Are banks really global and innovative?

Ann Cairns, CEO, transaction banking, ABN AMRO Bank set the scene at the opening session of Eurofinance's International Treasury and Cash Management Conference in Florence by depicting how the role of the treasurer had changed over a period of 15 years.

She spoke about globalisation, the proliferation of the internet and online payment services such as PayPal(which by the way was developed by a non-bank) and how these forces had dramatically transformed cash management. She asked the more than 1000 treasurers present, whether ERP software was giving them what they wanted in terms of visibility into their working capital and payment flows?

One question she failed to omit, however, was are cash management banks giving corporates what they want? The answer was forthcoming in the next session, where in a live poll of delegates, only 7% indicated that bank innovation had had the greatest impact on treasury over the last 15 years. Technology was the biggest influence on treasury operations, gaining 47% of the vote and centralisation and outsourcing garnered 16%.

In a proceeding session on real-time liquidity management, which concluded that there were too many physical barriers to managing liquidity on a real-time basis, Paulo Mueller, corporate treasurer, Logitech International, Switzerland, countered that whilst working with a global bank made global liquidity management more possible, there was no such thing as a truly global bank. "The global banks are not there yet in terms of their back office, harmonisation of structure," he countered. As much as the banks would have us believe they are global, the final say should perhaps go to the treasurer of a company that is 'truly' global as Logitech is in 33 countries and has yet to find a single bank that can service its global liquidity needs.

Consolidation is in the air

In a taxi last night on the way from Florence airport to my hotel, I was chatting with a banking industry analyst who I know, and in between idle chit chat, we were contemplating the future of European cash management banks. Sad, I know! At that time of night our minds perhaps should have been filled with more interesting thoughts (not ones I can share with you here unfortunately).

Anyway, it struck us as we basked in the warm and breezy Florence evening, that although the European banking industry has spoken about consolidation since the introduction of the euro - you know one currency, one European banking provider and all that. Well, that never happened.

But corporate customers of banks are becoming more technologically sophisticated and demanding more from their banks. At the Eurofinance conference in Florence, yet again corporates spoke about rationalising the number of bank accounts they held. I felt a sense of deja vu. It reminded me of a Eurofinance conference a few years ago before the euro was introduced where corporates said the same thing.

There was one company, Swiss dairy co-op Campina, which had set up a single euro cash pool for all of its operating subsidiaries with a single bank. But they tended to be the exception rather than the norm.

It appears that your average corporate treasurer sitting in his 'ivory tower' hankers for the day when all he needs to do is manage a single bank account for each currency. That probably sounds like music to the ears of the global cash management banks, but what about the regional banks? Where do they fit into all of this? Who are going to be the winners and losers from this consolidation everyone is talking about but we haven't witnessed yet.

As our taxi sped through the streets of Florence, the analyst and I mused, 'Could we end up with just a handful of banks dominating the business globally?'. Hardly a revelation, nevertheless we contemplated that as the global custody business had consolidated into the hands of a few providers, would the payments business follow the same trajectory?

It would be a tad premature though for the global banks to start popping the champagne corks and patting themselves on the back, as the banks themselves, even the so-called global banks, need to get their house in order before they can truly call themselves global in every sense of the word.