-- An Interview with Huang Zhongbin, General Manager of the Cash Management Department of Industrial Bank
Cash management has been a hot keyword in the field of corporate finance in recent years. As a modern financial service, what glamour does cash management have in attracting so many Chinese and foreign banks to throw themselves into this battlefield without gunfire?
Highly electronic and automatic cash management combines a series of traditional financial products and services of banks such as the settlement, investment and financing, account management to provide professional financial services of high quality to enterprises and help customers to reduce the occupation of idle positions, improve the utilization efficiency of capital and reduce the financial risks.
Recently, Corporate Treasurer made an exclusive interview with Huang Zhongbin, General Manager of the Cash Management Department of Industrial Bank (IB), listening to his talk about how IB has met the diversified demands of enterprises in cash management; how the bank has provided more effective and valuable banking services to them; and how it has achieved great development in the business of cash management in the increasingly competitive market environment by way of differentiated businesses.
Meeting Diversified Demands of Enterprises
To meet the demands of users is always the first objective of banking services.
With regard to the understanding of IB to the cash management service, GM Huang said: “Through cash management, IB provides professional financial services, targeting at the needs of corporate finance customers for cash flow management, which will involve the whole process that an enterprise handles its capital – funds aggregation and allocation, payment and settlement, storage and utilization, forms a complete business chain, and improves the capital flow efficiency and benefits in a scientific and effective manner.”
Since it was introduced into China by Citibank in 1999, cash management has witnessed sustained improvement in terms of breadth, depth and informationization, extending from the basic account management and payment and collection management to the liquidity management products, including cash pooling and consolidated interest accrual, and even overall solution, and further spreading to the financial fields of investment and financing management, electronic government affairs, e-commerce, supply chain and wealth management.
This shows that cash management came into being against the background of group-oriented enterprises, electronic business, and refined management. While the interest rates become market-oriented in a sustained manner and enterprises become increasingly aware of wealth management, GM Huang believes that the business of cash management will witness considerable development for the long period to come, considering such objective factors as decelerated inflation, and uncertainty in the wealth management market due to adjustment of monetary policies and frequent implementation of regulatory measures against the business of wealth management.
Development on Differentiated Roads
In fact, among the corporate businesses of commercial banks, the competition concerning cash management is very fierce. By the end of 2011, there had been five state-owned banks, 12 joint-stock banks and eight urban commercial banks releasing cash management services and brands in succession. Moreover, all banks gave preferred resources in the following aspects: construction of product manager and special technological team, assessment and evaluation, software and hardware, and investment in marketing.
Though all banks placed high hopes on the business of cash management, the relative homogenization of products and services also made the competition more furious. “Under such an environment, the key to success lies in making breakthrough and innovation and seeking differentiated roads”, GM believed.
In the filed of cash management, IB is not the forerunner, but its corporate culture is to strive for innovation and to be practical and rational. In April 2009, IB officially established its brand for cash management service “Gold Cube” to integrate the products and services under the two brands of “IB Wise Fortune” and “CIB Online”, customizing overall cash management service solutions for corporate customers. This signifies that the bank had a brand-new stride on the road aiming to meet diversified and individualized demands of corporate customers and provide financial services compliant to the business development of corporate customers.
To the question about the brand connotation of “Gold Cube”, GM Huang explained: “Gold” stands for capital and wealth, and capital is the core element of cash management and an important carrier for maintaining the relationship between banks and enterprises; “Cube” denotes all-sided and three-dimensional services, representing the cash management of IB characterized by “three-dimensional solutions to the demands of multiple parties”. Therefore, the brand of “Gold Cube” accurately represents the profound understanding of IB to cash management.
GM Huang believed that the differentiated development of cash management of IB could be seen in the following three aspects:
The first one is to break the barricade between departments to provide complete overall cash management solutions for customers. Considering the understanding and positioning of IB to the business of cash management, the bank completed the adjustment of upgrading the cash management department from a “Level 2 center” to a “Level 1 department” in the last year. After the adjustment, the cash management department of IB is directly under the Corporate Finance Headquarter of the Head Office of IB. As the professional division responsible for the operation and management of the business of cash management, the department is in charge of the development planning, system construction, product development, channel management, team construction, marketing organization, incentive restriction, risk management and quality control of cash management in the corporate finance sector of the whole bank. Meanwhile, the Corporate Finance Headquarter of the bank is in charge of the overall development of the whole bank's corporate finance sector, providing comprehensive coordination and relevant support for the business development of cash management, driving the effective linkage between cash management and other businesses and functions and the mutual collaboration of all departments under the Corporate Finance Headquarter, and providing all-sided and integrated cash management solutions to enterprises.
The second one is to choose key industries, build models for demonstration, and guide discovery of values. In confrontation with furious market competition, IB has always adhered to the specialized development, forming a development pattern where specialized “teams, products and operations” kept forging ahead like three horsecars in the field of cash management. It's worth noting that, as for trimming the cash management solutions for enterprises in different industries and selecting those matching the overall development strategy of IB for the business of corporate finance, the bank has always kept a rational, prudent and developing attitude. Besides the existing businesses such as the funds settlement center, inter-bank cash management, electronic government affairs, e-commerce, bank-enterprise direct linkage, and crossed marketing, GM Huang introduced, the solutions for key industries developed by the bank has covered medical care, education and energy since last year. Based on the research and analysis and case summing-up of key industries in combination with regional, industrial and specialized customer meeting, the bank has kept deepening the cooperation of cash management within industries, thus forming advantageous industrial solutions.
