Disjointed wholesale bank offerings are a problem at most banks, and one they've known about for years; it's been the object of numerous bank reorganizations, and it's still bedeviling them. As Dave Hunkele, vp of wholesale banking at S1 puts it: "As far as the top 25 banks, I see them making little to slow progress-and it's not that they're not trying."
The challenge, of course, is that converging multiple product fiefdoms across multiple markets is no minor task technically or politically; it requires knocking down silos and streamlining not only the front end where customers interact with the bank, but also the middle and back office where employees support those interactions. But banks may need to try harder to converge these services. Several forces are coming together, analysts say, pushing banks to better cater to their corporate customers, or be sidelined by more nimble banks that do.
Susan Feinberg, senior analyst in the wholesale banking group at TowerGroup, identifies four main catalysts that may push the industry to real change: The first is steadily declining revenue from wholesale banking operations-the result of cutthroat competition to offer largely commoditized services. New sources of revenue from the wholesale banking group must be found through cross-selling and more differentiated offerings. Second, customers are pushing banks; they want more efficient services as they interact with a global network of customers, suppliers and business partners.
Third is technology, in areas such as imaging, which is rapidly making convergence a practical pursuit. Finally, by converging their wholesale offerings and interactions with customers, both banks and customers can manage risk better, meet regulatory requirements and lower expenses by monitoring a single point of contact instead of numerous points of contact. But to meet the challenge, banks will have to push past the superficial wholesale banking realignments of the past, Feinberg says.
One bank that has recently announced a big push to converge its wholesale banking offering is Scotiabank, and executives there are not coy about the fact that customers pushed them to do it. Last month, Scotiabank announced the creation of Global Transaction Banking-a new business unit aligned to offer major multinational import and export companies a comprehensive, integrated business solution that will include: cash management, payments, trade finance, correspondent banking and foreign exchange services.
Effective November 1, the unit will provide services in the NAFTA region with operations to follow in additional regions. Albert Wahbe, evp & group head, Global Transaction Banking, says the bank, with a presence in 50 countries, hopes to offer the same services in Asia by sometime next year. "Within our own institution different countries have different products. The challenge will be to integrate and streamline across different countries and across multiple products," says Wahbe, who says customers didn't understand why the wholesale banking platform couldn't be as simple and streamlined as the retail platform.
Meanwhile, earlier this year, Scotiabank Group announced a new wholesale banking alignment in its Scotia Capital group. Scotiabank Group's new NAFTA platform will provide corporate, government and institutional clients with a seamless approach to business, under the Scotia Capital brand. The realigned business model will be more centralized, with common processes, products and services.
Frank Switzer, a Scotiabank spokesman, explained that the two initiatives, while separate, represented the bank's push to streamline product lines. They would not offer competing products, he says, but "effectively complement" each other. The bank estimated the new Scotia Capital initiative could increase annual revenue CDN $75 to $125 million after full ramp up.
While Scotiabank is new to the integration game, Wells Fargo is a bank that's been at it since 1999, says Danny Peltz, evp and head of Wells Fargo's Wholesale Internet & Treasury Solutions. Peltz explains that cross-selling has been the driver since Wells Fargo first integrated treasury management and the Internet in 2000. Since then the bank has launched a new service on the same single platform every quarter. There are now 45 applications, used by 70 percent of the bank's 26,000 corporate clients. Last year the customers, with minimum annual revenues of about $10 million, processed $4.4 trillion in payments over the platform.
All this may just be the beginning for Wells Fargo, which sees its Internet platform and the Check 21 legislation as positioning it to become a truly national bank, instead of a bank concentrated on the coasts. Its new Desktop Deposit feature allows companies to deposit checks over the Internet as well as add inputs that streamline their own reconciliation. More than 1.5 million checks have been deposited this way from July to October and the company is on track-by signing up 20 to 40 customers a week-to have 500 on board by year's end.
