The changing demands of regulators and the threat of alternative service providers chipping the market share of the traditional bulge-bracket firms are challenging the transaction-services industry.
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There are numerous challenges in digitization. One comes from the market newcomers Marc Carlos, |
BNP Paribas’ global transaction banking (GTB) business is looking to offer solutions for its regulatory-burden-addled bankers and clients.
Carlos cites know your customer (KYC) and counter terrorist finance (CTF) regulations as having the biggest impact on the business, and requiring the most attention from the bank, in both time and investment.
He cautions: “A lot has already been requested from us in regulation, but there is still a lot more to come.”
The bank understands the risks of falling foul of regulation after its almost $9 billion fine for breaching US sanctions in 2014. The bank is now not taking any chances in its approach to regulations, regardless of the cost.
“When we look at how much we invest in the security of our systems, it is significant," says Carlos. "Meeting the standards of anti-money laundering (AML) and CFT requires a lot of investment.”
The shifting climate means having to work closely with corporates to manage their expectations on what the regulator requires of them, and to clarify the responsibilities of the banking partner.
“We are focusing on KYC so that when we interact with the client we only have to do it once," says Carlos. "We also need to understand the clients so we can advise them on what to expect from regulation.
“We need to understand what a client requires from the products to understand what is happening in their business.”
Gaining a greater understanding of the individual corporate's needs has become a priority. To streamline the regulatory process for both the bank and the corporate alike, steps were needed to simplify the bank’s internal divisions.
Carlos points out that while a bank has different structures internally, a corporate will not see it in this way. To help overcome this, the bank implemented the One Bank for Corporates concept to support clients as they move into international markets, regardless of where they are based. Implementing this standard means corporates working with the bank in any of the 220 service centres will receive the same experience.
This homogenized offering of global services comes, in part, hot on the heels of new regulations, which have harmonized corporates' technology and payment services, regardless of their home country.
Centralized hub
BNP Paribas has also focused on creating a suite of services for its corporate clients. It provides several facilities for treasurers, and introduced a cash-management portal last year to create a centralized online hub for information. It has also recently created an online currency guide detailing the payment terms of more than 130 currencies.
The bank offers educational programmes, including the annual cash-management university for 250 treasurers and corporate finance teams. The GTB business works with clients to ensure it is meeting their requirements by hosting them together to learn what they require in their banking services.
“You don’t see any big differences across the regional markets in the international companies," says Carlos. "They are all operating across the same platforms now.”
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The bank is aware of the need to push forward with its digital offerings, but for banking institutions the amount of work and investment needed to keep up to date with the latest innovations can mean they are slower to market than the emerging finance providers.
The emergence of the new players is creating a climate for innovation, and the bank has developed its internal platforms for corporate treasurers. The Centric platform was released last year for its European and Japanese clients, after its launch in the Middle East and Asia Pacific, giving users access to their cash-management, trade finance and FX services digitally and through one platform.
However, new providers, relatively unencumbered by the regulatory burden, could be shifting the competitive landscape.
Carlos says: “There are numerous challenges in digitization. One comes from the market newcomers. They have the advantage for the corporates of being innovative, but they weaken the security of the payment systems, as being not bank, they don’t have same level of internal control standards.
“These newcomers are bringing good ideas in front of the clients, but [are] also somehow risky, as they may not be strong enough in their offering to be on the right side of the regulations when it relates to AML and CFT.”