HSBC Holdings PLC, aiming to get a bigger piece of the North American cash management market, has developed an international payment service for corporate transactions.
The London banking company announced the multicurrency, multiformat service last week. It lets corporate customers send HSBC a single payment file, with instructions to remit payments to multiple recipients in the three North American Free Trade Agreement nations - the United States, Canada, and Mexico.
Payments can be sent in U.S. or Canadian dollars or in pesos and can be delivered as check, wire transfer, or automated clearing house payments. Nafta took effect in 1994, creating one of the world's largest free-trade zones.
Michael Gallagher, an executive vice president at HSBC and its head of global transaction services for corporate clients, said the service is aimed at automotive, pharmaceutical, technology, logistics, and consumer goods companies that do business in any of the three Nafta nations.
He said it could also appeal to customers in Europe and Asia, which increasingly view North America as a single trading zone.
Analysts said the service combines accounts payables and foreign exchange features. It reflects the economy's increased globalization as well as corporations' efforts to centralize the management of their daily cash positions in various countries, they said.
Mr. Gallagher said the company is already providing the service in a pilot program to a handful of customers through HSBC's Global Transaction Banking Services business. He would not name the companies or give other details about them.
With HSBC's worldwide reach - it was ranked No. 2 globally in cash management last year by Euromoney magazine - its corporate customers can simplify their banking relationships, Mr. Gallagher said.
"Historically, what people tended to do was to set up three different banking relationships in the countries in the region," he said. "We had the three key pieces to cover the Nafta region."
HSBC Bank USA is No. 5 in the United States by assets, HSBC Bank Canada is No. 7 in that country, and Grupo Financiero HSBC Mexico is No. 5 there, with 1,000 branches and nationwide distribution following HSBC's acquisition of Grupo Financiero Bital in 2002, Mr. Gallagher said.
The combination of the payments technology, which HSBC developed in-house, and its presence in the three countries "makes this an interestingly different proposition from what we've seen," Mr. Gallagher said.
Jacob Jegher, a senior analyst at the Boston research and consulting firm Celent LLC, said the HSBC service is an example of the new offerings banks need if they are to generate more cash management revenue. "Crossborder payment is a very large area of growth," he said. "There are very few banks that can offer this kind of global network."
In a global village," Mr. Jegher said, "businesses, from small businesses to large corporates, aren't necessarily transacting only in their home markets anymore."
Other banks are exploring advanced payment systems "in different forms for different industries and markets, but not in this way and not targeted at corporations that are involved in Nafta," Mr. Jegher said of HSBC's new offering.
But he said other global banking companies will probably follow suit, in part to combat an industrywide decline in cash management revenue growth. "They're all going to be looking at innovative opportunities if they want to stay afloat in this market," he said.
David C. Robertson, a partner at Treasury Strategies Inc. in Chicago, said that with more centralized cash management, companies could move cash from one part of the world to another more easily. For example, HSBC's service could help a company avoid taking a short-term loan in one country by transferring excess cash from a business unit in a different country.
The percentage of companies controlling daily cash management functions from their headquarters went from 20% in 2004 to 40% last year, Mr. Robertson said. That "supports HSBC's decision to launch this kind of service," he said.
Banks often offer comprehensive payment services to their corporate clients, combining check, ACH, and wire payments, but they typically offer crossborder payments separately, he said.
What HSBC has done "is to combine the two together," he said. "To some extent it is unique."
