Crown jewels?

Feature | 13 October 2016

Panellists at the inaugural TFR cash management roundtable agree that working with fintechs and other banks for an improved corporate experience and increased inclusion is the way forward



The panel

Søren Haugaard,
head of supply chain and
trade finance, Danske Bank

Nkosi Moyo,
head of cash management, Ecobank

Daniel Verbruggen,
managing director, head of relationship management, developed markets treasury services, BNY Mellon

Moderator: Clarissa Dann,
editor in chief, TFR


Left to right:Daniel Verbruggen, Clarissa Dann, Søren Haugaard, Nkosi Moyo


Clarissa Dann: Welcome to the first TFR cash management roundtable, held here in Geneva straight after a Sibos where themes of the low interest rate environment and a changed competitive landscape came out loud and clear. Our panelists represent cash and trade banks from North America, Europe and Africa, who will kick off with their impressions of Sibos and the implications for their cash management client relationships.

Nkosi Moyo: There is a lot of interest from our Ecobank perspective in some of the newer trends and around making payments quicker and more efficient across the continent, so during the past few days we have spent a lot of time in discussion with various partners in terms of how we can make our solutions more efficient, both internally and also from a cost perspective for clients.

Daniel Verbruggen: At Singapore last year there was a lot of talk about fintechs taking over from the banks within five years, but now they are much more open to collaboration with the banks without whom they cannot survive in this more complex world.

Søren Haugaard: Yes, - I talked to a number of corporates and fintechs throughout the event and they expect us to be able to work together across the industry and with them, to form a triangle of collaboration for the development of new goods and services. Such collaboration fits well with our partnership strategy.

Clarissa Dann: Let's turn to the SWIFT Global Payments Innovation Initiative (GPII) and its impending second phase promised for 2017.1 What do you think of this?

Daniel Verbruggen: Our bank is part of the pilot group of 21 banks leading the initiative, which has three main elements. They are: timing, related to faster, real time payments; predictability, so that you can track your payments just as you do with a DHL delivery; and charging, optimising the charging components and possibly passing on a cost saving to the customers.

Søren Haugaard: Corporates ask for transparency speed and efficiency but also demand a trusted format and network -
although the fintechs have a lot of great ideas, they don't meet the required standards. I know from my discussions with SWIFT that there are
a lot of things happening, we are part of the pilot group of banks spearheading this.

Nkosi Moyo: We are not part of the pilot phase but are joining in the next phase.
Our clients operate across continents, so whatever is delivered outside Africa is what is expected within the continent in terms of speed, transparency and fees. We do see a wide variance from country to country in terms of fees, especially for cross-border transactions.

Søren Haugaard: You have a good point; your customers are global across multiple jurisdictions like ours. In response to their needs to have efficient liquidity management, be it FX or other services, this is a response to the call for transparency and efficiency. It became very clear during this week at Sibos that if the banks don't find a solution someone else will.

Clarissa Dann: This leads us neatly onto technology and some of the innovations that
are coming through so that the end user -
the corporate treasurer - does have full perspective on where their cash is anywhere in the world at all times and where payments have got to. What sort of fintech partnerships are addressing this?

Daniel Verbruggen: Yes we have various projects going with fintechs. If you look at what has happened over the past three years, it started off with the retail industry on the bank side. We saw the emergence of PayPal and ApplePay attracting all those customers. They may have underestimated the needs of the corporate world in terms of risk mitigation and cash monitoring, so it is not that easy and so you have to replicate those solutions into a wholesale mode if you like - therefore we have a number of proof of concepts going with R3, Ripple, and there are others.

We have six innovation centres globally with various degrees of activity across a wide range of use cases, whether it is cash management, liquidity, foreign exchange optimisation. To an extent you could say it is a bit trial and error -
I would not say that we have already established
a standard, far from it, but there is a lot of activity and investment as a result.

Clarissa Dann: But this is not just about the blockchain.

