If PSD2 is the well-intentioned regulation to be the catalyst for change, then a number of factors need to happen to precipitate such a change. Firstly, PSD2 is ostensibly a retail play and for banks the heightened need is to be compliant across their retail client base but less so for their corporate or institutional client bases.
Similarly, a big challenge for banks opening up their data to API’s for their corporate and institutional clients is that many of these banks are dealing with legacy internal systems and rigid protocols that make open data extraction very difficult.
As a corporate treasurer seeking salvation from PSD2, I think I may find myself waiting a while.
Let’s look at this tangled story so far . . . I am multi-banked and multi-currency. I may also be multiple geographies, have a centralised/decentralised approach, or both. My payments may source from a single ERP system, or different ERP systems or a combination of source points. I may or may not have a treasury management system, and if I do, hopefully I have a level of integration between my payments and my bank providers. My payments might be processed remotely, centrally, or a combination of both. My payments may upload via file-to-file integration methodology, in which case I may have to maintain multiple proprietary bank file-formats, or they may upload into bank proprietary payment systems which I will have to maintain - one for each of my relationship banks. Simple it is not!
At a conference recently, a treasurer held up a case with 70 security tokens in it, which represented tokenised entry sign-ons for all his cash management banks! His view was interesting in that he acknowledged 70 systems and tokenised sign-ons was onerous to say the least and also acknowledged that PSD2 and the emergence of FinTech providers could provide a technology-led solution to the problem. Interestingly though, he went on to expand his view to the extent that he expected his relationship banks to come up with the solution for him because the “relationship” to this treasurer was paramount.
For me, as a banker of 35 years experience, I do not see banks singularly solving this problem without collaborative efforts. However, within the FinTech community, best-of -breed, maturity and relationship driven solutions will ultimately bubble to the surface and provide technological answers to the problems faced today.
Back to my utopian treasury, post PSD2.
I want to be format independent and not locked into proprietary formats and I want to ensure future-proofing against change. My single payments file is hosted through a single portal and dispersed amongst my relationship banks and I can track the life of all my payments online. I may want to enrich my payments with multiple invoice information or be able to track my payment in the event of beneficiary claiming non-receipt. From a cash management perspective, I need to see my treasury cash position in real-time and in the way I choose to see it – it is my data after all - by bank, currency, subsidiary, group and on demand.
Isn’t the essence of API that I want to pull data on request and not just have MT940 or 910 messages pushed to me? One of the things I often hear from treasurers is that they cannot see their group position globally at any given point in time, either by bank, or across all their banks and entities.
The next consideration is my inbound cash. I want to see it real-time and I want it to instantly posted to my account receivables, which at the same time allows me to update my forecast and actual cash positions. I may have single credits with multiple invoice information and potential variances that I need to follow the payment information that allows me to manually correct in my receivables.
So, what am I looking for then? Single sign on, file independent multi-bank payment capability with global view of my data in a way that I want it, and when I want it. Should be simple right?
Many banks make the mistake of relying on being the “relationship” bank, when in fact they are just a transactional bank. Does that justify the term relationship? Is a transaction only bank enough of a differentiator in a post-PSD2 environment? Perhaps not.
Will the treasurer wait for one or more of those “relationship” transactional banks to be the panacea for cash management and working capital, or will they embrace change and look for a collaborative technical solution?
Transactional banking or transaction processing is only part of the problem for today’s treasurer and the value-add is in expanding the cash management journey in terms of file integration, reporting of data, enriched information and ease of reconciliation which all make the cash management cycle a much more compelling end-to-end proposition and a treasury utopia more likely.