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ANZ aim to change transaction banking and cash management delivery model

Carole Berndt gave the opening address for RBS at EuroFinance’s 2014 International Conference, see, making some important comments on the impact of disruptive technologies on the transaction banking and  cash management business for both banks and corporates. One particular aspect she focused on was that, “In our new reality, we will see us each centre our expertise and partner more, to ensure the client's need for global banking is able to be delivered. These won't be the basic partnerships of the past; they will be truly integrated. We don't have to look further than the airline industry to see how this will play out.”

Since RBS’s dramatic exit from the international cash management business Carole has moved on to become Managing Director of Global Transaction Banking at ANZ where, as you would expect, she has already made a significant impact. Her new job seems to have confirmed and clarified her vision and understanding of how banks can and should deliver corporate cash management services.

Sticking to her principles and understanding

In our discussion at EuroFinance in Copenhagen last month, she revealed some of the key principles and understandings which are driving ANZ’s corporate cash management service delivery and offerings:

  • no bank can be effective trying to be great in every location with every product and service which is why we have seen some banks rationalise their products and client segments to fit with their operational profile and financial targets
  • the impact of RBS’s exit from the cash business and other banks’ rationalisation of their services and coverage, is that “Multi-national corporations are now having to rethink their banking relationships and strategies so they  better engage with regional banks and reap the benefits.”
  • to meet the evolving needs of the MNCs, banks should partner more along the lines of the business model the airlines use.

ANZ’s coverage and positioning

For the last eight years ANZ has been pursuing a super-regional strategy to establish the ‘super regional’ bank across Asia-Pacific. ANZ now has local presence in 29 countries in Asia-Pacific, including two recent additions Thailand and Myanmar, as well as offices in Middle East, Europe and USA. They also have a full range of transaction banking and cash management products and service.

ANZ remains committed to the growth strategy in Asia, which they say is still the centre of the world’s prosperity.  However, the key geographies of : home - Australia & New Zealand & Pacific, Asia - greater China and India, and network banking arrangements in Europe and Americas are now a huge focus.

New delivery model

Berndt argues that global network banks grew by standardising through embedded technology, big host to host connectivity, and driving standardisation through bespoke development. Today banks cannot hold and retain corporates on basis of technology alone. Smart corporate treasurers today are building their technology infrastructures independent of banks and sticking together their own technology solutions so they don’t not need a bank portal anymore. Berndt concludes that, “So the service delivery model will become the key differentiator, but that can be the hardest part to produce.”

Berndt then explained how she believes that banks should adopt the ‘One World Alliance’ airlines model. This is because there are important similarities in how these alliances developed in the airline industry and how banks need to move forward in their delivery of corporate cash management services. When airlines started the biggest issue was service consistency. The service standards were very different - then two things happened:

  1. technology allowed airlines to get better connected and be able to recognize the different classes of traveller
  2. although the service differs between the airlines, they made this a feature as it is the personality of the airline.

She continued, “So I believe passionately that we are going to have to partnerships with other banks that will  deliver really smart service models through technology. While keeping what’s unique about each bank and those nuances and cultural benefits, Asian banks being Asian banks, but then partnering with a European or American bank to deliver what clients want and need. ”

Banks will have to decide who to work with and who to have long-term relationships with. However, this is way beyond today’s correspondent bank model. Berndt believes that it will need brave first movers to break out of this way of working. A reasonable example of the type of partnerships coming is how SEB provides cash management services for other bank’s clients, e.g. accounts and contracts are held with the lead bank and not with SEB (which gives lead bank independence of the local bank). Berndt believes this is the best example we have today, she continued, “If you take this model and then progress and multiply it, you start to see the Nirvana model we should be aiming for.” This SEB model is based on virtual bank accounts, but when I asked whether virtual accounts will be the basis of all partner banking in future, Berndt said, “Today yes, but tomorrow…….” Then she smiled and gave no more detail.

CTMfile take: This discussion showed three things; 1) ANZ is convinced that the time for the super-regional banks in cash management solutions is now and is what MNCs are looking for, 2) ANZ is doing some serious thinking about the future of the delivery of cash management services and how they can best meet the needs of corporates, and 3) ANZ is going to be disruptive in the cash management business. There is much more to come - watch this space.

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