As his first year in office comes to a close, Scott Barton, chief executive of Global Transaction Services at Royal Bank of Scotland, talks to Neil Ainger about his long-term plans for the unit and the challenges ahead - not least the eurozone crisis, mobiles, eBAM and changing world trade flows.

The transaction banking business is a ‘sticky' venture according to Scott Barton, the chief executive of Royal Bank of Scotland's Global Transaction Services unit, in that it is focused on the long-term. Having joined in January 2011 after working for many years at the bank's Global Banking & Markets investment banking arm, he appreciates the differences. "It is a ‘lumpy' business to invest in. You cannot flip in and out of transaction services if you want to be credible."

Barton says that the consistent, profitable nature of transaction banking becomes more important in tough economic times, especially as there are less merger and acquisition deals on the investment side. "GTS is much more focused on day-to-day mechanisms to oil the flow of trade and payments, delivering working capital and treasury related products where they are most needed," he says.

"Transaction banking has risen up the pecking order internally and externally," as banks look for sustainable revenue streams and companies look to ‘sweat' cash. Providing finance to businesses that are desperately in need of it is also a key issue, especially as the eurozone crisis threatens another credit crunch with banks refusing to lend to each other or to corporations.

"We're clearly monitoring the ongoing euro crisis. It means that we need to operate in a safe way and plan just in case there are any problems, using effective monitoring systems, stress tests and so forth, like other banks," he says. "We also need to provide our customers with ideas about how to mitigate risk. For instance, how can we help them with yields in a challenging environment?"

RBS had its problems during the banking crisis in 2008, "but a lot of the heavy lifting was done by the time I joined GTS in January 2011," says Barton. "Our approach now is to look at what we've got and to focus on our customers." The technology integration challenge following the acquisition of ABN Amro was also complete when he joined.

The sale of WorldPay a year ago - forced by the European Union's rules on state aid following the UK government's bail-out of the bank - was a blow as the profitable, steady acquiring business was sold for £2 billion to Advent and Bain Capital. The unit was the largest provider of card payment services in the UK and Europe and fourth largest globally, but while admitting that it would have been good to have hung on to this consistent business, Barton stresses that "we've still got a 19.5% equity stake in it". RBS' IT systems still provide the operational environment for the newly independent business and an access agreement is in place for several years to come, plus the branch banking network still points merchants towards WorldPay.

The real challenge for RBS GTS is to tap into growth markets in Asia, maintains Barton, who is acutely aware that changing world trade flows mean that no bank, however well established, can stand still. Although starting from a low base, Barton is very pleased with RBS' growth in Asia and points to the group's presence in China, Singapore, Japan, India, Korea and elsewhere in the region as evidence of their tight focus on the locality. "We can also handle Renminbi and have on and offshore capabilities for this currency," says Barton, adding that RBS was one of the first banks out of the blocks with this ability. The bank has also recently completed a roadshow in Europe with China's State Administration of Foreign Exchange body to try to further its business.

GTS is organised geographically and by products, explains Barton, so it is present in the UK, EMEA, America, and Asia-Pacific and has teams dedicated to trade finance, cash management, liquidity and foreign exchange so that firms can hedge, and commercial cards for corporations, whether that be fuel cards or employee plastic.

GTS has a strong UK home market and is present on the ground in 36 countries around the globe, with correspondent banking relationships elsewhere in the world where it is not so strong. "We're a global business with a global footprint," says Barton. "Outside of the retail bank, we look to provide products and services to RBS Group customers whether they come to us via our GBM investment banking unit or are domestic franchise customers via the corporate banking arm, who are looking for trade finance or cash management assistance in the UK or on their international business."

The global nature of the GTS business and the efficiencies it can achieve would be greatly helped by the development of standardised electronic Bank Account Management messages and transactions (see Banking Technology's earlier news story on RBS' and IBM's involvement in the Swift eBAM pilot HERE).

