Business confidence is a hard nut to crack, one day it's there and the next it's gone. Since confidence in the global financial system went out the window a year ago, banks have been slowly trying to rebuild their reputation with clients -- both of the consumer and corporate variety.
One man in charge of maintaining and retaining many of those corporate relationships is Eric Kamback, chief executive of treasury services at Bank of New York Mellon. After undoubtedly hundreds of conversations with corporate treasurers, he is sure of two things -- that BNY Mellon has benefitted from the economic malaise over the past year and that the tough times are not over.
At Sibos, the annual transaction banking conference organised by The Society for Worldwide Interbank Financial Telecommunication (Swift), which is being held in Hong Kong this week, Kamback shared a few of his thoughts on the forces still reshaping the financial and transaction banking industries as well as on BNY Mellon's future in Asia.
What are the emerging trends in treasury services?
Like the past 12 or 15 months, the coming year poses a lot of challenges and a tremendous amount of opportunities. Banks and customers are still reacting to the lingering effects of last year's [crisis] and are very much concerned about the short-term future. Any stability that can be brought to this equation is of tremendous value. Many customers and banks are still trying to determine the future of the banking industry and who they want to do business with. This is going to continue to create both turmoil and opportunities.
Do the flows you see tell you anything about today's economic situation?
The economy will remain very fluid for the next six to 12 months. From region to region and customer to customer, people are concerned about markets, about the interest rate environment and the equity markets. There is still a lack of confidence out there.
As financial institutions re-evaluated their treasury businesses, what trends emerged?
The biggest trend we saw was in the regional bank segment. Many players decided they couldn't properly play in the transaction banking space but wanted to maintain their customer bases by continuing to offer both innovative and global solutions. When these institutions took a step back and realised they couldn't do this themselves, especially in the environment we're in, they decided to take a different direction and look at outsourcing from a provider who already had a system with a full scope of global solutions. We've seen a lot more interest in this space than we ever have before.
Also, the liquidity crisis triggered a few events over the past 12 to 18 months -- one was the flight to safety, another about risk mitigation and finally the health of the institutions. What transpired, especially with the consolidation in the financial industry, is that customers found themselves with too many eggs in one basket and they were sensitive to that; this benefitted healthy, stable financial institutions.
Has there been interest in Asia?
Many of the businesses in Asia, through the consolidations that took place, took a step back and didn't want so much of their business consolidated with the relationships they had. A tremendous amount of balances were transferred in the 'flight to safety' but, what is interesting is that with those balances came transactions and transactions stick. Even as things have started stabilising, we've seen new transactions continue to stick.
Only about 5% of BNY Mellon's net revenue came from Asia last year. How important is this region to the bank?
If you look at the institution as a whole, yes, you can say only 5% of revenue came from Asia, but if you break down some of the products, as much as 30% to 40% of revenue comes from the region. Asian economies will offer some of the best growth potential over the next few years -- the region is absolutely key. We have a good base in Asia, but acknowledge that we need to continue to expand our presence in the region, notably Hong Kong, and we will continue to do that.
You say BNY Mellon is expanding in Asia, what is your growth strategy?
If you look at some of the prospects for growth in Asia, China, Taiwan and other countries offer tremendous opportunities. It's important that an institution has an appropriate presence to match the economic growth. BNY Mellon's plan is to take the strategies that worked for us over the past few decades and continue to build on these.
However, the transaction banking landscape in Asia will become more competitive. Many of my peers and colleagues emphasise transaction banking as a diversity play to replace some of the revenue they've seen disappear over the last few months. It is imperative that an institution have a strong presence, strategy and discipline about how they are going to approach the market.
How important is treasury and asset servicing to BNY Mellon?
Both these servicing bureaus are core businesses and have a lot of similarities in building growth momentum and delivering quality service. They are the foundations to many of our relationships around the globe and have enabled us to build upon the strength of other services across the bank. One of the things our clients consistently send a message about is the consistency of quality, service and innovation. These are key, especially in these challenging times.
Does BNY Mellon have any major treasury initiatives in the pipeline?
We've been working on this for about a year now, but in 2010 we plan to roll-out a whole new treasury services web portal. This will provide benefits to our customers from the standpoint of flexibility, access to different components of information, push technology, flexible reporting and a whole host of different things.
Something else I really think is going to take-off is the remit worldwide solution we've rolled out for global remittances. It's a product that will provide some competition in low-value, cross-border payments. We have several institutions already signed up and integrated.
What do you feel will be the next big thing for treasury?
Without giving away all my intimate secrets, I believe over the next two years the landscape will continue to change dramatically. Part of the reason for this is the events of the past 15 months. If you look at the financial institutions and the consolidations that have already taken place within the space, many of these institutions clearly need to rethink their strategies about what they are going to do with transaction banking and treasury services. The industry will continue to transform itself and there will be more shake-outs and changes among the players.