Following the success of our invitation only Treasury Ruminari event earlier this month, on September 29th, Gresham Technologies (Gresham) brought together a selection of cash management bankers and industry leaders across Europe to discuss current challenges in Corporate Cash Management. Moderated by Gert Raeves, Research Director at Adox Research and Bill Wrest, Senior Cash Management Strategist, Gresham, the meeting covered some of the hottest industry issues of the moment, including the power of data, innovation challenges, and of course the impact of COVID-19. We report on the key highlights below.
Driving true innovation
Innovation was naturally high on the agenda, and as always, there was debate as to how this is truly defined. Questions around the drivers behind innovation, what clients really want, and to what extent innovation is purely about the bottom line, were all debated by attendees, with many feeling that whilst innovation is high on the priority agenda, the challenge is making it happen in practice, particularly in these uncertain times of competing priorities.
One participant, a Global Channel Head of a major UK bank, kicked off the discussion by asking how innovation is driven forward. Does it directly consider immediate customer input and needs? Or is it thinking past them, and solving an issue the customer didn’t even know they had in the first place? Furthermore, it is not enough for the technology in itself to be new and exciting. In order to be considered a true innovation, it must be applied to the customer and product space in a revolutionary and disruptive way.
The Head of Cash Management Products from a major French bank replied that their firm goes some way towards addressing this issue by facilitating co-working sessions with clients. This enables the team to develop valuable products which can be used from day one, as opposed to say a catalogue full of redundant APIs, a situation which is all too familiar to many in the industry.
Fintechs: Their place in the ecosystem
From innovation, the conversation naturally moved to fintechs, seen by many in the industry as drivers of change, with attendees musing on what future potential relationships between these new entrants and incumbents might look like.
One participant, a Managing Director of a global bank, noted that the relationship has not been a static one but has changed significantly over the last 10 years. A decade ago, banks were the innovators, but this shifted, with clients challenging banks that weren’t offering the same level of innovative services as fintechs. However, this trend has recently shown signs of reversing, with the new turbulent environment meaning that corporates appreciate their established relationships with banks and the trust they have built up, whereas some of the smaller start-up fintechs can sometimes be perceived as less stable, more unpredictable, and lacking the reputational gravitas of their larger, more established cousins.
Other participants echoed this shift over time, citing that when fintechs initially came on the scene, banks saw them as a threat and immediately went into defensive mode. However, banks have now realised that future value comes from the ability to evolve, resulting in the rise of cooperation between fintechs and banks. The difficult part is selecting the right partner. It’s not simply about integrating products but also ensuring that your company cultures are aligned, that you have the same worldview and are able to build a truly open and collaborative relationship. This subject also gave rise to the question of how banks’ organizational design might hold them back when it comes to innovating – the idea that it’s not only legacy technology, but legacy structures and behaviours which act as an impediment to progress and change.
Building on this, an executive from a major UK bank argued that a nuanced view is necessary when looking at the bank-fintech relationship. In the retail environment, fintechs are often considered by banks to be competitors, but in the corporate landscape, banks see more opportunity for and value in collaboration, particularly in niche areas where it is difficult for them to develop their own propositions without the benefit of economies of scale. That being said, banks also need to consider the risk management aspects of working with fintechs – not only actual risk but also perceived – and ensure that they have strong, collaborative relationships in place to mitigate this.
Covid-19 and digitalisation
There was a broad consensus among the group regarding the impact of Covid-19 and how it has accelerated change.
A number of participants commented that the pandemic highlighted the good and the bad processes within a business, as well as speeding up changes that have been in the pipeline, with businesses viewing certain digital capabilities now as a must have as opposed to a luxury. For example, the ability to sign all documents online is a seemingly simple change, but it has taken a global pandemic to implement this in the complex and heavily regulated environment in which banks operate. This ‘digital leap’ was echoed by the Head of Cash Management Products at a major French bank who highlighted that they are now able to digitalise key processes in just two weeks.
When it came to the utilisation of data, there were a range of different opinions from the participants as to how far the potential of data has been tapped so far and what progress is being made. The perennial hot topics of data lakes and machine learning were never far from the agenda, with attendees considering how these can be used to tackle the thorny issue of analyzing unstructured data. Beyond the technical questions though, the discussion moved on to whether the potential of data is currently being realized in the industry. A product manager at a major Dutch bank argued that the data has always been available. The challenge lies in using it in an effective way, which relies on asking the right questions in order to really help the client. Other participants concurred with this point, but also highlighted potential obstacles, such as regulation and customer concerns over data privacy and storage, and the importance of communicating the intended use of data.
The discussion ended with a look to the future. One participant stated that the pace of change in the industry and rapid scaling and emergence of new start ups makes it hard for banks to tell exactly who their new clients will be five years from now. With this in mind, the discussion finished off with a brief mention of Brexit – the next major change facing the finance industry. Unsurprisingly there was little in the way of concrete detail on plans, but a definite awareness that this could potentially be a significant challenge for the industry in what has already been a highly demanding year. As we approach the final quarter of 2020, it remains to be seen what else lies ahead.