The Cash Management Forum is a tri-annual meeting of leading transaction bankers from over 35 North American banks hosted by GC Insights, a wholly-owned subsidiary of McKinsey & Company. At the Forum’s most recent gathering, Craig Martin, executive director of AFP’s Corporate Treasurers Council, arranged a panel of CTC members for a session titled “Corporate Pain Points and Perspectives on Industry Innovation.”
Moderated by David Stewart, Senior Expert and Forum Moderator, GC Insights, the panel consisted of:
- Grady Walker, Treasurer & Finance Director, Popeye’s Louisiana Kitchen
- Kurt Peters, CTP, Treasury Manager, Imerys
- Courtney Lowe, CTP, Vice President, Treasury, Fiserv.
Totaling 2,300 stores in 26 countries, Popeye’s has experienced high growth under lean management in recent years. “You’re looking at the treasury group,” Walker said. “As a 98 percent franchised enterprise, we’re focused on staying efficient and nimble in the corporate office. It’s a high EBITA, low expense model that we like.”
Fiserv (NASDAQ: FISV) employs 21,000 professionals serving 16,000 clients worldwide. Courtney Lowe, Fiserv’s Vice President of Treasury, highlighted a few of company’s roles, which range from transaction processing to card production. In 2013, the company generated approximately $5 billion in revenue and $800 million in free cash flow. Fiserv’s products and services include PEP+, RXP, DNA, Mobility, popmoney, mycheckfree, and Fraudnet among others.
Finally, Kurt Peters introduced the French mineral processor Imerys, which employs 17,000 professionals including 3,000 in the U.S. Peters, who as Treasury Manager handles areas of treasury and risk, explained that Imerys sells raw materials like talc to other businesses that include hospitals, breweries, and automakers.
Here is a transcript of the session:
David Stewart: I want to start this session by asking each of you on the panel about your experience with the regulatory pressures facing banks. How painful has it been?
Kurt Peters: Regulatory pressures have certainly affected us. Fortunately our group isn’t touched by Operation Choke Point, but we’re struggling now with KYC. We know that banks are struggling with these regulations too, so we hope to meet in the middle.
Courtney Lowe: I’ve observed that FIs can struggle with knowledge transfer. Many bankers ask for information we’ve already provided. We can excuse these questions in the context of a new banking relationship, but at the same time, we conduct standard business with predictable banking needs that should be much simpler than they are. Obviously some situations are more difficult than others. We understand that Check Free Pay Corporation—one of our subsidiaries and a licensed money transmitter—will need to meet very strict KYC requirements, for instance.
Audience: Do you find that the ODFIs you work with interpret regulations differently and apply the KYC rules differently from one another?
CL: It varies from banker to banker. We’ve made significant strides to understand nuances with each ODFI. But some can be especially challenging.
DS: Go deeper on the idea that some institutions are easier to work with than others. What does good look like? I understand that you shouldn’t ask for information you’ve already asked for. But how else would you describe it?
CL: I frequently find myself educating bankers that join the corporate relationship when it should be the other way around. Great bankers educate you and keep you informed about what is happening. They are responsive and don’t forget the follow-ups. They probe and help you prepare for things. They know what’s necessary and help us get there.
Grady Walker: The best service organizations know their customers; they ask how the product you bought is working. Yet, when I call banks, they don’t have this basic information. Almost every conversation begins with a banker asking me what I do. Instead they should be asking me about the new restaurant I just opened. They should be anticipating my product needs which almost never change. Even the most basic information would be helpful. Enterprise is a good example: “Hi Mr. Walker, I understand you like a midsized car with no GPS, is that still correct?”
DS: Do you have any good examples from FIs? Or is it all painful?
KP: It’s definitely not all painful. I can’t stress enough the positive impact of customer service. We all get bogged down in day to day situations and can easily miss unexpected banking regulation like LCR. In those situations, some bankers have done a great job of proactively bringing the issue to the forefront and helping us solve our upcoming problems. I want to do business with bankers who I feel truly understand my work.
GW: I used to have what I called a shell answer person at the bank. I could go to this person with any question and use that conversation to find the right person. Now I have to do all the finding myself. The more steps you can eliminate for me, the better.
DS: Kurt, you mentioned LCR, so let’s go there. Have you had any discussion with your banks regarding LCR?
CL: I think banks are still figuring out what LCR means for themselves. Yesterday a smaller institution came to give us their internal take on the legislation. That was the first time I had heard anything about it from a bank, which was surprising to me. They told me what innovative products they expected to emerge and what they thought would happen as a result of money market reform. But that’s the extent of it.
KP: I’ve initiated several conversations with our banks without getting straight answers; the best information I have so far came from AFP conference sessions. This legislation kicks off in two and a half weeks and I still don’t know what’s happening.
GW: I’ve had conversations with our banker, and he sent me a document that I thought was the human genome project. Turns out it was an explanation of LCR. I haven’t had many discussions with my bankers regarding that document, but the subject did come up recently when we were undergoing a credit facility. We found that despite our strong credit profile, our letters of credit were reduced as a result of the LCR. Our company is a great cash generator and we don’t keep much idle cash around so this really isn’t an issue for us, but apart from the genome project document I haven’t seen anything.
