Corporates are Looking to Their Local Banks for Dependable Solutions Since the Crisis and a New Approach to Financial Institution Partnership Models Can Generate Greater Value, According to a BNY Mellon White Paper

Study looks at more collaborative, value-based partnership "manufacturer-distributor" model

Oct 20, 2010, 08:04 ET from BNY Mellon

LONDON and NEW YORK, Oct. 20 /PRNewswire/ -- Financial sector executives and their clients globally are increasingly considering strategic partnerships and alliances when developing global transaction banking solutions, according to a new BNY Mellon study of 300 leading treasury professionals.

The study, "Global transaction banking, evolution through collaboration" found that a client-driven, mutually beneficial partnership approach, evolving into a globally-reaching ecosystem of capabilities and value, is a model well-suited to the circumstances of the global business environment – and even better suited to the post-crisis realities as they are taking shape today.  At the same time, traditional partnership approaches no longer fully respond to evolving end-user needs, as they do not capitalise on the value that local banks can bring to a modern working capital cycle.

Survey highlights included:

  • When assessing partnership options with global institutions, expertise and processing ability were the most important factors for over 43% of total survey respondents. At regional level, these factors were the priority for 47% of respondents in APAC, 40% in EMEA and 55% in North America.
  • Ratings of the effectiveness of local transaction banking services providers indicate that 81% of respondents see local providers as being most effective in providing payments solutions, and least effective in providing working capital management solutions (only 49% of respondents responded positively).
  • In all surveyed regions, there is a strong receptiveness to or acceptance of financial institution partnership between local and global providers, as a means of delivering value.  

Dominic Broom, Head of Market Development for BNY Mellon Treasury Services in Europe, Middle East and Africa, commented, "This study demonstrates the importance of striking the right balance between global-standard technology and enhanced processing, and local market expertise, which is why BNY Mellon advocates collaborative partnerships between local and global institutions – with local knowledge as the key constituent."

Aneish Kumar, Head of Treasury Services, Indian sub continent, added, "Corporate clients recognise the value that such partnerships can add, and they provide a way for their domestic banks to offer client oriented global solutions at local level. Furthermore, as BNY Mellon operates on a non-compete basis, local banks that enter into partnerships with us can be sure that doing so is no threat to their local corporate business."

By collaborating, smaller institutions can make use of a global provider's capabilities, in a way that is tailored to the evolving needs of their end-user clients. This joint approach also goes a step further to combine local and global best practice solutions to overcome the ongoing consequences of the global economic crisis.

While partnership between financial sector services providers is not a new concept, the study sets out to establish if a more collaborative, value-based partnership model, called the "manufacturer-distributor" model, has the potential to generate greater value for participating institutions, while remaining directly linked to the evolving needs of end-clients worldwide.

This model is predicated on the concept of local financial institutions, "distributors", who have a sound knowledge and understanding of their domestic market and their local corporate clients, leveraging the global transaction processing capabilities and extensive geographical reach of specialist global "manufacturer" institutions.  

Some of the key findings across different geographies included:

  • GERMANY: exhibits significant levels of collaboration in the financial sector, and the business and financial environment would be both receptive and conducive to the development of more comprehensive collaboration models, somewhere beyond a manufacturer-distributor model, tending toward all encompassing models such as a collaborative ecosystem. This assessment is based upon the relatively concentrated nature of the German financial market, particularly in terms of global or quasi-global providers, combined with the notion that German businesses is highly export-focused, value international reach and capabilities.
  • TURKEY: is a market in growth and expansion mode, with businesses actively seeking to engage in a variety of new markets. The Turkish financial sector is strong, particularly in the domestic environment; however, responding to the increasingly international requirements of corporate clients, is proving challenging for some local banks. The Turkish financial sector exhibits some degree of outsourcing activity, between partial outsourcing and full outsourcing. Given the evolving needs of commercial clients and the (acknowledged) limitations among some Turkish financial institutions, the sector is likely to shift to some variation of the manufacturer-distributor model.
  • INDIA: has shifted its recovery strategy from domestic consumption-driven to export-driven. Indian financial institutions are very familiar with various forms of outsourcing, however, there is a preference for maintaining operational capabilities in-house, and there are significant efforts to invest in and leverage technology to enhance service delivery. While there is receptiveness to certain modes and levels of partnership, there is also a desire to limit the scope of such alliances. India is currently at full outsourcing on the collaboration barometer, and indications are that the financial sector may be receptive to a shift to manufacturer-distributor.
  • CHINA: is in growth mode, with the global crisis referred to by one commentator as a "mere speed bump" on the country's road to prosperity. The financial sector is developing scale, international reach and enhanced capabilities at various rates, to meet the ever-increasing needs and expectations of Chinese businesses. While the financial sector is largely at the level of single provider, the scope of activity of Chinese businesses in international markets will drive rapid movement toward advanced collaboration models such as the manufacturer-distributor, and beyond, to full-scale collaborative ecosystem models.
  • UNITED STATES: continues to wrestle with significant impact arising out of the global crisis, including a material re-shaping of its financial sector. Several financial institutions have faced unplanned mergers, retrenchment to domestic markets and the sector as a whole faces the prospect of increased regulatory oversight. Various models of collaboration are well-known in the US, positioning it at the level just before manufacturer-distributor on the collaboration barometer, and suggesting a level of readiness to develop models in the range of collaborative ecosystems.
  • The study was co-authored by BNY Mellon in conjunction with Opus Advisory Services International, an independent research company and Moorgate, a specialist communications agency.  
  • A full report can be viewed in full at http://www.bnymellon.com/treasuryservices/index.html
  • At the forthcoming Sibos Conference in Amsterdam, BNY Mellon will be holding a special interest session on this research on at 4pm Tuesday 26th October (venue: Community Room 4).

Notes to editors:

With locations in 34 countries on six continents and a network of more than 2,000 correspondent financial institutions, BNY Mellon's Treasury Services group delivers high-quality performance in cash management, global payments, trade services, capital markets, foreign exchange and derivatives. It helps clients optimize cash flow, manage liquidity and make payments more efficiently around the world in more than 100 currencies. Processing more than $1.8 trillion in payments transactions on a daily basis, the company is a top-five participant in both the CHIPS and overall funds transfer markets, and is a recognized leader in the delivery of white-label treasury services solutions for banks and other large institutional clients. BNY Mellon ranked top in four categories and second in two in the 2009 Trade and Forfaiting Review (TFR) Magazine's Annual Trade Finance awards, including Gold for "Most Innovative Trade Bank".

BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets.  BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team.  It has $24.4 trillion in assets under custody and administration and $1.14 trillion in assets under management, services $12.0 trillion in outstanding debt and processes global payments averaging $1.6 trillion per day.  BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK).  Additional information is available at www.bnymellon.com.

SOURCE BNY Mellon



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