Tuesday, 16 April 2019

How corporates can innovate in the age of Open Banking

In a series of HSBC Cash Academy forums held around Australia, experts said that corporate treasurers must make strategic use of their data as Open Banking approaches.

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Sweeping changes are disrupting Australia’s banking sector. The New Payments Platform (NPP) has started transforming payments, and the implementation of Consumer Data Rights – first applied to the banking sector through the launch of Open Banking – will empower businesses to make use of their banking data.

The NPP is a payments infrastructure that enables individuals and organisations to make and receive real-time payments 24 hours a day, seven days a week. Open Banking is an even bigger change. To be rolled out from July 2019, it will allow customers and businesses to access their banking data through accredited third parties.

Together, the NPP and Open Banking will set off a powerful and seamless movement of money and data, according to John Scott, HSBC Australia’s Country Head of Global Liquidity and Cash Management (GLCM). “It’s a milestone that we expect will unlock opportunities for Australian corporates to grow their businesses,” he said.

But what do these changes mean to corporate treasurers? What value can they gain? How can they take advantage of these developments?

HSBC held a series of Cash Academy events in major Australian cities, where industry experts answered these and other questions – particularly around Open Banking.

Enabling real-time cash flow management

The forums discussed how corporate treasurers are under pressure to boost the efficiency of their processes through technology. For example, treasurers are increasingly expected to manage their cash flows in real time. However, this is difficult to do without instant access to data. The pressure has only increased with the proliferation of faster payments through, for example, the NPP.

Open Banking can ease this burden by encouraging banks to develop methods to quickly share account and transactional data with clients. HSBC, for example, has worked with fintech firm Identitii at a global level to develop a platform that allows the bank to exchange information with corporate clients in real time. The project is aimed at fully automating the reconciliation of incoming invoices and payments for corporate clients who rely on HSBC for their transaction banking needs. The platform is innovative in both the technology it uses to securely share documents and data related to transactions, as well as how it digitises a process that unavoidably adds time and potential reconciliation delays to the settlement process.

Key to doing this is using APIs effectively, according to Nick Armstrong, Identitii’s Chief Executive Officer. “APIs enable new innovations to be quickly added to the bank’s existing technology infrastructure, such as creating a path for more transactional data to be collected and shared on top of existing transactions. The result is improved cash flow visibility for corporate treasurers as payments are settled faster,” said Armstrong.

But Open Banking goes beyond enabling speedy access to data. It will create an ecosystem of service providers and data-led services. Corporates can leverage this network to choose products and providers and drive cost rationalisation, according to Christopher Copland, Product Manager – Digital, GLCM at HSBC Australia.

“Businesses can easily move their services from provider to provider and reduce their costs,” said Copland.

Driving innovation for corporates

Importantly, Open Banking is going to drive innovation, said Ian Pollari, National Sector Leader, Banking and Global Co-leader, KPMG Fintech practice. “Key among these innovations is enabling corporates to seamlessly aggregate transactional and account data across multiple banks and get a holistic view of their liquidity position.”

In the long term, the convergence of the NPP and Open Banking will allow corporates to make or receive cross-border payments in seconds. This will be done by creating an ecosystem in which banks and corporates can share ‘Know Your Transaction’ data and documents securely and in real-time, according to Armstrong. “The benefit will be faster payments thanks to more information travelling with a payment, resulting in fewer delays relating to manual investigations.”

Another potential big win for businesses is the ability to allow customers to buy products or services where and when they are searching for or looking at them, said Copland. With real-time payments and access to data, businesses will be able to offer customers easy ways of paying online. For example, through Open Banking APIs, authorised third parties can develop services that initiate payments on behalf of customers or allow customers to use their information to login to their corporate bank accounts.

Innovation in Open Banking can also streamline many of the mundane tasks expected of finance and treasury teams, such as manually consolidating cash balances with cash equivalents, said Pollari. “With a lighter load, finance and treasury professionals can genuinely advise their companies about strategy and decisions around financing the business,” he added.

Creating value for businesses

As Open Banking looms, Pollari urged corporates to take a step back and identify and gauge the value of their most important data. “Then ask yourselves, how could you work with your bank if you’d like to get access to transactional, payments and third-party data? What problems could you solve for your customers?”

Solving problems for customers doesn’t have to relate to sales only – it can also relate to risk mitigation and process efficiency, according to Pollari.

“Corporate treasurers must consider what role they can play as data custodians and think through their use of data in a far more strategic context, to streamline payments and deliver greater value to the business,” he said.

Copland encouraged businesses to capitalise on their banks’ standards and mechanisms for managing data. HSBC, for example, is well positioned to help clients use, manage and protect data because of its experience with Open Banking in the UK, he said.

“We can leverage our pioneering capabilities in data standardisation and customer consent management in the UK to help corporates in Australia,” added Copland.

Working with an innovative partner

HSBC also continues to roll out digital solutions and is working with third parties to help expand its service offerings, enhance the client experience and bolster process efficiency. “Technology innovations come from all sources in today’s open ecosystem and the best customer experience will come from banks like HSBC who look both internally and externally for new ways to bring benefit to customers. Combining the right thinking with new ways of working will set banks apart,” says Armstrong.

As part of its Digital Transformation for Corporates program, the bank has introduced innovations to HSBCnet, its online platform for businesses. This has made HSBCnet more intuitive so companies can do their banking with as few clicks as possible.

“On top of this, we’ve integrated our systems with SWIFT gpi to provide customers with access to Track Payments, which gives them visibility of where their payments are at any time during the transaction,” said Copland. “It’s all about simplifying banking for our corporate clients and giving them greater transparency across their transactions and account information.”

HSBC has also made it easier for businesses to administer their corporate cards by launching MiVision in 2017. An online platform, MiVision allows clients to view and manage their corporate card program in real time. More recently, HSBC added virtual cards to its suite of corporate card solutions to help clients boost the security and control of their accounts. Virtual accounts provide a business-to-business payment solution without the need for a physical card.

These solutions highlight HSBC’s commitment to corporates in Australia, according to Dominic Khoo, GLCM Product Manager at HSBC Australia.

“At HSBC, we continue to embrace digital innovation to enhance our proposition to corporate clients.”

These platforms are currently not available at HSBC and HSBC is working through its launch strategy. We will update the industry as we get close to the implementation date.

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