I regularly encounter discussions about corporates’ needs from banks that say: the corporate generally doesn’t give a buck about their banking.
Apparently most corporates do not understand banking, do not care about getting the best services and rely far too much on their cosy sense of keeping the status quo. Actually, banks probably feel the same way too, but at least they try.
Why am I saying this?
Because I said in 2010 that banks would roll out apps for treasury and treasurers would love them, as it would allow employees who could previously be untrusted to do treasury services to now be allowed to do them. This is because the processes and functions of treasury would be simplified into app components, so that even dumb and dumber could do some FX trading or cash netting and pooling without screwing up the operation.
Sure enough, over the years I’ve seen various banks rolling out app services for treasury and corporate services from the JPM offerings to the impressively evolving Deutsche Bank Autobahn App store, which now has around 200 apps for corporate treasury services.
But then, I ask: do corporates use them and, more importantly, want them? And the answer from the bankers I’ve spoken with in the past twelve months is ‘no’.
In fact, there’s a palpable sense of frustration amongst the bankers I talk with, who say that they regularly innovate to deliver differentiated services to their corporate customers but their customers, all too often, say “that’s very nice, but we won’t be using it”.
Why is this? How can corporates not take the best bank service?
Apparently it’s because they have as much junk sitting around the back office as the banks. Many corporates have spent decades growing multinational businesses using multinational banks, and are often stuck with the banks they’ve got. They cannot incorporate new technologies without re-engineering the old and replacing the legacy and so, like banks, they just don’t bother.
So when the bank comes up with this exciting new innovation, this great new product, this fantastic capability, the corporate says “that’s interesting, but we can’t use it because we’re stuck with this last century pile of crap at the back”.
OK, maybe I overstate the case, but how many corporates run their account receivables with just technology and no people? Very few. There are some, like Spotify. Spotify has just one person in treasury services. Just one. It’s all run on tech, because Spotify are a fresh-faced technology company that started with a clean sheet of paper. Most have 100s of people in treasury services because they’ve built the company from a paper-based structure to a diverse multinational structure and cannot change it easily.
It kind of reminded me of the story that Michael Hammer reported 25 years ago when he put forward the notion of re-engineering the corporation. Back then, Ford had 100s of people in account receivables and had heard that Mazda had just three. They could not believe it, so they asked Mazda if they could have a look at their invoice process and, in the spirit of sharing, Mazda said ‘sure’.
The team flew over to Japan and what they saw was a system where orders were place electronically. When the orders were delivered, one of the three receivables team checked the electronic order, checked the physical delivery and, as long as the two matched, paid there and then. The immediate payment gave suppliers the incentive to get their orders and deliveries right first time as, if the order was incorrect, the receivables guys just sent it back and rejected the delivery.
That was innovative thinking back then and probably would still be today for some corporates. Most corporates apparently have far too much spaghetti to ever move to this online ordering service. That is because most of the corporates I deal with have a function that is not viewed as delivering value, but is just admin.
Value in many companies is generated by sales, marketing, product development and customer service. Treasury and billing is just the financial admin to make sure you get paid. Who cares about that?
So maybe I was being over the top when I took exception last year to comments that technology doesn’t change anything in the bank-to-corporate relationship. Maybe it doesn’t, as the corporate just doesn’t care enough, is not agile enough or is just not capable enough to bother.