Payment transparency is a hot topic at this year's Sibos, the annual transaction banking conference organised by The Society for Worldwide Interbank Financial Telecommunication (Swift) that is being held in Hong Kong this week. Corporates are no longer happy with simple e-portals capable of payment approval with completion notifications; now they want FedEx-style real-time payment tracking.
Most financial institutions are today either rebuilding or retooling their technology platforms to meet these new high standards. Standard Chartered Bank is one such bank. Having recently rebuilt its fund administration and trade finance systems, it is now working on its custody platform. But, as Karen Fawcett, group head of transaction banking at Standard Chartered, explains, in the near term, clients should look forward to greater in-depth payments reporting on Straight2Bank, the bank's wholesale banking web portal.
Amid a busy Sibos schedule, Fawcett sat down with FinanceAsia over mooncakes to discuss transaction banking trends and the bank's technology investments.
What are the leading trends you see in transaction banking?
You really need to go back to the beginning of the crisis. What we're seeing now is a big change in client behaviour across all segments -- a change in terms of how corporates are using their working capital and how counterparties choose their clearing services and custody banks.
Corporates really suffered over the past year. We may be seeing volumes coming back again, but they're off the bottom of a trough and nowhere near where they were. We've seen a change in behaviour in terms of clients wanting to keep liquidity and expand their use of short-term financing. As long as corporates are not sure about the future, they are managing internal working capital very tightly.
On the banking side, in the payments space and in clearing services, what we see is the revenue stream has fallen out of the market for a lot of banks. These clients are looking for new revenue streams and ways to do things more efficiently.
And in securities services?
If we look at the investment industry and our custodian and broker-dealer clients, they've been on an absolute roller coaster over the past year -- now they are looking for stability and reliability. A lot of discussions are on how to ensure they are no longer relying on just one player in any one market and finding different ways to spread risk. On the whole, we've got a lot of dilemmas going on in the industry at the moment.
Among these "dilemmas," are there any opportunities?
One thing we've been focused on is the provision of information. Through our Straight2Bank channel clients can get a full view of what is happening in their business across cash, trade or foreign exchange. Our "info manager" on Straight2Bank allows clients to tailor reports to exactly what they want to see. Essentially, clients are demanding greater transparency into the payment itself and we are strengthening some of our back office systems even further to meet these needs.
Can you give me an example of a system you are strengthening?
First, we rebuilt our fund administration and trade finance platforms a few years ago so they are in quite good shape. The main focus now is on upgrading our custody and clearing platforms into true global models, to offer all 40 plus markets in a seamless fashion. Our new corporate actions capability will be ready in the middle of next year and our teams are now working on a new clearing and settlement platform for custody. This is a tens-of-millions of dollars investment, it's pretty chunky.
These new systems will be much more robust than their predecessors. Internally, we'll be able to bring some services that were previously outsourced back in-house. For example, some of the custody for debt instruments on the financial markets side and custody for our private banking clients were with external providers, and [bringing them in-house] will be beneficial to clients.
Standard Chartered's global transaction banking revenues are smaller than most of its competitors'. Do you intend to grow these streams and how?
Well certainly. Although first you need to look at the size of Standard Chartered as a bank compared to our global competition. We compete head to head with some of the biggest banks in the world, but as an institution we are not as big. In our focus areas -- Asia, Africa and the Middle East -- we are in fact bigger than most of the global competition.
We've made a dramatic shift over the past couple of years from a product- to a client-centric focus. For example, our sales force is now organised around client segments and within Straight2Bank, we have fantastic data within cash, trade and FX. If I'm the client and I want to follow a transaction through all those products, I don't really care what the product is, I just want to watch the lifecycle of the transaction. As a result, you will see us moving towards a holistic delivery mechanism being developed from the eyes of the client.
And the bank's physical presence?
First, we already have the broadest coverage across Asia, Africa and the Middle East with 1,700 branches with additional expansion opportunities in the Middle East. Currently there are some gaps in the Middle East and Africa but those are being filled in now.
In the Middle East, there are areas where we don't have licenses as a bank -- Saudi Arabia, Kuwait and Egypt. In Saudi, the bank is applying for a capital markets license and when that comes through we will be very strong in the financial and capital markets and able to do custody. In Kuwait and Egypt we are in the process of choosing alliance banks to work with.
It has been suggested that Standard Chartered will buy some of RBS's Asia-Pacific assets. Is there any truth to this?
Our strategy on acquisitions is very clear -- we try to find local banks or networks that will give us much greater presence on the ground. This is why we are having a lot of discussions with anybody who has a spare branch network in China and India. I cannot say more at this time.
What is the next big thing in transaction banking?
The big thing was actually this year. Transaction banking had been pushed into the background by many banks during the good times but there is a recognition this year of the huge value clients can put straight to their bottom line by managing their working capital far more efficiently. Through transaction banking a company can add just as much to the bottom line as it can through restructuring its balance sheet through sophisticated M&A, bond or structured finance deals. Transaction banking is becoming a real area for value creation.