Do banks really understand supply chains?

I have typically avoided writing much about SEPA during Sibos in Boston as I have already aired concerns about a lack of corporate appetite for the new SEPA payment instruments and how migration to SEPA will be handled.

While vendors such as TietoEnator appear to have signed up a number of banks for SEPA payments processing, it would be foolhardy to think that this suggests banks are well prepared for SEPA.

A vendor exhibiting at Sibos told me that while his own company's treasurer saw SEPA as a great opportunity to rationalise bank accounts and to reduce the complexity of managing excess liquidity in euros, when they asked a leading cash management bank when this vision of SEPA would be realised, they said it could take years.

European banks like Deutsche and ABN AMRO have announced that they will provide format conversion capabilities from old legacy formats to the new SEPA XML formats to help ease corporates' transition to SEPA.

According to Eric Sepkes, director, cash strategy EMEA, Global Transaction Services, Citi, although some banks are offering format conversions, "there’s little economic reason for corporates to migrate to the SEPA instruments.” Some form of incentive in the way of value-added services is needed, he says.

Some banks appear to believe that by inserting themselves further into companies' supply chains, they will be able to make up some of the revenues lost through SEPA. The spate of announcements in the last 12 months around banks launching supply chain financing solutions confirms this.

It is difficult to gauge if all of these supply chain financing solutions will succeed and one of the leaders in this space is convinced that they have the upper hand because they bought a logistics company.

Yet, one thing the banks forget is that not all companies want banks to play an enlarged role in their supply chain. Banks are launching supply chain solutions left right and centre, but in their scramble to say they have an offering, corporates believe banks are not taking the time to fully understand what they are really looking for.

A number of the exhibitors at Sibos will tell you they have a supply chain solution or that they are about to launch one, but as banks historically have tended to sell to treasurers, one wonders how they are going to embed themselves deeper in the corporate supply chain without establishing a dialogue with people in procurement or those that make the purchasing decisions.

Jan Van Dooren, e-commerce executive for Danish shipping container company Safmarine, is an example of the new breed of corporates banks say they want to work with in order to embed themselves deeper into companies' supply chains. Yet he reminded SWIFT and the banks that they need to start talking his language if they want to have a fruitful dialogue.

"If you want to move in the corporate space beyond treasury, banks need to start talking our language," said Van Dooren referring to the myriad of acronyms that are bandied about at Sibos."Banks also need to take our operational processes more seriously."

Van Dooren is the first corporate I have heard publicly praise SWIFT'S Trade Services Utility (TSU) initiative. Given the needs of logistic companies like Safmarine to automate trade documentation such as purchase orders, invoices and bills of lading, Van Dooren says the TSU is "moving in the right direction."

The TSU was established by SWIFT to provide a centralised matching hub for the exchange of information between banks for matching purchase orders and invoices electronically. But while it addresses a gap in the supply chain - if banks can capture and automate this information they can use it to provide additional services and financing solutions - once again it is a largely bank-driven initiative which has no immediate and direct benefits for corporates.