Do banks know their customer?

So I’ve just finished a mainstream keynote debate at #Eurofinance2011 in Rome about bank to corporate relationships.

My role was to moderate a panel of six key industry players, three from corporations:

• Debbie Millar: Group Executive - Treasury, Funding and Investor Relations, MTN Group, South Africa
• Darsh Johal: Head of Global Cash Management, Shell Treasury Centre, UK
• Dr Mark Kirkland: VP Treasury, Bombardier Transportation, Switzerland

And three from banks:

• Rajesh Mehta: Regional Head of Treasury & Trade Solutions EMEA, Citi, UK
• Daniel Schmand: Managing Director, Head of Trade Finance and Cash Management Corporates EMEA, Deutsche Bank, Germany
• Carole Berndt: Head of Europe, Middle East and Africa, Global Treasury Solutions, Bank of America Merrill Lynch, UK

It was a good debate and opened with what do the corporates want from their bank and how do they see best practices?

The summary of discussion was something like: “we want banks to be honest and open, transparent and communicative, and easy to do business with.  Their systems have to be resilient, reliable, robust, scalable and secure, as do their processes and practices.  We want them to understand our business needs and our treasury model, and organisation.  There needs to be a good, listening relationship where the bank looks at our needs and addresses our problems with solutions. In a global context, they need to show they have a global footprint with a wide range of products and services and demonstrate wherever possible consistency across those services and geographies.  We want no surprises or delays in dealing with our requirements and a responsive business partner overall.”

That’s not asking much is it? I asked the bankers.

The bankers responded by saying: “we try our best to provide transparency and ease of use in our products and services.  We try hard to understand the business domain and needs of our clients, and to educate them in the changing regulations that apply to our businesses and how it affects their businesses.  We try our best to work with our clients to understand the implications of things like Basel III and SEPA, and to support them in a collaborative approach, rather than just viewing these things as internal compliance programmes.  In this context, we try to partner to cover all aspects of the complete value chain from a financial viewpoint, in order to complement their supply chain.  Generally we see our work as being something of a marriage of needs, and a marriage requires strong relationship and trust.  That’s what we deliver.”

A few questions came up as key issues such as the documentary requirements of the banks particularly during client on-boarding, and how much of an overhead this created to both the bank and the corporate.

Another area discussed in depth was how to listen, understand and advise the corporate client when the bank has silos that operate as separate P&L’s: how can you advise a client effectively, when you are trying to sell products, often competitively against other divisions of the same bank?

There’s also a key question of consistency of process and delivery, as most banks are large, multi-country entities and delivering a consistent service across geographies and divisions is a big issue.

The banks claim that they get over this by focus.  You cannot be all things to all people, so banks are making conscious decisions around whether they are an SME bank, midcap bank, corporate bank or global bank.

That’s the only way to present, pitch and position correctly.

I was pretty astounded to then hear Rajesh of Citi say that their systems monitor and collect information continually from over 270 million data points across the network, and that the bank is more of a financial network provider than a product provider.

We then went into some interactive audience voting, with most of the audience saying their banks are average to good. 

Their biggest challenge is all around documentation, with technology and a failure to understand the corporates’ business coming next.

Having said that, corporates don’t help as the #1 issue in corporate relationships with their banks is a lack of openness and transparency: how can a bank be a true partner if the client hides things from them?

I wrapped up the whole session with the view that corporates want a trusted advisor and most banks will try hard to be just that; the issue is that a bank cannot be a true advisor if they try to sell products that are inappropriate.

Meantime, as is my way these days, here’s what the twitterati said about the panel:

Debbie Millar from MTN Group: banks need to be more clear about what they want to do and where they want to play.

Darsh Johal from Shell: banks need to partner with their clients and understand the business and onboard smoothly.

Banks are a business partner but sometimes they don't truly understand our business. They need to listen and solve problems

Mark Kirkland from Bombardier: banks are really a kind of supplier and need to understand their clients' business.

Having focused conversations with banks is key (Bombardier)

Corporates on the panel are saying transparency in bank fee pricing is key - need to understand what is being charged

Q for panel: do you get value from the banks? Do they have a right to charge for services? - A: a resounding 'sometimes'

Summary of panel so far from @Chris_Skinner: banks need to be business partners with their clients #EuroFinance201

Rajesh Mehta from Citi: banks need to understand the domain in which their products are used.

Mehta: transparency in compliance is as important as transparency in pricing. Innovation discussion must be collaborative.

The elephant in the room: documentation and account opening. Banks need to address these issues and view this from the clients’ perspective (Schmand, Deutsche Bank)

Schmand calls for standardized documentation initiative across banks.

Daniel Schmand, DB, talks about 'Apple-effect' - how to make products easy to use/ plug and play products for corps

Carole Berndt, BAML: we are successful when we stop saying 'the bank' or 'the client' and start just saying 'we'

Berndt: banks need to get out of product silos to achieve successful partnerships

How can banks be advisor and business partner, while they are still trying to sell?

Dr Mark Kirkland (Bombardier): the same thing that happened to FX markets w/ automation is happening to payments. Banks need to adapt. Businesses change and the profit isn't made in the same way.

How do corporates rate their bank (scale of 1-9)? 60% of corporates give an average-good rating (5-8)

Audience poll reveals that 3% of the bankers in the room think they're rubbish (1 out of 9)

28% of corp treasurers in audience say documentation is banks biggest shortcoming

Audience poll: bankers are as unhappy about docs as corporates (maybe more-so). Why is no one fixing this??

Carole Berndt (BAML) makes good point - banks are also frustrated with documentation and lack of standardization

Darsh Johal (Shell) and Debbie Millar (MTN) express difficulties dealing with local banking operations

Schmand: banks can't be everything to everyone. They need to focus their strategies and provide consistent service.

Mehta (Citi) banks need to understand clients and their location, have consistent systems, platforms + knowledge management

Millar: banks also need consistency in their people and how they're evaluated & incented.

Berndt (BAML) - corporates want to know their banks' strengths and weaknesses - no bank can do everything, everywhere

Berndt: the key is honesty and transparency. Banks need to tell the corporates where they're good and where they're not.

What can corporates do to improve the relationship with their banks? 55% say greater openness and transparency is key

Kirkland (Bombardier) negotiate with their bank - open dialogue, facts on table in a scorecard, is the way forward

Shell have bi-monthly (!) meetings with their banks.

Do corporates collaborate enough with banks? Berndt (BAML) - if we know more about your needs we can give better solutions

Key theme at bank-corp discussion: you need to have a strong relationship with open and honest communication

@Chris_Skinner sums up: Corporates looking for trusted advisor to give best service at best price