Daniel Verbruggen: I think blockchain is more of a protocol, a format containing information validation comparable to SWIFT. There are other solutions out there beyond blockchain (which addresses specific needs) but there are other cases that do not need a blockchain.

Søren Haugaard: Many fintechs have received seed capital from banks, so there is already a lot of joint development going on and not just in the distributed ledger area. In the P2P sector, there are multiple discussions about creating new services for our core customers, which is really exciting.

Nkosi Moyo: We are in discussion with a number of fintech companies active in that space but need to create a certain market perspective from a bank and regulatory perspective - we
need the regulators on board. Most customers (apart from possibly the very large corporates) will typically go with the bank solution because
it is stable, fully compliant and trusted.

Clarissa Dann: Let's move onto liquidity risk management and the corporate treasurer's challenge - is there enough cash to run the payroll, or is there too much that should be earning interest (if that is possible these days). How are they balancing the tightrope of meeting liabilities and responsible cash custody?

Nkosi Moyo: It varies from corporate to corporate - we have some corporates who run their global treasuries out of Europe, the US and elsewhere. One of the major demands is on the visibility so making sure they can see at the beginning of each day all their balances worldwide on a single interface. We see a lot of banks on the continent providing those solutions on the SWIFT MT940 standard. I think the liquidity side is, from a bank perspective, supported through short and long term financing, and making sure that there are efficient receivables solutions in place so they get inflows more quickly, and efficient processing of payments.

We are seeing an increasing demand for banks to provide cashflow forecasting solutions. The bigger corporates invest in enterprise resource planning systems such as Oracle and SAP, but even then if they are operating across a number of countries, there will be countries too small to justify that investment, so they look to the banks to provide that through their platforms.

Clarissa Dann: How do you do this?

Nkosi Moyo: It is a case of already existing solutions, and how you adapt them into the existing internet banking platform. We are talking to service providers with already built solutions and finding out how easily these can be integrated. We don't want to develop something completely new if we can leverage something that has already been developed and is working efficiently.

Daniel Verbruggen: Corporate surveys have highlighted the problem of how the data can be enriched. Yes we have SWIFT 940 or MT950, but with new technology we will finally have a catalyst that will oblige us to enrich that data and bring added value to the corporates. Regarding liquidity and companies being cash rich - this may be true for the large MNCs and regional corporates working across six or seven countries, SMEs are still suffering from being squeezed in the working capital cycle. They cannot refinance their imports or exports, so we need to distinguish between the MNCs and SMEs.

Søren Haugaard: The bulk of my business and the majority of my revenue line comes from the Nordic SME sector and that is where we are concentrating our investments - to your point about the liquidity overview and how to create funding opportunities and the importance of transparency and getting it into one single platform. Some of the ideas for solutions to this sector are found in the P2P market where there are mobile solutions that transfers.

In the Nordics we are in the process of signing up with suppliers of accounting services into these segments and integrating some of their data models into our solutions.

Clarissa Dann: Perhaps cash management is actually a wider thing of consulting; advising SMEs how to wrap together various pieces of technology ranging from basic Excel to, for example, receivables finance platforms.

Søren Haugaard: Yes this is moving into more of an advisory role. We are seeing the traditional banking model being dismantled in the western hemisphere because of demographics and changes of behaviour. This is accelerated by the development of new technologies.

Clarissa Dann: This is a good moment to look at the development of mobile phone payments in Africa - there was a great talk at Sibos from Harvard's Professor Jay Rosenthal about the whole MPESA model in Kenya.2

Nkosi Moyo: Mobile technology allows the banks within their economies to play a greater role in financial inclusion. A lot has been done but there is more that could be done in terms of integration. Many initiatives have come up but they operate in silos. Moving money from the mobile wallet of one operator to another is still a problem. I think there will be more development as the technology improves.

Clarissa Dann: Let's revisit some of the fundamentals which we touched on earlier. In an environment where banks now pay central banks to hold their deposits, how is this affecting cash management services? Of course it is different in Africa where interest rates are not languishing at 0.25%, but what about Europe and North America?

