Consolidation into Single Transactions Underway Found By Misys

Consolidation of payments, cash and trade into a single transaction banking function is well underway as banks focus on growing their transaction banking businesses, but the delivery of a joined-up service is not there yet, according to research published today by Misys (FTSE: MSY.L).

The results of the research, undertaken by Misys and Finextra Research; the respected information source for the financial technology community, outlines the key challenges and actions being taken by banks to address this area.

IT complexity is seen as the biggest obstacle to transaction banking plans ahead of "domination of global banks", cited by 55% and 40% of respondents respectively. At the top of the list of technical problems that banks say their customers want them to solve are greater integration with corporate systems and delivery of cross-border, multi-currency cash pooling services.

The research found that a majority (57%) have already taken steps to restructure their organisations, bringing together trade services, cash management and payments services as a single offering. A further 19% have plans in place for specific transaction banking units within the next 12 months.

Despite these changes, 45% of respondents -- including half of those who have already restructured -- believe existing customers rate their services as no better than average, suggesting either that the new structures have yet to bed in or that other difficulties prevent them from reaching their potential.

"The research backs up what we have found from our own customers, comments Guy Warren, EVP and General Manager, Misys Banking. "In the current downturn in the financial industry, banks are searching for value-added banking services, which involve low capital usage but promise stable earnings and return on equity. There is a huge shift towards providing new and improved transaction banking services delivered online, so that they can both defend existing corporate business and win new customers. There is a fantastic opportunity for fast moving banks to create credible alternatives to the services offered by global competitors in their multinational heartland as well as going after the smaller corporates and SMEs who tend to operate under the radar of the global banks."

Adding new products and services to satisfy existing customers, and widening their appeal to the smaller customers are the top priorities for 39% and 33% of respondents, respectively. Offering new cash pooling offerings are particularly effective, with banks already seeing an average 14.4% increase in business as a result.

Although nearly half of banks in the survey said their overall 2009 IT budgets had been frozen, average spending on development of cash management systems and services is expected to increase by 8%. As the primary delivery platform for new services, the online channel is the main focus of IT spending. Cash forecasting, invoice and payment reconciliation and real-time payment tracking feature prominently in online investment plans of a third of respondents in the next 12 months.

Guy Warren adds: "Banks have either completed or are well on the way to completing the first stage in their transaction banking strategies. Stage two is about getting the delivery platform right, which is a matter of building viable online channels that feed smoothly into corporate systems. Only then can they deliver the integrated transaction banking services to satisfy both their customers' requirements and their own desire for growth."

Babson Capital Management Award

Babson Capital Management has been named 2008 Best Cash CDO Manager by Creditflux magazine, the second straight year it has earned the recognition despite drastically different market conditions.

Creditflux, based in London, is a leading information source worldwide for the credit derivatives and structured-credit markets, publishing a monthly newsletter, online daily news and a comprehensive database of collateralized debt obligations. The magazine uses comprehensive data analysis exclusively to determine its honorees, and the award is based purely on quantitative performance metrics. More than 300 CDOs were submitted for recognition this year. The magazine's inaugural awards were issued in September 2007.

"We are delighted to be named Best Cash CDO Manager for the second year in a row. It is a great honor and recognizes the hard work by the many skilled individuals within Babson Capital," said Thomas Finke, President of Babson Capital. "The recognition for our overall performance versus our peers speaks for the quality and consistency across our firm."
"It has been a difficult 12 months since the last awards," Creditflux noted in its August issue when nominees were announced. "New CDO issuance has plummeted ... But, as these finalists show, this has not prevented many managers [from] providing strong returns for their investors ... Asset managers are looking to the future, and are eager to show the world just how good their track record is."

The nominations for individual awards included the Duchess V CLO, nominated as Best European cash CLO - seasoned, and Duchess VI CLO, nominated as Best European cash CLO - recent, both managed by Babson Capital Europe, a subsidiary of Babson Capital based in London. The Babson CLO 2007-I, managed by the U.S. Bank Loan Team in Charlotte, N.C., was nominated as Best Cash CLO - recent.

For the Best Cash CDO Manager award, all deals that a firm had under management were compared with its peers. Through its CDO/CLO businesses in Springfield, Mass., and Charlotte and Babson Capital Europe, the firm manages more than $22 billion in 57 CDOs as of June 30, 2008.