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Exclusive: ‘Predicting the unpredictable’ – Ad van der Poel, Bank of America in “The Fintech Magazine”

Ad van der Poel, Co-head of Product Management at Bank of America’s Global Transaction Service for EMEA, believes ‘digitising the trade’, not just the payment, is key to business survival in a future that’s increasingly hard to call.

Latin scholar or not, every company boss and treasurer surely knows the mantra scientia potentia est. In the digital age, knowledge is most definitely power.

Having forensically accurate financial forecasts, including the key drivers of income and expenditure, are the bedrock for forging strategies for success. And the need for that has never been greater as the COVID-19 pandemic continues to wreak havoc on economies across the globe.

Latest statistics show how easily future-looking business plans can be rendered completely useless. Manufacturing in some sectors has plummeted. The retail and hospitality sectors are also reeling, with many high street chains looking at various ways of refinancing their debt mountains as layoffs mount. And it’s not just the major players that have been caught out by COVID. In the US, there are suggestions that at least 100,000 small businesses could be lost for good as the economy shrinks.

Bank of America, like many banks, is seeing the impact of the pandemic on clients and recognises the urgent need among corporates to get faster access to working capital, which is linked to the speed with which transactions are settled, better strategic decision-making and improved forecasting that can be achieved by leveraging the information around those payment journeys.

Could better transaction data save those small businesses in the US? Maybe not, but it might give some a fighting chance – or at least a clue as to whether there is a future worth fighting for – by giving treasurers the granular insight needed to model a variety of forecasts more accurately.

That’s where Bank of America’s CashPro, the platform used by thousands of businesses around the world to manage payments, receivables and deposits, could help as the bank focusses on what Ad van der Poel, co-head of product management for global transaction services Europe, the Middle East and Africa (EMEA), calls the ‘digitisation of the trade’.

Timely improvements to the CashPro platform late last year included allowing treasurers to carry out their banking via mobile; the ability to originate real-time Automated Clearing House (ACH) payments in the US from the same platform that they use for all their other payment requests; and the extension of Bank of America’s eSignature capability to 20 countries across EMEA.

While CashPro’s registered user numbers have remained fairly static during the pandemic, its usage has soared. This indicates that the crisis-driven changes to companies’ working practices, combined with the need to access working capital and understand a company’s available liquidity in real time, has become even more important for many clients.

Describing the fast-evolving payments ecosystem, van der Poel says: “Initially, many were focussed on digitising the payment component, but we and our clients are now very much focussed on digitising the whole trade.  When I say trade, I mean it in the broadest sense of business-to-business, business-to-consumer and government, too.”

The more sophisticated the intelligence that’s attached to a payment and the faster it’s processed, the better a business can judge current performance, model future resilience against a range of scenarios and take operational and strategic decisions based upon them.

A basis for change

There are many forces at play in shaping the evolution of payments.  “From the consumer’s perspective, everything needs to be easy to use and customer-friendly; globalisation is increasingly affecting payments; and let’s not forget that we need to make sure we are compliant, transparent and doing the right things,” says van der Poel. But he believes the introduction of the new global payment messaging standard, ISO 20022, will be truly transformational in achieving that goal of digitising the trade.

Van der Poel goes as far as describing ISO 20022 as a ‘foundational change for our industry’, and that’s because of the sheer volume of data that will be unlocked as different countries’ specific payments systems eventually become interoperable. More than 70 countries have so far signed up to the standard for crossborder payments messaging, which should be fully in place by the end of 2025.

Emphasising its impact, van der Poel says: “In deploying ISO 20022, we get a lot more data that’s richer and delivered in a structured format. That will automatically achieve efficiencies, and it will achieve better transparency and, therefore, compliance.

“There are many players involved in moving an international transaction from A to B and it’s important to keep that transparency so that, by the time it reaches B, the data that was with A is still there. ISO 20022 is going to give us that.

“At the moment, ISO developments are done within the context of a specific market infrastructure – for example, TARGET2 or CHAPS – and they’re focussed, obviously, on benefitting those specific infrastructures, which is great, but the real advantage is going to come when those infrastructures are interoperable from a payment processing perspective. I think SWIFT said it is expecting 80 per cent, globally, to have that connection by 2025. Once we achieve that, we will see banks, payment service providers and other financial institutions, but also corporate clients, innovating on top of the enriched, structured flow of data. That’s when it becomes really exciting.”

Cashflow forecasting is an area where van der Poel sees big improvements being made as fintechs step in to develop tools to analyse this newly-harvested data.

“Better cashflow forecasting has been on the top-five demands list from treasurers for years because it’s such a difficult thing to do,” he says. “Because of automation, we will see reduced times to compile and compute all the data that feeds into cashflow forecasting, so you will be able to make quicker, more accurate predictions. And, because of all the data and the computing power you have, you will be able to do more specific modelling on your company, your industry or any specific area – to run more ‘what-if?’ scenarios, which will help you to  determine whether you need more funding at some point or if you can use investment opportunities.

“Treasurers will always have certain covenants and pledges in place that govern the way they manage their treasury. This automated cashflow forecasting will also help monitor those controls and thresholds, so that they don’t have to check it, leading to less risk of duplication or clashes. So, there really are a lot of benefits on the cashflow forecasting side and we’re looking forward to what all the new technology is going to bring us in that area.”

Like many of its rivals, Bank of America has witnessed the pandemic’s direct impact on its clients’ demands and behaviours. Armed with its own granular data insight, it has disclosed that, despite that robust performance in the first pandemic-blighted quarter, it built up an extra $4billion in reserves to buttress it against any future credit losses due to the continued economic fallout.

The future may be challenging, but better to meet it fully informed.

This article was published in The Fintech Magazine: Issue #17, Page 50-51