How can technology support the principle of ‘fair and effective markets’?
In my last blog on cross border payments I was mulling the concept of “fair and effective” markets and musing how that would apply to the current landscape of high bank charges in this area. The original blog was inspired by a newspaper article that was expressing outrage that a bank was discriminating against smaller corporates (SME’s) on a systematic basis.
This is in sharp contrast to the competitive world of FinTechs who are said to offer up to 90% cheaper overall fees compared to banks. From a bank’s perspective this is an unwelcome development and drew the attention of the small business minister Anna Soubry who made a call for more transparency and told the Sunday Times in a related article: “I want to know how we can make sure we do things fairly and make sure small businesses are not disadvantaged. I look forward to an explanation.”
So for all the acres of papers being written that are dedicated to banks waking up to the digital world and for the significant investments being made why have we not seen any wholesale improvement in this crucial service banks provide to the small business community? What is certain is that the bank’s share of this market is plummeting and surveys indicate that they currently only account for something under 65% of the market and of that 65% half of the customers are unhappy and feel that their bank does not understand their FX requirements nor offer them a full range of appropriate products to help them manage their FX needs. Against this backdrop and given the current rate of progress banks are risking becoming a minority of the service providers in this lucrative area.
The time to act is now and especially given events in the UK. The question is – What should be done?
Banks business customers are exposed to the economic impact of the Brexit vote on their FX costs. The immediate impact of the sharp depreciation of the pound has led to anecdotal evidence of companies being unprepared and unhedged for this outcome. Depending on if you are a net exporter or importer this will have been either painful or an unexpected windfall. However most commentators agree that going forward for the next few years the pound exchange rates (and by implication EUR rates) will be volatile as sentiment changes as to the terms of the negotiations around Brexit. This is why at eurobase we have added simple hedging tools to our solution so that banks can offer additional value to their cross border payment customers.
One of the reasons banks have found it difficult to respond to the challenge has been the simple fact that for many the front office world of foreign exchange and trading is siloed from the payment factories in the bank. A core element of any solution is that it must be capable of bridging this divide by being able to communicate with both worlds without any requirement to change underlying workflows and processes. This system integration work has been a mainstay of our business at eurobase alongside our solutions capability to deal with real-time systems and those deploying a batch loading methodology and anything in between.
It was exactly in anticipation of all of the above that prompted us at eurobase to conclude that “fair and effective markets” would not be just the mantra of the front office but would also pervade through all of a banks cross border payments engagements in time. The solution needed for this is what drove our development of a cutting edge ePayments platform. A solution that shows transparently the fees a customer will be charged, based on the speed and method of payment selected, alongside dynamic current exchange rates. An intuitive interface; built on the principle of that old witticism - “A user interface is like a joke. If you have to explain it, it’s not that good”; coupled with modern techniques to streamline payment information entry and a rapid time to market a bank can quickly get to winning back market share rather than watching the business erode.
We offer a cutting edge platform that will prepare a bank for the changing attitudes of customers in the banking market and equip an incumbent bank for the competitive and regulatory scrutiny ahead.
Click here to find out more about what eurobase’s siena can do for you.