EuroFinance, the annual corporate treasury conference, this time in Copenhagen, Denmark, highlighted the issues and increasing challenges of cash management and the more and more pressing problem of adhering to sanctions lists, which are prone to change as much as twice a day. Anna Milne writes
A hot topic among corporate treasurers is how to gain and maintain an overall view of payments to keep a tighter control on things. The EuroFinance conference 2015 had three main themes: regulation; the need for fintech, and visibility control in treasury cash management.
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Challenges
Corporates can have hundreds of subsidiaries and agencies worldwide, making payments and cash management something of a nightmare, particularly POBO (payments on behalf of). The need to have an overview of all payments, incoming, outgoing, in advance and otherwise is not just desirable, it is really crucial for healthy running of the business.
A consolidated overview of the payments systems was one of the most repeated phrases on the wishlists of corporate treasurers at EuroFinance. It is also very difficult to achieve. For multinationals, with subsidiaries in myriad countries, each subsidiary tends to have its own bank, hence an extra leg on the payment journey. Corporate treasurers want to own the bank account relationship on behalf of all agencies, ideally.
Then of course there are the ERP and TMS systems- as corporates acquire smaller companies, so they inherit decrepit, ageing systems and payments are at an increased risk of getting caught up in the mire.
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By GlobalDataAlain Falys, co-founder of Yoyo Wallet: "There is no technology excuse for not having centralisation, although I do appreciate it does take sometimes years to create a shared service centre of any kind, let alone a financial shared service centre. Sanction filtering is becoming a huge burden which I don’t see becoming simpler again."
Corporates have begun to get nervous vis-à-vis sanctions, with all the news stories about banks being fined. "They’ve realised they do have a responsibility to not violate sanctions and they want to improve straight through processing," said Parth Desai, CEO of Ace Software Solutions.
Desai explained how last year corporates began expressing concern about about their payment processing, given all the news coverage of fines for breaching sanction regulation. Quite a few of them wanted to take the matter into their own hands.
"Ownership lies with corporates, within their due diligence, so they’ve realised they have a responsibility to not violate the sanctions. They also want to be vigilant and make sure they don’t break the law," said Desai.
Will regulation ever push corporates to take responsibility?
There are two main aspects around this-sanctions and AML, explained Desai.
"The latter is enforced by the Financial Action Task Force, based in Paris. This is more about analysis of the behaviour of the person. If there is sudden abnormal behaviour, fraud is suspected. This is only applicable to banks and some corporates such as money transfers or casinos, lawyers, accountants, they need to check. But sanctions are applicable to everybody, consumer, corporate, bank. There are no new legal requirements. Corporates have not been fined yet. It is easy for regulators to monitor banks- all transactions go to them- there are 100 banks vs. million corporates. But it could come- it is a criminal as well as civil violation.
"From a sanctions point of view it is simple-you need to check the black list for names you’re doing business with but for international businesses- you need to obey the laws of all countries you’re operating in, and all the countries a transaction goes through. That becomes complex, there are over 100 lists published by each country."
Complex problems for corporate treasurers go further than the sweat of sanction breaching. Sebastian di Paola, partner, PwC, said: "There is a tendency, when you have an arcane topic such as this, where the knowledge is restricted to a few individuals, there is this tendency to adopt the policy: if you can’t convince, confuse."
"Sometimes players in the market may use regulation as a commercial tool, whilst making sure the other party doesn’t fully understand the implications. So you do need to get sufficient knowledge to be able to make up your own mind about the impact of regulation in general and particular products that you’re entering into. The devil is in the detail. Get into that dialogue with your banks- they can help you."
PSD2
But, as Daniel L Blumen, CTP, partner, Treasury Alliance Group, US, put it: "There is no product that a treasurer purchases from a bank that cannot be impacted by new regu¬lation, including Basel III, EMIR and Dodd Frank.
Marcus Hughes from Bottomline Technologies, discussed the hot topic that is PSD2. "I am convinced there is more there than meets the eye.
"There is so much that the corporates haven’t yet understood about PSD2 that they will be impacted by- I don’t think the banks have quite understood how it will affect them either- they will be exposed to massive new competition from new payment service providers, who, with a mandate from a client, can demand of a bank to give them the details of their mutual client’s bank account to also accept payments instructions from that PSP on behalf of the mutual client.
"That opens up a whole series of opportunities for retailers such as Amazon or Google, to offer payments as part of their user experience. They will be able to offer an aggregated access to all the customer’s bank accounts. We do that already using SWIFT and Ebix so as well as serving banks we work with large corporates and very large multinationals to give them access through our payment hub in the cloud via SWIFT to multiple banks and in some cases to access those banks via Ebix. So we’re using two different channels to get information and to send instructions to those banks. It is ‘lowest cost routing’. And a continuation of that theme is what we’re doing with decentralised ledgers.
PSD2 is due to be implemented in 2017 by member states in their own market.
Falys continued: "Banks haven’t yet started work on creating APIs to give access to these payments initiation service providers to make this whole structure work. It will be like SEPA I believe, there’ll be a deadline and there’ll be a delay."
