New networks are being forged in transaction banking as the EU's single market nears completion, the renminbi becomes increasingly internationalised and new mobile technologies speed up and simplify transactions.

Transaction bankers could be forgiven for thinking that the main theme of 2012 is ‘more of the same’. Regulation continues to dominate people’s thoughts, as does the impact of the eurozone crisis on the global economy. 

The industry has become characterised by regulation and its associated cost burden, but transaction banks are looking beyond merely complying with the rules and are seeking out the opportunities of the future. Despite the slightly sober operating environment, there are some bright spots on the horizon and there are some key areas that banks are seeking to innovate and invest in. 

Transaction banking is about networks and connectivity, and this special report focuses on this by highlighting three areas that show promise for the future: mobile technology, the internationalisation of the renminbi and the approaching end-date of the Single European Payments Area (SEPA). These projects have been many years in the making, but are still topical as they give an insight into the industry’s future patterns of connectivity. 

Going mobile

Advances in mobile technology are well known in the consumer sphere, perhaps because they are more noticeable. Transaction bankers are also consumers and any industry conference is likely to be filled with delegates toying with their smartphones or tablets.

The mobile device has transformed the way people work and how they interact, and the banking industry has made advancements in mobile technology at the consumer end of the spectrum. Innovation, however, is also present in the transaction banking industry and John Beck reports on how mobile technology has been developed in this industry in particular. 

The mobile device has transformed the way people work and how they interact, and the banking industry has made advancements in mobile technology at the consumer end of the spectrum

Mobile technology can be used to speed up payments and make it easier for companies to conduct business with each other. This has been one of the advantages of using the renminbi for companies that trade with China, as the payment process has been accelerated. The internationalisation of the renminbi has been a hot topic, with many banks vying to be the experts in this burgeoning field. While the outlook for the global economy has been gloomy, this is one area in which the industry is optimistic. 

Currency concerns

The pace at which the renminbi will become fully convertible and internationalised has been debated, and predictions vary over whether it will rival the US dollar or will just be one of many international currencies. For now, and for years to come, the Chinese authorities will maintain control over the flow of renminbi to and from mainland China, which means the options for clearing renminbi payments remain limited.

So far, Hong Kong has been used effectively as the gatekeeper for renminbi transactions to the mainland, but the existing model needs to be changed as financial centres such as New York become involved in the renminbi’s internationalisation. The question of how the payments infrastructure will be developed as the renminbi is liberalised is an issue that is also explored in this supplement. 

Liberalising the renminbi is a political vision based on a simple idea, but is made complex by the devilish details of implementation and their unintended consequences. Likewise, SEPA was part of a political vision, which at first seemed simple. The vision of SEPA underpinning Europe as a single market was an ambitious project, and as Duygu Tavan reports, its implementation has been plagued with many difficulties. 

The problems in the eurozone prompted discussions about whether a Greek exit – or ‘Grexit’ – or the collapse of the euro currency would derail the SEPA project altogether. When questioned on this, the overwhelming response of the industry was that, no, SEPA was not in jeopardy and the project is going full steam ahead. The vision for a single payments area may not be threatened, but there are still a number of hurdles to be overcome before the vision becomes a reality. As the end-date of 2014 approaches, the industry looks forward to a new era of connectivity in the region, the technical standards of which could be extended further afield in the future. 

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