John Marshall, director of bank strategy and solutions at GE, and Michael Spiegel, global head of trade finance and cash at Deutsche Bank, discussed whether banks should stop differentiating on non-competitive services such as client onboarding processes.
Moderator Susan Feinberg, a senior analyst at Celent, said: “There is no doubt that everyone is feeling the pain of onboarding and the pain of increased compliance requirements.”
Citing a survey of about 300 globally-operating corporate treasurers from Deutsche Bank and the Economist Intelligence Unit, Spiegel suggested that regulation has “come up not only as an operational cost item, it has also come up as a potential threat to the banking relationships”.
He added that for corporates based in a single jurisdiction, or a handful of jurisdictions, complying with onboarding rules can be relatively simple, but for those corporates operating all over the world it gets “increasingly complicated”.
Banks, along with the regulators, need to determine what is required and create a standard that has “as little room for interpretation as possible”, Spiegel said, adding: “That is where I think we have collectively failed.”
Corporates should also engage in this area to create a “different ecosystem”, suggesting that all players in the industry have the same aim—a safer and less risky environment.
Marshall noted that regional banks were in a good position to take the lead on establishing standards in this area, however they have not necessarily done so. These banks tend to be more in touch with the local regulators, but they may not share the view of the global banks.
Marshall said: “If there’s going to be a consensus, that’s where there is going to be friction.”
Later, Marshall stated that innovation in the industry is “in the short run, killing standardisation”, calling innovation “distracting” for corporate treasury professionals.
He argued that without enforcement, there are no standards, pointing to several standards that are currently in place, but seldom used. For some innovative solutions, the existing systems would already have the capabilities for the job if the existing standards were utilised properly.
In the long run, however, Marshall suggested that innovation will promote standardisations, simply because enough innovators will be successful, meaning banks and traditional service providers will have to either innovate or lose out.
Spiegel disagreed, saying that banks need to keep up innovation in order to create more intelligent solutions. He also asked: “How far do you standardise? The world hasn’t [even] agreed on a standard power plug.”
He concluded that the industry should find a balance between standardisation and innovation, but “that equilibrium remains to be found”.