In the international and domestic corporate cash management markets the question to be asked is: how does an Acquiring arm of a major UK Clearing Bank balance the international (local in-country) demands regarding account receivables of the multinational corporation/retailer and customer, with the latter’s domestic “incoming” activity, if the UK Acquiring entity is not the incumbent’s international cash management bank? Easy you might say; but is it? Read on please.
The multinational corporate treasurer key role is to monitor the detailed activity of day to day working capital management by viewing all the corporate’s accounts across the globe. This includes the long and short balances in many different currency accounts at disparate banking organisation, with countries’ different clearing cut-off times, different payments and settlement, varying legal jurisdictions, potential local withholding taxes and possible local Central Bank Reserve costs. The Treasurer further requires a real-time and accurate global overall corporate net position internationally and domestically with regards to “end of day” available balances in all in-country local currency account, all in the corporate’s home currency. This is a big task; and the key sophisticated tool in the market to meet these needs is a form of true “multicurrency pooling” offered by a number of major Universal Banking Corporations. The two offerings that immediately come to mind from my cash management experience are and were: “Chase Liquidity Manager,” and Bank Boston “Optimizer.” There are of course others currently on the market.
Since multicurrency pooling results in balance sheet exposure to bank providers of these tools, these same banks will generally insist that all the corporate’s international and domestic traffic should move across the incumbent bank’s balance sheet. Here lies a real issue for the UK Domestic Clearing Bank’s Acquiring arm when seeking to bid for new “acquiring” business from a major high street merchant, retailer, or even an international concern, such as a hotel chain. Why?
Because literally at the end of the “working day” a treasurer will want to see all his organisation’s activity within “one view,” hence in one “treasury and/or omnibus account. Yes; in possibly a number of different business accounts naturally; but nevertheless in one bank, and under “one roof.” Consequently, if you are not the cash management bank proving the aforementioned services, you will find it a real challenge to get the treasurer to open new domestic bank relations and accounts to service other domestic incoming activity such as credit card transactions/merchant activity, if all “merchant retail transactions” can be acquired at the point of sale by the very same international cash management bank that provides the required “pooling” facilities to the corporate customer/merchant.
Why would a Corporate Treasurer open a secondary domestic bank account or accounts, and endure more painful “KYC” compliance, risk assessment and due diligence work, the additional time and costs incurred in on-Boarding, new EB interfaces and the required supporting security tools, in addition to a lengthy merchant acquiring discussion on the proposed “timing” of all commercially “polled” transactions; including the timing of transactional clearing and settlement. To add to this additional work load and costs; this all has to be undertaken alongside the demands and day to day needs of existing numerous bank relationships and accounts held overseas on behalf of the corporate’s subsidiaries, and the local in-country domestic requirements. “Business as usual” must clearly continue
Perhaps someone in Barclays Merchant Services or HSBC Merchant Services for example, can enlighten us (without of course breaching confidentiality) as to how their domestic acquiring service meets a treasurer’s needs in this scenario, and offers an all-encompassing solution over and above the intentional cash management bank’s service, whom in this example is also local in-country acquiring institution.
In this scenario, the independent “non bank” Acquirer has all to play for here, as they can simply ask the customer: “to which Bank do you want the incoming merchant transactions and funds to go?” A UK Bank’s Acquiring arm – if not the corporate’s cash management provider – will have to offer the customer something quite enticing, to win its domestic merchant retail business activity, given no international cash management services are available in this UK Bank’s portfolio.
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