Earlier this week, Citi's Treasury and Trade Solutions team hosted a press roundtable that reflected upon the challenging year many treasurers have endured, while also finding the positives as we head towards 2021. Introducing the session, Mark Smith, EMEA Head of Treasury and Trade Solutions outlined three key themes that would frame the discussion - the significant acceleration of digitisation, the work around business resilience that has in many ways defined the year, and the work around sustainable finance that has been able to persist in spite of COVID-19's looming presence.
"There's some really interesting work in progress that we've seen taking place," said Smith. "In many cases, treasurers are the accelerator and sponsors of the sustainability push that we see within our clients, leading the charge of a lot of that transition through their supply chains, and through the interactions that they have with their suppliers and their banking partners."
Acceleration of digitisation
Looking at the digital journey that the bank has been on with its clients, Magda Mielcarz, EMEA Head of Digital Channel and Enterprise Services at Citi Treasury and Trade Solutions explained that the bank's direct digital onboarding is now offered in 49 countries, and has already opened over 15,000 corporate accounts digitally. The fulfilment of KYC requirements, as well as account activation in electronic banking, is happening online.
"E-signatures are also gaining traction, with over 40% of the requests that go to the bank through its digital portal leverage e-signing for the process," commented Mielcarz. "We believe that we finally moved the needle in that difficult area."
APIs were identified as critical in underpinning the e-commerce propositions that many corporates have switched on for the first time or have enhanced this year. APIs are vital for corporates and banks to be able to connect in real-time in ways that support new disrupted business models.
"We've reached a 1 billion API calls milestone, and and have seen a 63% increase so far year-on-year," Mielcarz said. "Citi has a catalogue of over 60 APIs that it already offers to its clients, ranging from payment initiation, authentications, and balance enquiries, for example, that come directly from corporate ERP systems. By building this connectivity, they pretty much have everything embedded into their own systems rather than having to use bank systems."
On the business resilience point, Mark McNulty, EMEA Head of Payments and Receivables at Citi Treasury and Trade Solutions distinguished between three main focus areas:
- Financial resilience. Treasurers around the world are looking to build liquidity and balance sheet strength. From a treasurer's perspective, the ability to absorb shocks needs to be absolutely front of mind, given the year we just had.
- Organisational resilience.This is new in terms of the level of focus that companies around the world are putting on remote working and virtual operations, not just to be able to work through COVID, but also in terms of seeing remote working as a much more standard organisational model into the future, and the risk management implications of this.
- Business model resilience. COVID has disrupted many of the normal distribution channels that companies have. Companies around the world are now transitioning to new business models, with the direct to consumer e-commerce sales model becoming much more prevalent.
In terms of corporate cash management and payments needs, data is key. From an overall resilience perspective, smarter data enables smarter decision-making, which in turn creates better financial resilience. Smarter utilisation of data enables the automation of treasury processes and therefore reduces risk in the new organisational models that are being formed, which are more virtual than ever. As adoption of the direct to consumer model accelerates, this is going to provide corporates with an entirely new connection model to their end customers that they never had before.
"This will provide a whole new set of data on their end customers that they've never had before, which will enable them to build relationships with their end customers that they've never been able to do before," commented McNulty. "That all feeds into them being able to build additional business resilience, as you think about the future."
Being digitally enabled really helps reduce risk for corporates, particularly as new organisational models evolve. Additionally, with the direct to consumer model, corporates cannot afford to have a payment experience that contains any friction. If the payment experience or direct to consumer model is not seamless, the consumer will go and buy their goods elsewhere.
McNulty noted that the shift to e-commerce has been accelerated significantly by COVID:
"Looking specifically at Nigeria, South Africa, and Kenya, they saw a 30% average increase in online shopping through lockdown," he said. "The UK saw an increase of 21% in the growth of consumers shopping online for the first time during COVID. Over in the US, 49% of US consumers are saying that they'll do more online shopping next year than they did this year. The direction of travel is clear in terms of the shift to e-commerce and the shift to direct to consumer selling."