Søren Haugaard: This has a very dramatic consequence to our business - we have had negative interest rates in Denmark for the last two years, so overnight, if I have excess liquidity in my bank and I want to place it in the central bank it costs me 75bps. We have had to pass this cost on to our professional clients in the corporate and institutional space and it's been a tough one to explain. In addition, we have had to develop new features in our systems to accommodate charging for interest. For the treasurer its mind boggling; excess liquidity is a burden. In our neck of the woods corporates are asking how payments to suppliers can be rearranged.

Daniel Verbruggen: If you look at the US$, the low interest rates are not sustainable because they have already fulfilled some of the expected effects. We could expect further interest rate rises in the course of 2017. The banks and corporates need to prepare for this. Some companies can diversify their investments into different asset classes. Cash is being moved into real estate asset classes and into hedge funds that in turn recapitalise the fintech industry.

Nkosi Moyo: From the African perspective we try to attract some of that European excess liquidity onto the continent. At least in Africa we do pay decent rates - we are trying to attract as much foreign currency as possible. But it's a long process to persuade the corporates to put their funds into Africa. On the local currency side the interest rates are much higher - double digit - so from a corporate treasurer perspective they will get decent returns on local currency funds.

Clarissa Dann: What about managing the FX risk?

Daniel Verbruggen: Let's go back to the customer. For them the hedging strategy is dependent on the working capital cycle and also the information that they can obtain. If we put this in the context of fintech partnership, we could have a solution where the customer can determine their FX exposure much earlier in the cycle, and reduce this risk. There is an import cost issue here in favour of the customer, ie while accepting the counterparties settlement currency is commercially benefical it does create exposure, but mitigated to a major extent with the timely information provision.

Søren Haugaard: It's not more difficult to manage than before but there are better tolls for corporates. As banks we have had good opportunities to manage this in the past. Now there are new players coming in offering alternative services. The playing field is changing and we need to consider how to play.

Clarissa Dann: Of course corporates don't just bank with one bank. We are here in Geneva in the home of commodity traders. Trafigura have in excess of 100 different banking relationships. How do you manage in a multi-banking environment?

Nkosi Moyo: We are more of a regional bank. We structure around the client requirement and we have the flexibility to feed whatever information the client needs for their global bank. We set up lines for their African requirements that cover them across the entire continent. We do collaborate with a number of banks inside and outside Africa - these are close cash and trade relationships.

Søren Haugaard: Yes, I agree - as another regional player we have been working with corporates on the same basis where we play within a larger global structure. But corporates want to decrease their dependency on global banks and while we continue to feed into their internal liquidity management and risk management structures, we increasingly also see regional solutions appear for the global corporates.

Clarissa Dann: Did anyone see the 2015 Deloitte Global Corporate Treasury Survey3 on how cash repatriation is a big issue - the process of converting foreign currency, dependent on
the exchange rate at the time of settlement?
The report notes "Credit Suisse estimate that amounts repatriated or earmarked for repatriation hit $301 billion in 2014." Companies are reluctant to repatriate their cash because of the high corporate tax rate. Do you have corporates with cash repatriation issues?

Daniel Verbruggen: The corporate looks at all aspects of his business and the treasurer has many tasks beyond the banking relationship. There is a lot of trapped cash out there, due to tax, regulatory, and local investment policies. It is not up to the banks to drive this but we can support the process. Its actually about global tax harmonisation - this could unlock this cash as well and steer it into, for example, Africa. Why not?

Nkosi Moyo: We would love to have that cash flowing into Africa. What we see a lot of is the number of corporates who have generated significant cash in the various countries and they are trying to get it out. They struggle quite a bit and it is purely from a euro/dollar liquidity. Governments just don't have enough of it to open up or end restrictions on foreign currency. A few countries are flexible and you can move money in and out but for a lot of countries, there are controls in terms of what you can send in and out and for what purposes.

