Interview with Alejandro Arauzo Romero, Managing Director, Cash Management at Banorte Ixe
For banks, cash management represents a reliable revenue stream. However, the regulatory diversity of LATAM makes the region one of the most complex and restrictive markets for cash management, mainly due to the currency restrictions imposed in certain countries. Banks are in need of a clear solution to optimise their cash management offering.
Mr. Arauzo, Managing Director, Cash Management at Banorte Ixe, recently spoke with GFMI about key topics to be discussed at their upcoming Innovation in Cash Management in LATAM Conference, December 7-8, 2015 in Miami, FL.
What issues arise with cash management in LATAM at the moment?
AAR: Overall we are living in a changing environment in LATAM mainly as result of 2 structural factors:
I) A growing technological transformation that is opposed to a culture of low banking adoption, which translates into a discrete growth in the finance sector and a slow pace of electronic mechanisms approach
II) Disparity in terms of control and compliance environment in each one of the countries, as well as lack of standardized banking languages (local and regional)
What role does the diverse regulatory environment of the region play in cash management in LATAM?
AAR: It clearly plays a major role by limiting expansion and operational capabilities within the region. Monetary settlement processes remain a challenge due to the different restrictions and policies of each country. Contractual and documentary processes in the region are not uniform, which implies a significant investment of resources by companies and organizations.
The regulatory control regarding repatriation and monetary anchoring is exhaustive and sometimes a tangible constraint on expansion projects. Authorities are highly focused on this.
What is the biggest challenge that Mexico faces?
AAR: It is difficult to establish a unique challenge because there are four important areas that should be analysed and understood individually:
Individuals - must achieve a higher level of bank penetration and bonding, as well as more incentives to increase the use of plastics and electronic transactional services “cultural barrier”
Enterprises - although there is a greater focus on technological developments and use of cash management solutions, there is still a huge space of opportunity in terms of knowledge and best practices in a vast majority of Mexican companies
Banks - substantially need to improve their delivery processes (times + simplicity) of transactional services according to customers perspectives; also the need to increase the supply of services through technological innovation
Government - facilitate a more competitive environment in the banking sector through more flexible regulations and receptivity to new technologies
How does local cash management fit into global operations?
AAR: The first step of local-regional & global integration is transaction visibility from the different institutions and countries that comprise it. In order to achieve this goal, it is necessary to implement account statement reception. Nowadays this can be launched relatively easy. The payment and collection processes are complex too, but as of today there are operational vehicles that allow remote centralization.
The real challenge remains in certain local services such as: taxes, payroll, ZBA and, in some cases, investments. “From a regional perspective, it is crucial to have a local cash management understanding of targeted countries”.
What do you hope to gain from attending this conference?
I) Acquire new local and global trends regarding transactional solutions from a market perspective
II) Strengthen my relationship with colleagues, customers and experts in the field
III) Share my experience on the Mexican market and Banorte’s capabilities to serve as a benchmark for future projects or initiatives
This GFMI conference helps Financial Institutions discover how to overcome the obstacles that arise from LATAM’s fragmentation. One key take away from the meeting is how to integrate new technologies and solutions into the cash management infrastructure in order to enhance cash management offering and put your company ahead in a highly competitive market. The conference will also look at the importance of KYC and customer profiling, not only from a security perspective, but also to increase revenue potential.
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