Development And Innovation Of Cash Management Business

From Citigroup

Cash management is regarded as the foundation of corporate finance and the focus of decision makers and financial executives.

With the improvement of capital management requirements, cash management will become an important battleground for commercial banks to compete in the market.

Since Citibank introduced the concept of cash management into China in 1999, it has been more than 10 years ago. Cash management business has also received more and more attention from domestic banks. Especially in recent years, the major commercial banks have launched their own cash management business and service platform. Some banks have launched a financial management system for enterprises to extend the cash management service of commercial banks to the corporate side, and receive good market feedback.

The core of cash management in Enterprises: centralized management of funds

The capital management of traditional large enterprises is faced with many difficulties, including: the imbalance of capital and profit of member enterprises; the paction between member enterprises through external bank settlement, resulting in a large amount of capital extracorporeal circulation; group headquarters can not effectively monitor the payment of subsidiaries' funds; it can not quickly grasp the stock, flow and direction of the group's total capital; the financing of member enterprises, and the irregular investment decisions.

All these directly affect the efficiency and efficiency of the capital operation of enterprises. Due to the lack of necessary technical means, the ability to control capital is very inadequate, and many enterprises have paid a heavy price for it.

In recent years, the SASAC has been implementing the centralized management of funds to enhance the financial risk control ability of state-owned large enterprises and strengthen the supervision of funds.

Li Rongrong, director of the SASAC of the State Council, pointed out in the evaluation of the central state owned assets in 2009 that more than 80 large state-owned enterprises have carried out different levels of centralized management of funds through financial companies and funds settlement centers, most of which have more than 70% capital concentration.

State Grid, China Huaneng, aerospace technology and other enterprises fund collection rate reached or exceeded 90%.

With the continuous progress of information technology, more and more enterprise groups hope to implement centralized management of enterprise group funds through the use of internal banks, clearing centers and financial companies, so as to maximize the efficiency of funds.

In order to achieve the centralized management of enterprise group funds, it is inevitable that the support of banks is compatible with the development trend. Banks have developed advanced fund management systems (or cooperate with software companies) to provide various services including payment management, cash centralized management, cash flow forecasting, investment management, financing management, financial management and so on. At the same time, through the optimization of electronic channels, various channels of application such as online banking, bank and enterprise direct connection, mobile banking and other channels have been provided to help enterprises effectively manage their funds.

For example, in 2009, the Bank of Beijing launched the management of online cash management online banking channel solutions and the all-around housekeeper multi bank capital management system (IBS system). It became an early multi bank capital management system, and has a joint stock commercial bank providing cash management services for small and medium-sized enterprises and large and medium-sized group customers.

Multinational corporations are also the main objects of bank cash management services. Many large international banks have special cash management departments to provide cash management services for multinational companies.

Most multinational companies have set up a global cash pool with the help of banks. They have collected cash into the capital management headquarters in major financial markets daily, and have been undertaking unified investment operations by headquarters.

Some multinationals have established global shared service centers in areas with developed financial markets such as Singapore, India and Hongkong with relatively low labor costs, which focus on collecting and paying business.

With the entry of foreign banks and the acceleration of the establishment of fund management centers in China, the cash management business will develop in full swing in China.

In the traditional sense, there is no need for cash management in small and medium-sized enterprises. Most banks are locking cash management products into large group customers for marketing.

As a bank serving the small and medium-sized enterprises, Beijing bank has found that the demand for SMEs' liquidity management is equally urgent after long-term research. Cash management will become the only way for SMEs to grow and expand.

Facing the targeted cash management services of small and medium-sized enterprises, it further widens the scope of target market and promotes Beijing bank to occupy a leading position in the field of cash management.

The application of bank cash management platform

Since the financial crisis, the demand for cash management has become more and more vigorous. It is no longer a simple payment and settlement service. Banks' cash management services are constantly changing their thinking, from single product sales to providing cash management solutions, including providing settlement and account management, online banking, payment and management, cash centralized management, cash flow forecasting, investment management, financing management, financial management and information consulting.

At present, most commercial banks in China have launched their own cash management brand, which has covered some key businesses in the company's business in a branding way and launched a unified integrated business solution to customers.

For example, Beijing bank's "wealth 1+1" company's financial services, bank's "Yun Tong account", Pudong Development Bank's "Pudong fat" and so on.

For enterprises, the bank cash management solutions help enterprises achieve "three high to three low", that is, turn Gao Cunkuan, high loan and high cost into low deposit, low loan and low cost, accelerate the turnover speed of capital, improve the efficiency of fund utilization, and provide effective fund management guarantee for the rapid development of enterprises.

For example, a group of bank customers in Beijing has applied the cash management products of Beijing bank, and the fund collection frequency has changed from the previous weekly collection to the daily collection, and the dispersed funds are effectively utilized by the group. The group has controlled the risk through the combination of capital plan management and payment management. Through the accurate prediction of cash flow and the allocation of funds within the group, the scale of external financing has been reduced, and tens of millions of dollars in interest expense have been reduced.