The third one is to improve the competition mechanism and optimize outsourcing management. IB has also achieved obvious progress in the introduction of competition mechanism, and completion of evaluation system. In recent years, through independent innovation and cooperation with third party partners, IB has improved its exclusive capital management system, and embedded “IB chips” including its characteristic products and services into the client software successfully, thus simplifying the business flow, enhancing the efficiency and improving the participation and satisfaction of customers. The bank is, as indicated by GM Huang, developing the online payment resources including internet banking and online payment platform actively now, and cooperating with third party payment companies to extend the internet payment channels to provide a more convenient, safer and more stable payment environment for corporate customers.
Grasping Opportunities to Segment the Market
IB has its own reasons to list such industries of medicine and education as key ones for cash management. “The selection of theses key industries is not the result based on a hotheaded decision”, GM Huang laughed, “more and more banks propose that they would transform the financial anticipations of enterprises into the medium- and short-term objectives of their own service expectations, and fulfill these objectives by providing segmented financial products with industrial features. By comparing the cash management solutions of all banks, analyzing the present situation, development and features of enterprises in various industry, and combining our own overall development strategies and advantages, our bank preliminarily defined the key industries including medicine, education and energy, etc.
With regard to the segment industry of medicine, the increasing importance attached to health by people provides a significant opportunity for various pharmaceutical enterprises. Some data predict that the aggregate economic volume of the medicine market in China will reach RMB 1.5-2 trillion by 2020. However, in the segment industry with great outburst power, the questions about how to manage corporate capital, accounts receivable, financing channels and integrated utilization of IT system puzzle many pharmaceutical group enterprises. In regard to provide integrated services and suitable financial products to these groups, IB has done substantial works. In 2010, the bank released the “Cash Management Solutions for the Medical Care Industry”, aiming to help pharmaceutical enterprises to manage business and investment, and the incoming, retaining and outgoing links of financing cash in a scientific way so that they can have their cash foreseeable, monitorable, viewable panoramically and all-course controllable, and give consideration to the liquidity, security and added value of capital, so as to achieve the maximum benefits.
“Another example is higher education. We can say that it is a plot not ploughed by cash management.” GM Huang said frankly, with the development of all businesses in universities at a high speed, the growth of capital supply to universities lagged increasingly far behind the demands of teaching and scientific research. And the problems in the field also appeared gradually, including dispersed capital management, serious circulation of concealed capital, loose management of budget system, and weak cost-saving awareness and measures for instance. “Therefore, the initial intent of IB in researching and releasing the “Cash Management Solutions for the Industry of Higher Education” is to intensify the management of capital of university, ensure the safety and integrity, make it work normally and be used in a reasonable way, and reduce and avoid losses and wastes, so as to guarantee the normal operation of teaching and scientific research.”
Improving the System and Cooperating with Each Other for Win-Win Results
In the long run, the business of cash management and the cash flow of corporate customers blend with each other. Its “embedding property” makes it possible for the relationship between banks and enterprises to evolve from competing to blending and growing together. Banks and enterprises are not merely in the relationship of Party A and Party B, but rather in the partnership where they collaborate closely and grow together to bring benefits to each and achieve win-win results. In such cooperation, a bank should not only provide services to meet the demands of enterprises, but also need to make development and innovation, and improve its capability in guiding the demands of customers.
Therefore, the cash management business of IB has proposed a development objective and planning for the coming three to five years, mainly including:
First, it will improve the system for cash management customers, and exert itself to develop large- and medium-sized customers and lead manager customers of medium-sized entity while give consideration to medium- and small-sized customers; then, connect the customers correspondingly with the management of differentiated products, channels and services, such as the exclusive capital management software separately at the client, shared capital management software uniformly at the banking terminal, and corporate internet banking. In this way, the bank may extend its business base in all directions, form effective links with all business sectors both inside and outside the Corporate Finance Headquarter, and intensify cooperation between them.
Secondly, it will enrich the cash management product family, keep improving the serial, pertinent and effective properties of products, and establish standardized cash management service solutions in line with various capital management models, customer scale, and industrial features. During the process of cooperation, the bank will, considering the individualized demands of customers, improve the experience of users, enhance service functions, and improve the service efficiency.
Third, it will intensify team construction. Cash management, especially complicated cash management, has a high technical barricade, and requires product combination and even secondary development according to the varied business characteristics and management demands. As it demands breakthrough in product innovation, marketing management and technical support, it is hard to promote and involves a broad range of coordination, varying demands, long implementation process, and big competition pressure compared with the conventional and single products. Therefore, the specialization and stability of a cash management team directly determines its productivity.
Fourth, it will consolidate the allocation of resources to build the foundation for the sustainable development of business. Regardless of brand resources, professional human resources, technical resources, financial resources, or credit resources, the Head Office will work together with branches to allocate the required resources, so as to ensure that there are sufficient human resources, funds and materials in all links of business development and maintenance.