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Yes, transaction services are hot

Forget M&A, capital markets, or proprietary trading. The new, new thing in 2009 may well be the innately unglamorous area of transaction services.

Banks’ transaction services or cash management teams help corporate customers manage their cashflow and liquidity requirements. The Financial Times last week pointed out that while most other areas of banking are struggling, cash management businesses still boast an annual growth rate of 10-25%.

Cash management professionals say revenue growth isn’t the only thing driving banks’ interest in the business.

“Managing cash for corporates brings liquidity into a bank,” says Colin Hemsley, head of major corporate sales at LloydsTSB. “And that helps immensely when the cost of funding in the interbank market is so high.”

Much of the data collection involved in cashflow management work is now automated, but companies still help interpreting the data when it comes in. Hemsley says offering this help has the added advantage of forging strong client relationships. “It gives you good visibility of what’s going on, and in difficult times like this, that’s a really good thing,” he says.

All of this means that cash management teams are unlikely to shrink in 2009, and may well grow. “For many banks this is an area of focus. People and resources will be switching into it,” predicts Hemsley.

From capital markets to cashflow?

So, what’s the possibility of a down at heel investment banker reinventing himself as a cashflow specialist?

Hemsley’s not so sure: “It’s very, very different to capital markets and M&A,” he says. “You need a really good understanding of how payment systems work, of the implications of the Single European Payments Area, and how the payment and account structures work all the way down a company’s supply chain in order to optimize them.”

However, Mark Cooper, head of UK cash management at SEB, says there could be openings for bankers with corporate relationships on the sales side of the business.

“Investment bankers could certainly reinvent themselves, but there would be cultural difficulties to overcome: selling cashflow management isn’t exactly rocket science,” he says.

Comments (18)

  1. rocket science can only be rocket science, anyone can do investment banking, even a hairdresser!

  2. cynic, when the hair business is so good, why would the hairdresser want to change career?

  3. I disagree, i think some parts of IB involves the financial equivalent of rocket science. Try working out the price of one of those infamous CDO’s and you’ll know what i mean.

  4. Dude, who told you that I want to change career and Anon, can you value a CDO?

    Sorry guys but I have a customer. Time to earn some money…..

    and I’m talking about M&As.

  5. Read some chapters of CDO valuation in some textbooks- CFA L2 volumes, if that is your benchmark for its being rocket science.

  6. Anon

    Its easy, develop a mathematical model for the price of a CDO (in the form a partial or stochastic differential equation, with appropriate boundary conditions) and solve it for some pricing formula or some numerical solution. Getting a rocket into space and back to earth, efficiently and responsibly, thats a different ball game.

    realrocketscientist Reply
  7. ok, then get a hairdresser to value the CDO and lets see what they come up with.

  8. I agree realrocketscientist. Its just a shame that we don’t get paid well enough to do rocket science – atleast in comparison to doing something trivial like valuing a CDO. I’m not angry at finance, but I’m angry at how unfair the system is.

  9. aiQuant, you’re joking right? there’s obviously more demand for people who can value CDO’s than people who can put rockets into space. what’s unfair about that? next you’re going to complain that, say, cuckoo clock makers in australia aren’t earning enough. If there is no market, it won’t pay. Majority of the population decides. nothing fairer than that.

  10. Love your comments guys !

  11. anon2, Its not a supply/demand issue. Forget putting rockets into space. There is great demand for teachers who can, say, teach people like you to use the term “rocket science” correctly. It doesn’t mean they’ll earn more!

    The thing with finance is that it is relatively easy and most of it doesn’t improve the average person’s life. So then why should a banker be given more pay than a DNA scientist, who’s efforts might one day help cure ball-cancer?

  12. I am totally bemused at the amount of relentless banter about valuaing a CDO. No wonder the market is spiralling into a depression. You lazy good for nothings all arguing over how intelligent you all are isn’t really helping the industry. If this is an example of the Industries finest – we are all doomed!!!

    Get a new job that challenges you. Oh and while you are at it… Get a Life!

  13. ha ha loving these comments – esp the muppets talking about how to price a CDO – they obviously got it wrong else we wouldn’t be in the mess we’re in! guys – get a job / life !

  14. Finally, some serious comments. The Hairdresser!

  15. Oink oink! Most bankers wouldn’t even know what a CDO is. I was a corporate financier at Lehman’s for 22 years and I still don’t even know how to turn a computer on.

  16. So twaldermar what you doing now? Still in banking?

  17. I’m still in banking, yes. Now with a boutique bank based in Mayfair and still having difficulty with the intricacies of my computer’s on switch. I’m actually considering early retirement – at the age of 45, I’ve made my fourtune and feel the need to spend my time amongst legions of incompetent, pin-striped buffoons has long since passed. I am significantly more intelligent than almost everyone at my current firm and investment banking work just doesn’t challenge me any more.

  18. twaldermer, if you fancy a challenge, become a headhunter like me. You get to hang out with pin stripped bafoons all day, but instead of caring about who is more intelligent. You get to decide which idiot fits what overpaid role and laugh all the way to the bank……Oh wait I forgot…. that was in the good times.

    There is now little laughter, mainly tears and we usually go to the Post Office instead – its the safest place to store your money these days!!!

    My god… I’m writting on this blog at 10.48 work time that proves how bad things are!

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