For banks, cash management business can strengthen the relationship between banks and high-quality key customers, and promote the comprehensive cooperation between banks and enterprises, including deposit business, financing business and intermediary business, which contains tremendous business opportunities and profitability potential.

At the same time, through cash management, we can further stabilize the relationship between banks and enterprises, improve customer loyalty and stabilize high-quality customer groups.

The future development direction of cash management business should be: financial advisor, investment and financing consultation and service.

In addition, providing financial risk management for enterprises will also become an important service content. All of these require higher requirements for commercial banks' service capabilities and professional skills, and commercial banks may also undertake part of the financial risks pferred by enterprises.

Of course, commercial banks will also benefit from this.

There are indications that cash management has become a new position for commercial banks to expand their business areas and compete for high-end enterprises and institutional clients.

With the continuous development of domestic cash management business, the cash management business of major commercial banks will be increasingly refined, the customer groups become clearer and the professional positioning clearer. Cash management business will be an important strategic position for the future development of banks.

Reform and innovation of cash management

Global cash management services

With the acceleration of the process of economic globalization, the "going out" strategy of Chinese enterprises has become a common understanding. The demand for cash management is not limited to the domestic market. The globalization of enterprise sales and procurement will stimulate its capital management to globalized. The demand of enterprises ultimately determines the pformation of banking services.

European and American big banks have been very mature in the global cash management business. Our commercial banks should learn from experience, break through the boundaries between banks and countries, raise cash management services from various angles, and provide "one-stop" global financial services for enterprises.

In addition, the development of RMB internationalization and foreign exchange control has created a vast space for commercial banks to develop global cash management business. From the 104 issue published in 2004 by the safe and the new nine in Pudong, the regulations on the centralized operation and management of foreign exchange funds within domestic enterprises were released last year, all of which have a positive impact on the management of domestic and foreign capital, and the cash management products of banks are also being introduced to these changes.

The development of global cash management services will also become an important product and means for commercial banks to maintain and consolidate customer relationships, meet the needs of individual customer capital management, and increase intermediate business income.

Electronic bill

As an important part of cash management, the bill is convenient for the enterprise group headquarters to manage and coordinate the funds of the subordinate enterprises after it is completely electronic.

Because the bill is the medium and short term market financing tool of the enterprise at present, the group company can realize the advantage of cross regional financing according to the price of different regional time periods of the bill. In addition, after realizing the electronization, the bill is equivalent to "electronic currency", and the amount and validity period of the negotiable instrument can be changed or split up.

There is no doubt that the application of electronic bills will have an impact on the cash management business of banks.

Electronic bill is a marketing tool for banks to expand public business, and an effective product of absorbing deposits.

The successful implementation of the electronic commercial draft system has greatly promoted the innovation and attempt of commercial banks on electronic bills. It is reported that many banks have been developing e-business direct service in electronic commercial bill business, and will soon be put into use.

It is foreseeable that with the wider and deeper application of electronic commercial bill, the market grab of electronic commercial bill will become more intense.

In June 28, 2010, there were up to 299 banks in the second batch of electronic commercial draft system.

Data show that as of June 30, 2010, the electronic commercial draft system handled 93448 electronic commercial draft pactions, amounting to about 354 billion yuan, and handled 550 electronic commercial draft pactions on average, amounting to about 600 million yuan.

Central bank super online banking online

The current cash management system is based on the e-banking platform.

Electronic banking, especially electronic banking for enterprises, is the basic platform for state-owned commercial banks to implement cash management services.

From the development track of cash management services, we can see that cash management services have been developing towards the direction of service globalization, business integration and technology modernization.

As an integrated business process and customer service platform based on electronic and networking, e-banking plays a decisive role in the implementation of bank cash management.

Small and medium-sized banks in China have great differences in physical outlets with the four major banks, but they have certain advantages in electronic banking, and have played a basic supporting role in developing cash management business for small and medium-sized banks.

Electronic banking is developing rapidly, but the bottleneck of the Internet banking system of various banks has seriously restricted the rapid development of e-finance.

It is the fundamental starting point for the central bank to unify the construction of "online banking interconnection platform" to break the current situation of "self governance" of banking online financial services.

In order to improve the clearing efficiency of cross bank online banking payment, the central bank built an online payment interbank clearing system in the second generation payment system which was launched in August 30th, enabling all commercial banks to interconnect online banking systems, while interbank pfer and payment services can achieve real-time arrival.

In addition, the clearing system provides interbank query function of account information. After signing an account information inquiry agreement with an open bank, the customer can check the account information of other banks by logging in to a bank's online banking system. However, according to the former people's Bank of electronic banking department, the current account can only be inquired, and for other financial products and other information, the system is difficult to support at present.

The development of science and technology has promoted the rapid development of cash management business. In the future, it will break the original pattern of cooperation between banks and enterprises. Small and medium banks are expected to get rid of the problem of network disadvantage, emphasize encirclement and relocate, and develop cash management business by means of electronic channels, and win customers' trust through special products and intimate service.

The Bank of Beijing will take this opportunity to make bold innovations in the field of cash management business, and constantly improve its service level, so as to finally achieve win-win situation between banks and enterprises.