DS: To draw a theme between what I’ve heard so far, it seems that the information isn’t flowing within folks at the bank. I imagine that some system knows who you are, Grady, but that information isn’t getting out to the folks who serve you on the phone. Likewise, the heads of TM in this room know about the LCR, but they aren’t getting the information into the field. Does that resonate with you all? Anyone want to say that they’re doing particularly well at this? No hands, interesting.
Craig Martin: We recently hosted a session together with a couple of bankers and banking analysts to discuss how the financial industry is changing. We learned that it’s become dramatically more complex. Regardless of the LCR ratio, regardless of what you can and can’t hold, it boils down to the customer’s relationship with the bank.
DS: I don’t want to get distracted by how banks organize themselves, but when you say “your banker” who are you referring to?
CL: It’s so disparate at different banks, but the short answer is, whoever can help me. I call my relationship guy and make sure that he understands what’s going on. This is the guy I call to talk through my wish list with and confront with a score card that ranks the bank 1-5 on progress. We have this honest dialogue and feedback.
DS: Did you initiate this feedback or did a bank?
CL: We initiated the feedback and the score card.
Audience: Can you share with us the main topics covered by your scorecard to give us a sense of where you put your service priorities?
CL: Yes, the score card includes implementation, responsiveness, value added ideas, and customer service. By customer service I mean follow up. Are you bringing me timely information and new ideas that will add value to my business? Are you helping me find fee reductions? And, are you partnering with me to find new and innovative ways to solve problems my business faces?
KP: We have a similar system that as of yesterday led me to start shopping around our credit card relationship. We’ve had the same provider for 20 years, but we’ve also had a lot of problems and other companies vying for our business. When I called our current provider and learned that they wouldn’t match a competitor’s offer, it showed me that they didn’t want our business. Then last week they accidently shut off our credit line; we waited on hold for 30 minutes trying to get someone from corporate to pick up; I understand that everyone tries to run as lean a shop as they can, but as a customer I hope it’s not too much to ask for customer service.
DS: Would you potentially tolerate the higher fees for better customer service?
KP: I would never tolerate higher fees; but changing banks is painful, so I tend to try to solve issues by kicking and screaming. That said, if problems get bad enough and I can find a stronger alternative from a smaller provider, I will go to them.
CL: We attempt to spread wallet share across our partnering banks. We have a few programs where we rotate our FIs, which set the expectations that they aren’t the only institution we work with. That helps us avoid some bad service traps and enables us to share valuable feedback regarding costs and execution.
GW: Siloes in the bank prevent certain bankers from seeing the full customer relationship. TM departments don’t realize that we have hundreds of millions of dollars in credit, which is much more valuable than the small deposit service causing us a lot of pain. For us, the biggest issue isn’t simply the service, but the service recovery. If banks could take a more holistic view of the relationship and start owning problems rather than saying “that belongs to operations” then we would be much more satisfied.
DS: I want to switch gears to talk about some of the newer stuff: EMV, EBAM, bitcoin, faster payments, mobile deployment. What’s the top of your wish list?
GW: EMV is one of our top concerns. There seems to be a disconnect in the industry between the processors and the bankers regarding timelines for adoption. Another huge problem we have is keeping the credit card in a customer’s custody at a drive though; banks don’t seem to have good solutions. Finally, with regard to real time payments, we’re wondering how we can move our smaller merchants to ACH over checks.
CL: We are all in a race to the finish line wondering who will win. The Fed is working on faster payments, EPN has the real-time payment initiative, NACHA has same-day ACH and the Now Network was recently launched to enable real-time payments. On top of it all, Ripple is trying to disrupt the system. We would love clarity. Are these things competing are they not competing? What should we expect and when should we jump in?
KP: We need more education around EMV—half my users don’t know what it is. I’d also like to see Apple Pay in more places. It seems to be an elegant solution.
DS: Was EMV part of your consideration when you shopped your commercial card relationship?
KP: Yes it was, especially since we are a global firm headquartered in Europe.
DS: With regard to these cutting edge technologies, how critical is it that your TM provider be a first mover rather than a fast follower?
CL: First mover status is my preference. Being a first mover in security is critical. I’d like to see more FIs adopt mobile products so that people on my team can leave the office and still conduct business.
KP: I agree, we need to improve mobility; I got locked out of my mobile banking platform because I wasn’t at my desktop IP address. I thought to myself, “Well isn’t that the whole point of being mobile?” I tried to call the number on the screen and they were asking me for my Tax ID number, which of course was all the way back at the office.
Audience: It’s great to get this feedback because, from the bank’s perspective, the fraud prevention experience you just described makes sense. We need more feedback like this to help us see our blind spots.
GW: Regulation tends to push banks too far in the wrong direction; we need more innovation to achieve equilibrium.
DS: Can you imagine evolving to a state where security is a standard RFP requirement?
GW: It might be possible to standardize the requirements within an industry, but we would need strict boundaries. Across industries there are too many desperate interests.
Audience: How much are you relying on your banking partners to deliver innovation?
KP: I would prefer to have fewer service providers where possible; my bank is my first choice, but sometimes it’s easier to go get the new thing from someone else.
GW: There’s a level of trust we maintain with our FI and we would prefer to maintain that relationship if possible. It would prefer the innovation come from a trusted partner.Reprinted with permission of GC Insights, a wholly owned subsidiary of McKinsey & Company.