Looking at developments in cross-border payments, McNulty identified SWIFT's forthcoming transaction management platform as a potential game changer.
"This strategy is going to deliver an instant frictionless cross-border payments experience when the platform launches in November 2022," McNulty said. "That's going to be a game changing experience for many of our clients, when we can replicate the experience that many clients are getting in domestic instant payment schemes globally, and on a cross-border basis."
Focus on sustainability
Conversation then turned to the topic of ESG and sustainable finance. Corporates across all industries have been announcing quantitative corporate targets to their stakeholders that they are aiming to meet around the whole ESG agenda. But alongside that corporate focus, similarly institutional investors have been announcing and adopting quantitative targets, and really trying to focus on investing with a purpose and using their ownership to encourage that corporate change.
"We've really started to see the treasury and the CFO driving that sustainability and ESG agenda within their corporations," said Peadar Mac Canna, EMEA Head Trade Finance at Citi Treasury and Trade Solutions. "While ESG has been moving from niche to mainstream over the past couple of years, COVID has probably brought the social aspect of it more into focus."
Of course, the ongoing challenge of the pandemic has to a certain extent impacted corporate resources and their ability to invest in change. How can they continue to do that and achieve best in class ESG practices? Mac Canna outlined the role that banks can play in that conversation:
"We're collaborating with our clients and their suppliers and supply chain, and various different areas of our bank and external providers to develop the right solutions to help incentivise and provide the support and financing tools to go beyond traditional supply chain finance," he said. "Part of the issue that we have is around data in ESG, in terms of how to benchmark suppliers against what the sponsor corporate is looking to achieve in terms of their goals. We've been working with external providers, like sustainability ratings firm EcoVadis, to get those data points and be able to reach suppliers."
The Sub-Saharan Africa perspective
Inclusion and diversity are among the important themes that make up the ESG theme, but this is hard to achieve when access to the financial system is restricted. For example, the population of Sub-Saharan Africa (SSA) that has access to financial services used to languish at about 23%. However, as Esther Chibesa, Head of Sub-Saharan Cluster at Citi Treasury and Trade Solutions explained, over a 10-year period, that number has transformed and today approximately 43% of the population in SSA now has access to financial services.
"That's truly a reflection of how many different players on the continent, whether they're in financial services, technology and telecommunications, or in regulatory policy, for example, have innovated in various ways," Chibesa explained. "Over that period of time, there's been a confluence of initiatives that have driven digital inclusion, which in turn has enabled financial inclusion."
Investment in digital infrastructure across the African continent has triggered digital inclusion, which has also helped to evolve regulatory policy in areas such as mobile money or interoperability. In turn, these have been a means to enhance financial services participation, driven by innovation around product offerings by market participants.
"Over 66% of all the global transaction value that is made in the mobile money ecosystem actually happens on this continent," Chibesa noted. "There are nearly half a billion unique mobile phone subscribers on this continent and of that number about 180 million are actively using their mobile money account. The way in which this segment has really contributed to GDP growth here is compelling. It's now tracking at the rate where nearly 10% of GDP contributions come from this particular segment, which is something that you can't ignore."
Citi is working with fintech aggregators to create a single point of entry for its clients.
"By connecting Citi's capabilities with fintech capabilities, we're able to reach into several new markets," Chibesa said. "That's currently underway and we hope to be able to expand the offering we currently have to go into new markets next year. We're also working quite extensively with regulators who have market infrastructure that actually encourage the interoperability of both banks and non banks on a single platform."
A good example of this can be seen in Zambia, which some time ago went live with its National Financial switch. This requires the participation not just of banks, but also of mobile money operators as well. By participating in an interoperable platform such as this one, the bank is able to enable the flow of financial value for its customers.
"We're going to see even more of that happening across the continent and there are several of these platforms in place already," Chibesa said. "It is exciting, and it is good that the regulators are enabling these kinds of ecosystems to grow and mature."
While 2020 may have been an extreme exercise in virtual fire fighting for corporate treasurers, a backbone of digitisation has laid a platform not just for business resilience, but also for future growth and efficiency.
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