A lot of the big corporates find that quite frustrating and if you open up some of the systems and just allow a couple of the big players to move in significant amounts, then you will probably not have any foreign currency left for the rest of the economy. I guess there needs to be that balance between the corporate needs and the overall country's FX strategic reserves.

Clarissa Dann: SEPA was a huge amount of work at the time and there was no wriggle room. Everyone had to meet the deadline. Do you think we have seen the last of regulation like this that had such a huge impact on cash management investment?

Søren Haugaard: SEPA was a European initiative but it does have impact on the payment flows. There were a lot of sessions at Sibos around PSD2,4 and this is also not just a European issue. It's this notion of "one leg in or one leg out" that will have some consequences as to how we as banks create systems to facilitate our customers' traffic. Regulation determines how we drive this forward, with fintechs and non-banks entering the scene.

Daniel Verbruggen: We see the emergence of news standards. If we look at it globally, take China for example - with CIPS for cross-border settlements. The infrastructure is different in Africa, but you see the standard in technology coming out for mobile payments. In Latin America we experience the same evolution. In the US and Canada it's about real-time processing and payments. The Americans and Africans need to participate in the European economy and likewise we need to participate in their regional economies.

Clarissa Dann: To conclude, let's explore how trade and cash management intersect - we have already covered how receivables finance can provide liquidity management solutions, but what are the others?

Nkosi Moyo: In Africa there is a huge amount of informal trade - they trade domestically and cross border but mostly in cash. A number of banks including ourselves are looking at how to make it easier for anyone in trade to do their business more efficiently. How the solutions from a cash perspective support that trade business. We are trying to make transactions as electronic as possible - from the platform of large corporates through to the SME at the end of the supply chain who also needs to complete that transaction safely and securely.

Clarissa Dann: How do you incentivise unbanked SME growers to wean themselves off suitcases full of cash so that their trade can be formalised and count towards their country's GDP?

Nkosi Moyo: We are rolling out a mobile solution that is standard across more than 30 countries because that will make it easier for us to provide the next layer of solution within a standardised framework.

Daniel Verbruggen: I believe we have seen a stronger conversion between cash and trade. But we have now also noted that with the recession there is increased sovereign and counterparty risk that needs to be mitigated. That creates an obstacle for trade flows so that conversions of cash are suffering. At one point we thought there would be a meaningful reduction in traditional LCs with confirmations and discounting, but on the contrary, it is still very much prevailing depending on the trade corridors.

I also think that the complexities of a trade value chain are still there whether because of the documentation, and logistical matters such as warehousing of goods. Again, technology could be an enabler here to digitisation, maybe block chain again or through other protocols to recreate conversion of cash and the predictability of the cash flows in the system.

Søren Haugaard: There has been a lot of discussion about digitisation of the letter of credit and the ICC tried with the Bank Payment Obligation which did not really take off. I am sure that with all the intiatives going on we will see some good things coming out. They will not necessary transform the LC but will facilitate change of behavior and how do we make it interesting for the corporates.

Clarissa Dann: It's quite tough isn't it, to be innovative and take risks in a bank when you are worrying about regulatory censure and making mistakes?

Søren Haugaard: In our IT and development area, we have two types of development; the guys that make sure the bank is running every morning and turn on the switches, and the others that never wear a tie, and may come in at some point.

Daniel Verbruggen: We should embrace technology, look forward and collaborate with the fintechs and with other banks and that is clearly the future - we are not working in isolation any more. Regulators are there to steer what we come up with.

The TFR cash management roundtable was held on 30 September 2016 at the Starling Hotel and Conference Centre, Geneva




  2. See his paper' 'A quantum leap over high hurdles to financial inclusion: the mobile banking revolution in Kenya' published by the SWIFT Institute on 29 June 2016:

  3. See

  4. See a useful briefing on PSD2 from Payments UK at

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