Interviewed By Foo Boon Ping
Luca Corsini, the head of global transaction banking at UniCredit, talks about the new regulation requiring banks to open up their data to third parties.
Foo Boon Ping (FBP): The first half of 2019 was marked by geopolitical uncertainties and technological innovation in payments and trade finance. Tell us what the 2019 SIBOS means to you?
Luca Corsini (LC): 2019 was a revolution year in terms of payments and innovation. We have the revised Payment Services Directive (PSD2) in Europe, a completely new law, which will open the data transfer between the banks and non-banks. This will be a completely new paradigm for the payments industry in Europe. We will see this as an opportunity for the banks, including UniCredit, in order to play this aggregator role to offer to our own client and to proceed to aggregate all the data from the different banks.
PSD2 is a very important aspect. UniCredit is focusing on payments and global payment innovation (gpi). Focusing on the cross-border payments is really a key pillar of our payments strategy. Last but not the least are the foreign exchange-related payments, visual accounts or even a tool for our treasury – any kinds of service that make life much easier.
FBP: With that, there has been a lot of innovation on the payments market infrastructure, such as PSD2,Trans-European Automated Real-time Gross Settlement Express Transfer System and gpi. It levels the playing field for every player, in a sense, so how do you leverage off that? How do you create business as well as maximise revenue and profitability?
LC: It is a level playing field, and it will be even more with this new legislation. What you see that is completely new is the innovation, which in the past was coming from the big corporates and big institutions, and was cascading down to the chain of the small and medium caps and then into the retailer.
Now, the paradigm has completely changed. The innovation is happening in the retail sector, and then spreading up into the multinational. How can we make money out of it? In the retail sector, evidently, there are opportunities, but there will be a lot of competition. In terms of corporate institutions, I see less revolution. It is very important to have a key client relationship. And all these new instruments and products will allow the banks to maximise the returns out of this relationship and offer new services to the client in a cheaper and more fashionable way.
FBP: Tell us a bit about the banking industry here in Europe. It is going to a state of luck. The union is under threat with Brexit. European banks are globally fighting for scale, dealing with margin compression.
LC: Being a global transaction banking (GTB) head, I cannot comment on the banking history, but I can comment on the GTB sector. In the GTB sector in Europe, there is still a really good growth, a 2% to 3% growth in the market. In terms of payments, the market is growing because the client is moving from cash into digital payments and so on. We see an increase of the transactions now even in double digits.
The revenues will not be in double digits, because there is a squeezing of the margin. Basically, payments and cash management are still very attractive businesses for all the European banks. In trade finance, I would tend to agree. I've been through the situation in Europe, there is a competition, which is much fiercer and difficult compared to the US, and probably Europe is still a less competitive market than Asia. I would say Asia is extreme in terms of trade finance margin. All the banks are switching from the traditional trade finance into the more supply chain finance working capital per se. But this is a market trend to be honest.
FBP: You talk about the margin being more compressed on the trade finance side, but isn’t margin in payments also? There's no money to be made out of payments now.
LC: There is still some money to be made. It will be a scale game. In Germany and Italy, people are still paying a lot with their coins, with cash. The fact that these people are moving from cash into digital payment is enlarging the wallet available for the banks. All the banks are increasing the number of transactions but also increasing revenues.
At UniCredit, we see a very good progress in terms of our revenues for payments. We are also offering new services, especially in cross border. In payments, it is not only payments per se, you can attach services using the data (overlay services), but you can also attach a lot of services especially from the cross border.
FBP: This is also a market where you have a lot of fintechs and payment aggregators, who are very active. You are an incumbent commercial bank dealing with this.
LC: This is completely the worse picture in the retail sector. In Italy, banks in the retail sector will compete with fintech. I don’t see the same in the corporate sector. At the end, corporate will still remain with the banks for a number of reasons: security, relationship and so on. In the corporate sector, I see more banks cooperating with fintechs in order to offer something to clients, which is a completely different paradigm than in the retail sector, where banks and fintechs will probably compete against each other.
FBP: European banks have much more regulation than other banks in terms of PSD2 and open banking. We also talk about General Data Protection Regulation in terms of data sharing. In terms of the best practices that you bring to other regions, for example your Asia Pacific market, what are the lessons to be learned?
LC: For UniCredit in Asia Pacific, the strategy is very clear. We want to be the bridge between Asia and Europe. Basically, we want to have Asian clients that are doing business in Europe and we want to serve our European clients in Asia. Therefore, our scale will be lean, but very focused on the strategy. What we can bring, especially to the Asian clients, is our expertise in Europe. If they are coming to Europe, given all these new regulations, we can help them and we can advise them how to navigate the new environment in Europe with this new regulation.
FBP: Tell us more about the Asia Pacific priorities you have now as the new global head of transaction banking.
LC: Our presence is in Singapore, Hong Kong and Shanghai, and this is where we will keep a lean, small, but very focused team. The idea is to increase the number of relationships with Asian multinationals, but always look at the fact that these Asian multinationals will have business in our core countries, not for Asia per se.
The same is the other way around for the European. We will have a very focused strategy, especially in transaction banking. We will do cash management in Asia Pacific. But even more, we will do cash management for the European subsidiaries of the Asian multinational in our core countries. That is a very simple strategy.
FBP: What are the opportunities for trade finance in Asia Pacific?
LC: In Asia, trade finance is very dollar-dominated, where UniCredit is not very competitive. We will focus on trade finance, especially on the Euro-denominated funded facilities or otherwise on the unfunded facilities like guarantees and so on. Again, in terms of the bridge between Europe and Asia, this is our core focus and our strategy in Asia Pacific.
FBP: One of the big collaborative initiatives you are involved in is we.trade. Tell us where that is heading? What can we expect from all these trade digitisation projects?
LC: Regarding trade digitisation, there is a lot of noise. Asia is probably a front runner. The Singapore government and Hong Kong government produce very ambitious plans in terms of digitisation of trade as a platform for all the parties. We are observing the market. I see we.trade as a very good exercise – cooperating with other banks and starting to play around with blockchain. I don’t know if it will be the dominant model for trade. However, what I know is you see all these consortium of bank like we.trade, Voltron, Marco Polo and so on. It is very clear that the reaction will be a network of network. All the consortiums will need to find a standard to talk to each other, and I see this going in the right direction.
FBP: So, they will coexist.
FBP: Great. Thank you so much.
LC: Thank you very much.