01 March 2008 Features

 

Back to the beginning

David Bannister

After 12 years in the banking industry, Mark Hale has returned to consultancy, where he will be building on the changes that he helped create in the industry.

Many employers are happy to let staff go off for a while in order to pick up new skills and perspectives that will enhance their abilities when they come back.

Mark Hale, who became director of PricewaterhouseCoopers’ financial services transaction banking practice at the beginning of the year, did just that – 12 years ago – when he left PwC to join Barclays Bank, where he rose to become director of payments and settlements, closely involved in the development of the Single Euro Payments Area.

Hale had joined Price Waterhouse, as it then was, straight from university, where he had sown the seeds of his future career. “I started my working career at university, really: I did a mixed degree in computer science and economics, which gave me an insight into the possibilities of technology and an understanding of how finance works,” he says. “It seemed to me that the two go hand-in-hand. I was also very aware of the relationship between regulation and technology, and had some explanatory work published regarding the Data Protection Act.”

After joining what became PwC, he went through a fairly standard career path: chartered accountancy exams, working in audit, then moving to computer audit, and spending several years in the early 1990s developing stock exchange DVP systems at Swiss Stock Exchange and as far away as Malaysia.

“But I really wanted to understand more about banking, so joined a client, Barclays,” he says. “PWC said ‘treat it like a sabbatical – do what you have to do, then come back’. And while it’s been 12 years, it feels like that: a natural progression.”

At Barclays towards the end of the 1990s Hale was asked to programme manage the implementation of the euro, a project of which Rob Close, now president and chief executive of CLS Bank, was in charge.

That was the step into the payments world, in which role he went on to represent the bank on various national and European committees and bodies as well as on the boards of the main clearers. Most notably and most recently, he was an office holder on the European Payments Council, and involved in the development of SEPA. In this role, he played a large part in setting out what will be a major change in Europe’s internal structure and its ability to compete in the world economy.

“When all’s said and done and I sit with my pipe and slippers, I’ll look back on the creation of the SEPA Credit Transfer scheme as another step in the creation of the single market, and a significant step in the evolution of European banking,” he says.

There are still more steps to be taken in the transformation, but he still feels that he can take part in the debate.

“Having moved back into a professional services firm, I can still take part in the debate, and independence adds to that. I’m now only an observer … in a way that is easier: I can play Lear’s fool. If you’re representing an association, or a bank like Barclays, you’re always circumscribed by someone else’s rules. Here [at PwC] it is just about fact-based observation and analysis, so it’s more powerful Now I’m talking less about policy, and more about commercial delivery and how organisations can generate value.”

There is also a sense that he is moving on to the practical aspect of SEPA, rather than the politics, and that he relishes this. “I’m interested in understanding the outcome of course, but now more focused on optimising the process to get there. Working in a professional services firm you are typically dealing with people who are really interested in getting things done,” he says.

The role at PwC is to build its practice in the transaction banking area, pulling together the firm’s skills from other related practices to address the challenges the banking industry faces. “The vision is pretty clear: PwC is an outstanding professional services firm; it’s got excellent people, a great brand and a great track record. I want to bring all of those aspects to bear on transaction banking so that when people are looking at forming their transactions business – payments and settlement, cash management, trade services, custody, etc – we will be an obvious, easy first port of call. When people see that we’re successful at what we do, then hopefully we will be the most critical port of call,” he says. “It doesn’t mean that we will get every job – life’s not like that – but it does mean that anyone who is doing anything substantial will at least want to hear what we’ve got to say.”

Regulators, customers, technology innovators and new entrants are all driving significant change in the European industry. They all have a common drive – to generate change. The challenge for the transactions industry is in making this change sustainable. This means that it has to be founded on a clear vision, based on robust data and driven by bold leadership. “For me, PwC has an outcome and benefits driven approach to change and an appreciation of how to really make change stick. What better place to be at this point in the evolution of banking?”

Another PwC strength, Hale says, is its engagement with the “extended parts of the transactions supply chain” such as multinational corporations, larger corporates and also to SMEs. “Starting from the assumption that the status quo won’t do and seeing the benefits of integrated processes, this allows you to focus on innovation and added-value services. Customers want value, control, convenience and certainty. This is shouldn’t be a threat for banks – it is an opportunity,” he says.

Other opportunities stem from the changes that SEPA, and related structural initiatives, will bring – changes that Hale says are more profound than many realise.

“The intention is to change the status quo. At a macro level, Europe is over-banked and under-competitive from a consumer perspective. The Lisbon Agenda, and the creation of a single market is all about creating more real competitiveness inside the single market. It’s all about increasing integration and reducing price variation across member states,”he says.

“European legislation is inherently imperfect, and I don’t criticise the legislators for that because it’s immensely difficult. Having pushed through SEPA Credit Transfers to gain agreement in 31 countries [I know] that European legislation is about consensus, and that means trade-offs,” he says. “The industry has adapted to accommodate the lateness of the Payment Services Directive by delaying the SEPA Direct Debit scheme. The various derogations, the inherent technical challenges and its scope make the PSD a very difficult and risky piece of legislation to implement.”

Such is the complexity of the legislation, and the number of changes it has gone through, that a large obstacle in implementing it has, and will continue to be, the volume of misunderstanding that has built up around it.

Hale recounts taking part in a conference recently at which some 44 points and questions about SEPA were raised. Of these, he reckons 40 were just plain wrong, while two or three were correct, but out-of-date. Instead of giving the presentation he’d expected to, he spent the session explaining the final point for the audience.

One area of misunderstanding is the view taken by the European legislators, who use the word ‘local’ to mean pan-European, so when they talk about local competition, they don’t mean in the UK or in France or Italy. They mean between France and Italy, and between all the other member states too.

While some of the difficulties and trade-offs, like the PSD, are simply related to the difficulty of managing large-scale change, others, particularly relating to changing clearing cycles, as with the UK’s Faster Payments programme, will have far-reaching and unpredictable effects.

“On the shortening of clearing cycles … most people don’t see the implication of that yet. It means that branch accounting systems are going to have to be changed, because they’re founded on operational processes that can often take a couple of days. D+1 means that everything you now do over an extended period now has to shift to intraday and real-time – your overnight batch systems, message standards, technology standards … everything that everyone has avoided changing about the branch accounting is going to change,” he says.

“We’re seeing that with Faster Payments in the UK. Even though the industry has deferred from November to May, not all of the organisations involved are going to be there on time or in the way they originally intended,” he says. “People are still coming to terms with the scope and scale of the changes required. Payments processing has a high level of operational, technical and risk dependencies and because these have not been changed so significantly for a generation, people have understandably lost sight of the full potential of the implications. This is leading to some very urgent programme assurance and remediation work.”