some banks are more advanced in the implementation of the regulation than others. For example, the Benelux central banks have implemented PSD2 across 95% of their business, in Germany across five banks, in Belgium across six banks and in Italy, 1200 banks.”

Bartels goes on to state that: “the European banking landscape is not as consolidated as the US believes. Western countries are further in the implementation than Southern and Eastern European.. That’s why products such as instant payments are so much more advanced in one country compared to another, for example.

In order to resolve this issue, the ING head advises companies entering the convoluted European arena to ensure their partner has a strong understanding of the markets as in the Dutch bank’s experience, it has been a struggle to manage flow directly from the US. “With local legislation in the EU, you’re occasionally forced to have an underground presence and in others, if you’re domiciled, you are also required to have a physical presence.”

However, in this age of digitalisation, Bartels advises treasurers to avoid focusing on products, but to consider the ambitions and goals of the treasury team: whether it is to prevent fraud, save costs or to centralise processing. “Once these goals have been determined, a tailored solution can be built.”

“As a bank, we realised that developing a one stop shop solution would be something that would take us a minimum of five years. That is why we bought one of the largest acquirers in Europe and integrated that solution into our offering. As well as this, we are also aware that companies require a reduction in non-labour costs such as the cost of KYC, which is why we have also been investing in virtual cash management solutions.

“If there's a proven solution in the market, pick that or build your own solution,” Bartels concludes.

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