Is SAP’s Financial Services Network losing priority?

Okay, so this is a cash management story, but I was intrigued with a recent news release from SAP saying the overall progress of their Financial Services network launched later than anticipated.

Bala Ram, VP and GM of SAP FSN

According to Bala Ram, VP and GM of SAP FSN, the membership has been intentionally limited to a select few, to get them up and running first, to solve the 'pain points' (e.g. providing rich remittance information which corporates 'love'.  For those who have no clue of what SAPs FSN is, I refer you to here –What's the Buzz around SAPs Financial Services Network.

Mmmmm. The whole idea of developing a business cockpit for corporates ERP system to work with banks without going to each bank’s portal to handle their payment, FX, liquidity and other value added services makes intuitive sense. I mean, if I was Clorox or BHP, it would be nice not to have to go into 5, or 10 or 20 bank systems to manage my transactions and see my payments activity across all the banks I am dealing with, instead of going separately to each bank portal.

According to Bala,

SAP is also aiming to create a broader ecosystem around FSN, he says. The priority since the launch has been to onboard banks/FIs (Visa and Citi are the latest recruits) and corporates, but now there is also a push towards partners. 'This is a natural evolution. We started with banks, then corporates and now we feel partners can bring a lot of value.' There is already interest from this segment, Ram claims, and SAP is talking with a number of selected prospects. 'We have to be careful to choose the right partners to build the right solutions for our customers.' 

The first announcements are expected to be made before the end of this year. Ram envisages partnerships in two key areas: value-added services and system integration. For the former, there are many players specialising in specific areas that are of interest to FSN members, such as liquidity management, banking master data, and FX exposure management. 'There is no need for SAP to reinvent the wheel,' he comments. 

This initiative is not without its challenges and hence may join the long list of mult-ibank initiatives that die a slow death or never gain full traction.

  • For one, banks may find this more a threat than an opportunity – do banks want to expose their client’s business to their competitors?
  • While SAP certainly has the global client base, is the value proposition only to corporates running a modern SAP implementation? How will SAP persuade non SAP customers that they can interface eloquently with a different ERP system, such as Oracle, Peoplesoft, Microsoft, etc?
  • According to a few pilot banks, version 1 pricing is not attractive. Why isn’t SAPs own Treasury group rolling this out to be the first case study?
  • Data privacy issues – This is an area that differs by jurisdiction, but how bank data is handled is not a trivial issue. SAP’s own Jane Tweddle, financial services principal at SAP UK & Ireland, commented that "the UK’s Prudential Regulation Authority is conservative about cloud and has reservations about where the data is kept, whether it is housed in the UK and whether foreign regulators have access. That uncertainty also affects potential customers."
  • Visa angle – still not clear if this is their supply chain finance proposition.

Banks are watching with interest, and if their clients demand, they obviously will follow. The concept is good, but like many of these propositions developed between technology companies and banks (such as SWIFTs Bank Payment Obligation) the proof is in corporate demand.

The case is far from proven, but given its SAP, it certainly bears watching. SAP sees value in the whole supply chain - but smaller vendors like Taulia, Tungsten, and others are making some real noise around P2P functionality and early pay solutions.

I would welcome comment from the SAP community if they have some different views.

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