International Cash
Management - keeping
TABS ON CASH FLOWS
WHAT'S NewS Issue 10 November 1997
info exchange
13
The business of helping our customers manage their domestic and cross-border
cash flows together with the various associated risks has become increasingly
demanding and competitive. What's New's examines a new International Cash
Management (ICM) strategy and discovers a surprising parallel between ICM
developments and those in the express freight business.
Douwe van der Meer, transforming our
bankers into information brokers.
Companies like Federal Express are now
household names because, a decade ago,
»iey technologically revolutionized the
usiness of delivering parcels. Not only were
they able to promptly deliver their packages,
but they could deliver 'information' about
them as well. Their ability to locate a
package at any given moment proved to be
an advantage over competitors who lacked
this skill. The same principle applies to the
management and movement of money, as
Douwe van der Meer of Operations
explains. 'We want to transform ourselves
from a payments broker into a competitive
'information' broker.'
MISSING OPPORTUNITIES
'If our customer wants to send money to
Germany, the real issue is no longer whether
we can arrange a transfer from point A to
point B - that's trivial. We need to be able to
inform him exactly where the money is at
feiy given moment, and thus make it possible
Tor him to manage his assets and risks more
effectively. Today, we can't deliver the
services our customers expect. The transfer
process involves many intermediaries (i.e.
correspondent banks) and can hardly be
monitored from start to end. The result is
that we have lost customers and missed
important opportunities.'
TRIGGERING INNOVATIONS
A rapid improvement in our capability is
made even more urgent by the imminent
introduction of the euro, or common
European currency. This will further raise
the performance benchmarks and add to
our customers' needs. These issues have
triggered an initiative by Henk Visser of
our Executive Board to revamp ICM
services throughout the organization.
^igether with the member banks division,
we intend to set up a common ICM system
for wholesale and top-end retail customers.
At Rabobank International, where we are
under intense pressure from customers and
competitors, a solution is needed by 1998.
This will be coordinated with two other
projects that have been simultaneously
initiated. One of them involves our
member banks and the Unico partnership
of European cooperatives. Another is TES,
or Trans-European Services. The intent is
for all these systems to smoothly work
together within Rabobank.
POOLING FUNDS
The most important 'functionality' we can
offer our customers is the ability to pool
their funds. Most large corporations keep
multiple accounts according to their
internal organizations and their
geographical spreads. But they want to
optimize their use of all their available
assets, regardless of where they are held. If
there happens to be a shortfall in their
Erench account A, for example, they want
to draw on the surplus funds held in their
Belgian account B rather than being
obliged to seek costly short-term credit.
Our task is to perntit such flexibility.
KEEPING CONNECTIONS
We must also rapidly bring ourselves up to
speed in several other key fields, including the
adoption of new and non-proprietary
electronic connections between ourselves and
our customers. At present, customers often
have multiple computers and many different
software programs that they are obliged to
use when dealing with their partner banks.
But there is a growing demand for non-
proprietary (or open) systems that the
customer can use to interface with all of his
banks - and on which information about the
internal financial flow can be centralized.
(For large corporate clients, such systems
include Cerg, Beyers and SAP; for the smaller
middle market customers, the market
standards include Fontis and Multicash.)
FINDING PARTNERS
The tight time framework and heavy costs
associated with adapting to these demands
before the end of next year has led to a
decision to organize much of the work
together with a strategie partner, most
probably one of the large US banks.
Working on the basis of a carefully-
delineated contract, the partner will
deliver an ability to process and monitor
transactions from start to finish and act as
'super correspondent' in specified
countries. It will also offer Standard cross-
currency and cross-border pooling
capacity, which branch Utrecht will then
supplement to allow, for example, pooling
across accounts held at Rabobank
International and at the member banks.
DELIVERING CUSTOMER VALUE
Implementation of these new ICM services,
and thus delivering added value to our
customers, will involve coordinating
expertise centred at account management
in Utrecht and other European branches,
the various IT departments, the legal
department and the Cash Management
Services division in Utrecht. We are
operating in an age when 'the customer
tells the bank what he wants - and not vice
versa,' van der Meer concludes. At the end
of the day, our competitiveness will depend
on whether we can deliver the information
and services that give our customer more
control over the flow of assets and the
exposure to interest rate and currency risks.
Illustrating the International Cash Management product flow
Customer telebankmg
applications
SAP Cerg Beyers
Security Distribution
Communication layer
Distribution layer
Member Banking proces
Banks
Telebanking Parinerbank
corresp ACH Netherlands
banking (Interpay)