"eBAM is a good technology and business opportunity for us," says Barton. Customers can also use RBS' web services platform, "where we have more than 100 currencies available, knitting together FX, our network, and our capabilities in one offering. When we spend money on technology we want it to connect and provide extra functionality to our customers; that is a key aim." 

Another emerging technology steam that Barton is deeply interested in is the rise of the mobile channel and the opportunities that it presents for remittances and payments, from Mobile Contactless Payments using Near Field Communication technology, through to corporate treasurers approving trade authorisations while on the move. The potential opportunity for transaction banking is huge and Barton is keen to learn lessons from RBS' retail banking operation which is strong in this area. "I'd be neglecting my duty if I wasn't looking to this for the future," he says. "I've also been out to Nice, France, to see the exciting trials and mobile initiatives that have been centred around that town." The Mobile Network Operator, Orange, launched an MCP scheme there, alongside several banks, such as BNP Paribas and Credit Agricole, MasterCard and Visa, the local transportation system, retailers and other partners to try to create a mobile contactless city.

This raises the spectre of non-traditional players entering the market and competing with banks, something that Barton is very aware of. "You have to be conscious that our competitors aren't just other banks, but newcomers as well. I'm also looking to hire non-traditional transaction banking staff from the telco or mobile operators, for instance, so that we can get fresh names and thinking into GTS: Watch this space."

Barton has also instituted an internal innovation forum that is tasked with investigating unobvious, non-traditional opportunities and technologies in an attempt to ‘future proof' the unit.

The difficult balancing act for all banks, of course, is investing in tech to ensure future revenue streams, while still ensuring that there is enough money to run the day-to-day operations and to ‘keep the lights on' when budgets will inevitably come under pressure as another recession looms. "It's a juggling act," admits Barton and it's not helped by the huge number of different regulations that the industry is facing, covering the Basel III capital adequacy rules, the Independent Commission on Banking' report in the UK, the cancellation of the planned withdrawal of cheques in the country, Dodd-Frank in the US, the Single Euro Payments Area, and so forth. "Maintaining the license to operate is crucial but it is getting more expensive, meaning tougher choices on discretionary spending. The key is to ensure you get an additional business benefit from any regulatory-driven technology spending," he says.  

"In isolation each regulation is manageable. The big challenge is in handling the sheer breadth and volume of differing regulations at the same time." 

For those who stick with it, however, and get the juggling act right between investing in new revenue streams and keeping operations relevant and efficient, the long-term benefits are obvious. Barton says he wants to run a sustainable, steady and profitable unit that delivers consistent returns and excellent customer service and that means understanding the "lumpy, sticky" nature of transaction banking.

Curriculum Vitae

Scott Barton, chief executive of Global Transaction Services at RBS. 

Jan 2011 - Present: Takes over as chief executive of the Royal Bank of Scotland's GTS unit in London after spending 16 years with the bank across various roles and divisions, mainly concentrating on investment banking with the Global Banking & Markets unit in later years.

2009 - 2010: Returns to London to run large corporate banking, overseeing the corporate banking division's FTSE 350 UK business, global shipping and the trustee and depository business.  

1995 - 2009: Starts out at RBS working on corporate clients in London before going to New York City and Houston in the US. On the formation of RBS' Global Banking & Markets investment unit, he took over the UK corporate coverage franchise and begins to build up RBS' franchise in the Middle East. After the ABN Amro acquisition, Barton moved to Dubai to run the Mid-East & Africa hub, spanning the full array of GBM's business. "Texas is a different country to NYC, and Dubai is different again, but I enjoyed my time abroad experiencing the cultural differences in those places, as did my wife and two boys," he says. "Having an international perspective is crucial in our business and working abroad helped widen my outlook." 

1990 - 1995: Joins Andersen Consulting after graduating and works in their financial markets division on corporate banking and project finance. Joins RBS' graduate training course after deciding on a career change.

Education: Barton has a first in management sciences from Loughborough University and an MBA from Cass Business School.