Banking News

EXECUTIVE INTERVIEW: Alastair McGill, Managing Director, Cashfac

• Only 35 percent of corporates in four Asia-Pacific markets say they have access to a real-time view of their transactions and cash
• Only 23 percent of cash is physically pooled in Asia Pacific and where Notional Pooling is possible it’s not fully exploited; with less than 50 percent of all cash being notionally pooled together
• The biggest shortcoming in multi-banking arrangements is in the linking of accounts between banks
• Self-serve functionality and reliance on banks for customised changes are major shortcoming of multi-bank arrangements

What are the advantages corporates gain from understanding their cash positions in real-time?

Post the global financial crisis, companies learnt to do more with less; a more austere economic environment has put a spotlight on cash, ensuring those responsible for it in the business make their cash work even harder. The phrase “Cash is King” has never been more relevant. The start point for better cash management has to be in gaining a holistic view of it; across all currencies, all departments and across all banking relationships. Greater transparency of cash provides firms with more options; to fund strategic investments; to make tactical short term investments through their treasury operations; to reduce debt.

Without a real-time, accurate view of cash, gaining greater control over it is impossible. Just look at the data from the survey; even accepting the regulatory challenges of trying to centrally manage cash across an Asia Pacific operation, we would have expected a greater proportion of firms to be utilising liquidity structures such as pooling and end of day sweeping. However, the start point for utilising these structures and practices is in knowing where your cash is in the first place. If the time taken to identify cash across the operations takes too long there’s simply too short a window for the Treasury team to utilise the firm’s money to best effect.


What are the tools which are currently available to them to achieve this? Do these solutions come from the banks, or from their ERP or both?

As any firm’s cash exists both inside and outside the business, the processes and systems that are required to identify, track and manage it are both internal and external. Internally you have myriad of systems from ERP and Finance and Accounting solutions through to systems which may be used for managing specific cash processes, a simple example would be the company’s payables and receivables system. Depending on the size, nature and complexity of the business it’s not unusual to find multiple and duplicate systems in place serving different regions or divisions – so internally the cash view is often fractured and siloed. Externally, the picture isn’t always any better. The view of cash outside the business is from the company’s Bank providers. And as the Operational Cash Index survey showed, it’s usual for most firms to be multi-banked – so the external view of cash is also fragmented and siloed.

Bank provided systems have traditionally evolved from the Banks own infrastructure and started from the bank asking “how can we extend our systems and provide them to our clients?” Whilst this is a logical start point, it’s not one that takes into account the large client base banks serve and the individual needs of each client; their different processes, the terminology. They also typically don’t accommodate transaction or balance information from the firm’s other banks – so members of the finance and treasury teams are left with goldfish bowls of security tokens that they need to access their various different bank systems, ahead of manually consolidating the data. The result is a time consuming process which often yields unreliable results.

The alternative is for corporates and Banks to use Client Managed Accounts to better effect. Rather than relying on bank systems, the new generation of Client Managed Accounts based on virtual bank technology places the Corporate in charge of the bank account infrastructure. Client Managed Accounts can be bank connected so they act and operate as a real account, but the creation and management of the accounts is massively simplified. Account structures which support the working operations of the Corporate can be quickly established and provide immediate transparency of cash – even where cash is held at multiple banks.


East’s research showed a significant gap between corporates who have systems to deliver this transparency, and the levels of transparency they achieve. What were your take-outs from the research?

I think the research highlights the reality of the challenges facing multi-banked, multi-regional corporates in building that consolidated view of cash; even where one or more of bank partners can provide real time systems, the systems fail to provide a complete view. So corporates are left wrestling with integration challenges or left with a fall-back position which is to adopt manual and time consuming process which negates much of the value of the real-time data available. Ultimately, I think there’s great scope for Banks to offer much richer, more integrated systems – or for Banks willing to take a leadership position, provide a solution which not only delivers real-time data from the bank’s system but consumes the corporates feeds from their other bank partners and creates that real-time consolidated view.


What are the issues which are impeding a clear view?

I think we’ve covered many of them; the challenge is to pull together a consolidated view of cash that overcomes the fragmented reality and delivers transparency, irrespective of where the cash is physically located. Impediments are therefore data aggregation from multiple sources and parties, integration of systems and processes, and the tools to be confident that the end consolidated picture is accurate. As with any process that has multiple data sets, relating to the transactions, being provided and recorded by different systems there’s an issue of reconciliation – how do you maintain integrity of the transaction and the account or balance that it impacts?


What do corporates say about the issues of multi-banking, and how that impacts on a real time view?

The research was pretty clear in this respect with respondents highlighting three main factors. The most commonly cited shortcoming was the patch-work of systems that were relied upon to achieve a holistic view of operational cash. It’s clear that Corporates are tired of ‘patchy, work around solutions’ and feel that they take on the brunt of the work in ‘filling the gaps’ in – either in integrating systems or consolidating the data.

The second area of concern was the low level of self-service functionality available through Bank–provided systems. And, as the systems are in the domain of the bank, rather than the corporate, when changes to them are required, the response is typically slower than desired. The last major area of concern was that Corporates are concerned over spans of network and that they frequently fail to map to their own operations.

I don’t believe these issues reflect negatively on the banks – it’s more a reflection of a Corporate’s expectations. The majority of a Corporate’s systems that are used to manage and control financial operations are internal systems, selected specifically to support key requirements. For example Treasury systems, F&A applications have all been selected carefully and are all within the Corporates control to make system and process changes.

Now, in most cases Corporates are reliant upon systems that they are using as a result of selecting a bank, not for the technology they offer, but for their core banking services they offer. The bank meanwhile is serving hundreds of firms often with centrally managed systems which handcuffs it when trying to respond to any one client’s needs. Hence you get a satisfaction gap based on the delta between the Corporate’s individual desires and the Bank’s ability to respond.


Looking at the comments respondents made regarding overall satisfaction with their Bank-provided systems what were your key take-outs?

The three areas cited as causing the least satisfaction were Integration – specifically with payments systems, on-boarding and account opening processes and scaling to achieve regional coverage. Integration and on-boarding are two of the complex tasks that occur at the start of any system implementation and often leave clients feeling more pain than they would ideally like. As part of the on-boarding account opening is typically time consuming initially, but Banks could do more to simplify this by greater reliance upon ‘client managed or virtual accounts’ and putting the ability to create certain accounts into the hands of the Corporate. Scaling to achieve regional coverage may also be better addressed if the Corporate had greater control over their bank account platform, something which once again can be achieved through client managed accounts.