There was a time when transactional banking was little more than a suite of products offered by a bank to enable and support the trading activities of a business. Were that still the case today, it would be relatively simple for private or public sector organisations to choose an appropriate provider of these services. However, recent changes in the global economic and business landscape have substantially changed the transactional banking landscape, and highlighted the imperative for businesses to find a transactional banking partner that’s able to add real long-term value.
According to Gary Marais, Divisional Executive: Nedbank Corporate Banking, the process of finding the ideal transactional banking partner has been complicated by the recent stellar evolution of business and banking systems and money transfer infrastructures, particularly across the African continent. He emphasises that, as a result, business decision makers would be well advised to invest far more time and attention into the process of selecting their transactional bankers in order to ensure they have the ability to meet their ever-changing business needs.
Marais says that the importance of a more thorough transactional bank selection process has been significantly magnified in recent years as a result of the combination of stricter post-recession controls, tougher legislation, tighter liquidity and the steady growth in popularity of Africa as a highly attractive global trade destination.
“Ironically, Africa’s stellar adoption of modern, real-time transactional banking systems and structures has been something of a double-edged sword,” Marais explains, “in that the plethora of offerings has largely commoditised the industry, making it far more difficult for businesses to ensure they partner with the ideal solution provider for them.”
Marais points out that finding such a transactional banking partner requires that businesses look beyond the ‘bells, whistles and promises’ of systems, but to also consider the ability of their chosen bank to leverage those systems for their maximum benefit.
“The more regulated global business and banking environment has increased the need for proven innovation by transactional banking providers in order to not only deliver products, processes and systems,” he emphasises, “but also optimise their clients’ operational cash flow through capital structuring, the minimisation of working capital cost and effective liquidity management – all while maintaining strict compliance with bank and regulator policies.”
Given that, in difficult economic times, transactional banking is seen as a relatively safe source of revenue by most financial institutions, Marais argues that sustainable quality of services is by no means guaranteed. He contends that without the proven expertise to operate these systems optimally, it’s possible that some institutions won’t be able to keep on delivering the levels of operational optimisation that they should for their clients, particularly at times when the economic environment worsens.
“Against this backdrop, client-centricity is a central requirement for developing agile, inclusive and effective solutions,” he says, “so it is more important for a transactional banker to be a business generalist and product specialist than to be an industry expert – because transactional banking effectiveness is really all about understanding capital and gearing, managing risk, and then applying this expertise successfully via appropriate business acumen.”
For Marais, the ultimate effectiveness of transactional banking therefore boils down to a relationship-driven approach that is proven to unlock real client value. It’s a philosophy that has seen Nedbank’s transactional banking offering evolve significantly in recent years to the point where the relationship between client and service teams now drives the development and application of appropriate solutions for collections, disbursements, information reporting, investments, employee and risk management, according to each client’s specific needs.
The success of this enhanced approach is evidenced by the results achieved by Nedbank’s transactional banking franchise, which saw the bank increase its non-interest revenue (NIR) expenses ratio for the first time in 2013.
“This growth was a direct consequence of our effective combination of a client-centric approach, transparent and competitive pricing, and innovative, tailored solutions,” says Marais, “all of which have resulted from our commitment to knowing our clients, understanding their challenges and supply chains, and ensuring that our services represent a value adding, real-time and sustainable response to their needs.”