Bank of America Merrill Lynch recently hosted a webcast on how to successfully navigate the payments landscape in Europe. The event was aimed at U.S.-headquartered businesses planning to expand their operations into the region.

Ken Ullmann, head of U.S. Central Region Treasury Sales for Global Commercial Banking, who led the discussion explained, “Based on BofA Merrill’s experience, there are five common European payment considerations that are frequently discussed with U.S. clients. During the webcast, these five considerations were ranked by the attendees in a poll*. Results were:

1. using the correct mix of payment instruments for each market – 37%
2. evaluating how to set up FX controls (taking international payment flows into consideration) – 27%
3. recognising when to establish local accounts to support transaction needs – 21%
4. being aware of cultural differences that can impact the payments experience – 8%
5. deciding on the location for a regional hub – 7%.

Ad van der Poel, EMEA head of Global Transaction Services (GTS) Product Management, Corporates, provided commentary during the webcast and reinforced that the right mix of payment instruments should be the highest priority, stressing that:

• “Even though cheques are still widely used in the U.S., there are a number of countries in Europe, such as Belgium, that no longer use this payment method.”
• “Europe is an important trading partner for U.S. companies and taking its complex payments landscape into consideration, there are also a variety of external factors to consider such as different regulations, country volatility and multiple currencies. Furthermore, the region includes a large number of countries, all at varying stages of development and maturity from a business and banking standpoint.”

Not just Europe, apply globally

These considerations don’t just apply to Europe, they apply globally. When considering any new country or region, corporate treasurers need to:

• use the right mix of payment instruments for each market, e.g. in China the most popular payment card is Union Pay, that cater for the local businesses and consumers normal payment/collection habits
• set FX strategy and controls based on payment flows
• minimise the number of local bank accounts required by using any opportunity to avoid having to open accounts, e.g. in the eurozone payments and receipts can be theoretically made from a single account, and there are now other services that remove the need open local accounts, e.g. BAML’s CashPro Payments service, and Money Corp virtual account international payment solution.

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* 62 clients completed the poll.

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CTMfile take: These best practices for making and collecting payments locally miss one vital practice: ensuring that the payment or collection system is integrated with business transaction processes. This complements and enhances the business as a whole which should be the aim of all payment and collection systems.