But the digital revolution gaining pace across the world has been a gamechanger, allowing large banks to offer platforms that provide these traditional services at a scale and scope not imagined even a decade ago.
These channels can help businesses seamlessly and quickly deliver domestic and international payments, manage liquidity, improve cash security and even access advice on cashflow digitisation and treasury processes.
We’ve made it a priority to develop our payments and cash management business into a world-leading provider of these services. We also provide the ability for our clients to use our technology, systems and expertise to deliver services to their end customers, placing ANZ at a critical and valuable point in the ecosystem.
This year, ANZ’s payments and cash management (PCM) business facilitated the movement of $164 trillion in all payments and capital flows to, from and within the markets in which we operate, and either cleared or provided payment services to more than 90 per cent of the world’s globally systemic banks. This enterprise business has enormous economies of scale and this year’s results are a major step forward.
The success of the PCM arm is a key part of the bank’s broader growth story that was outlined in the latest full-year result. It’s also a sign of the successful transformation of ANZ’s Institutional business.
Over the past seven years the Institutional division has diversified its revenue streams and simplified to focus on fewer but deeper customer relationships. It has also made careful risk management part of our culture and invested appropriately in technology and customer platforms.
This financial year profit from the Institutional division was up 53 per cent on the previous financial year and revenue from the PCM business jumped 59 per cent in the same period. Institutional contributed about 40 per cent of the group profits.
This business is delivering strong returns well above the cost of capital and providing critical support to ANZ customers who move money and goods around the region.
The success of the PCM business has come through long-term investment in the systems and platforms that support customer transactions. Over the past seven years the bank has invested more than $1.2 billion in technology supporting payments and cash management.
Using secure API technology, customers can integrate cashflow and treasury management tools into their business, receive up-to-the-minute data on inflows and outflows and have banking instructions executed in real time seven days a week.
For customers working across multiple countries, with complex financial structures and significant payroll functions, this can involve thousands of transactions a day and billions of dollars. They value ANZ’s expertise in security, governance and compliance management as well as our global reach.
The PCM business fosters deep relationships, delivers significant income and valuable operating deposits to the Institutional business and provides about 75 per cent of the transaction banking arm’s profit.
Our history connecting banking systems around the world and facilitating payments between institutions across geographies has honed our experience at settling transactions and delivering funds.
In fact, ANZ provides clearing services to more than 500 financial institutions. We are the number one clearing bank in Australia and New Zealand with 60 per cent market share – effectively executing transactions on behalf of other banks.
Foreign banks and smaller domestic organisations without the size or scale can still provide key services to their clients in a more cost-effective manner. And ANZ can expand its infrastructure across multiple counterparties.
Due to the speed and proliferation of digital innovation, businesses today expect more services from the modern banking system. Services that didn’t exist at scale ten years ago.
They want the best product and data insights as well as governance, risk management and contractual services. They also want security and reliability and frequent investment, such as the global development of real-time payment services.
Our investment in our PCM business has made this possible and differentiates us from our Australian peers.
ANZ’s international reach into 29 markets provides significant benefits to our customers trading in Asia and the Pacific. It also provides us with crucial diversification outside the competitive Australian market.
We can provide regional expertise and banking services across Europe, North America, Singapore, Hong Kong and China – as well as countries with fewer banking partners such as Laos, Vietnam, Indonesia and the Philippines.
The benefits of PCM’s expansion is beginning to show. We have built a great base from which to move forward and we’re confident this business will remain at the core of a strong Institutional division – and a strong ANZ – well into the future.
Lisa Vasic is MD Transaction Banking, ANZ Institutional and Mark Whelan is Group Executive Institutional, ANZ