The financial crisis of 2008 inaugurated an era of uncertainty for investment banking, which was compounded by the ambiguity created by the global pandemic. One very complex theme that has emerged in the post crisis world is that of sustainable banking and decarbonization.
“The interesting part of transaction banking today is that we are focusing very much on helping our clients deal with their scope three emissions, which are much more difficult to solve than scope 1 or 2,” said José Luis Calderón, Global Head of Global Transaction Banking (GTB) at Santander Corporate and Investment Banking (Santander CIB), the world leader in renewable energy financing. Calderón was speaking at SAP Sapphire in Barcelona about the completely fresh approach to technology required today in the sector.
With over 165 years of experience, Santander has extensive knowledge of how sectors such as distribution, infrastructure, engineering, and utilities work. The bank’s mergers and acquisition department is unusually busy connecting companies in these sectors and helping them understand the opportunities and possibilities in the market.
“We are helping companies to buy enterprises, mostly small and midsized ones, that can help them in the decarbonization of their supply chains,” Calderón said, explaining that there are many examples where Santander CIB has helped businesses join forces through mergers. “We help companies decarbonize by helping their suppliers decarbonize. This is an incredibly intricate exercise, because we’re talking about thousands and thousands of suppliers of all sizes, all trying to prepare for a new, demanding regulatory environment.”
Santander CIB is developing solutions and offering financial benefits to support companies as they enter the first stage, which usually requires transforming operations to become greener. But this stage is barely scratching the surface.
Calderón cited the example of a company that is a big supplier to one of the largest retail companies in Spain. About 80% of their production requires dealing with scope three emissions, meaning they and their suppliers must comply with a multitude of different requirements in a multinational environment.
“The CEO of this supplier told us he is thinking about building a hydrogen factory close to his facilities just to secure his own supply of green energy,” said Calderón, commenting that such a move would clearly require a substantial investment.
Santander CIB is operating in a very complex environment comprising different currencies, different regulators, different laws, and different payment infrastructure systems. Santander also has a huge SME base. The company’s advantage is its long-term, commercial banking engagement in over twenty countries, covering Europe and the Americas, with more than 150 million clients around the world.
Santander has been operating through commercial banks for decades in most of these countries, so they know very well how each individual system works. Their clients in each country expect them to help navigate the complexities of doing business outside their own country. They want to manage their business from one single point in a region, be it Miami or São Paulo, for example, in Latin America.
Calderón explained how Santander CIB created a set of solutions that help connect the client from a single point of entry to all the different transactions without having to navigate the complexity of operating directly in the country.
For instance, if a client has a multinational payment plan and wants to pay suppliers in different countries throughout the region, it creates one single payment file. Previously the client had to manage the process of sending files to the bank, purchasing through the local system, getting information back from the system. The bank would then return the file to reconcile information, and then the file was sent around again to all parties.
“Now, the bank does all of this, and it’s all automated,” said Calderón. “Basically, we are integrating our banking products and services with the day-to-day digital touchpoints of clients. But this is only the first stop in the journey.”
Santander CIB has partnered with SAP to expand the digitization of their global transaction banking services. Through the alliance, Santander has become the first bank in the European Union to join SAP Multi-Bank Connectivity, a service connecting banks and financial institutions to corporations across the globe. The partnership prioritizes connectivity and new digital solutions to accelerate client-to-bank services. It provides invisible banking solutions by embedding Santander services within a company’s Enterprise Resource Planning (ERP) system.
“SAP is the most widely used ERP among corporate clients, and it is the perfect partner to co-create distinctive solutions and make invisible banking tangible,” said Calderón. “Our ambition is to embed Santander Cash Management and Working Capital solutions, both global and local, within the client’s core system, enabling them to transact directly inside their own SAP ERP. It covers the full scope of solutions to enhance cash flow and lend efficiency to our clients’ supply chain using the most innovative solutions. This is what we call invisible banking.”
The agreement will enable both parties to improve user experiences by enhancing the decarbonization of industrial activities, and it also provides new financial tools to help clients navigate supply chain disruptions.
“This partnership is a step forward in the digitalization of the solutions we provide to our clients,” said Calderón. “The strong focus on connectivity, supply chain management and energy transition will help them navigate the complexity of doing business globally. This partnership comes from understanding the needs and daily challenges of our customers and leveraging the latest technology that SAP can deliver to support the depth and breadth of our product offering.”
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