Systems And Services: Reimagining The Treasury Function

An array of new and improved technologies promise to make moving and managing money much simpler for treasurers.

Corporate treasurers face a variety of cash-management and liquidity challenges. Not least is the global trend toward rising interest rates, after nearly a decade of next-to-zero or even negative rates in many countries. “Working capital works harder when interest rates are higher, [but rising interest rates] also represent a challenge for treasurers, as the treasury function must take advantage of higher rates in the most efficient way possible and be prepared to move funds dynamically as rates shift,” says Vinay Prabhakar, vice president of Product Marketing at payments software provider Volante Technologies. “Getting an extra 100 basis points on an overnight sweep can make a material difference to treasury positions over time.”

In addition to rising interest rates, there are myriad geopolitical risks. “Brexit, whatever form it ultimately takes, looms large in any discussion of the top risks and challenges for treasurers,” says Prabhakar. He also points to trade tensions, fueled by the rise of nationalist policies in both developed and emerging markets, which create increased uncertainty and a higher risk profile for treasury operations. “Regulation also continues to grow,” he says, “with the recent rollout of the General Data Protection Regulation causing corporations to reassess how they manage and store customer information.”

So how will these economic, regulatory and political changes shape the systems and services that treasurers rely on to manage their cash and liquidity? Prabhakar says almost all the innovations happening in the world of payments can help treasurers with these challenges directly. “Consider real-time or instant payments. With more than 40 countries now ‘live’ with some form of real-time payment mechanism, treasurers have the option of performing instant account-to-account domestic transfers in nearly every major trading currency. Liquidity can now be managed on an intraday basis, rather than relying on end-of-day sweeps, or waiting for end-of-day balances to make money-movement decisions.”

Sven Lindemann, CEO of Serrala, a payments service provider, agrees that restrictions on funding and lower margins require timely and detailed visibility of cash and liquidity. “Technological innovations such as Robotic Process Automation (RPA) and Artificial Intelligence (AI) bring about greater opportunities for automating processes, handling large amounts of data and complex calculations, and providing the cash visibility needed for strategic decision-making,” he says.

Conor Deegan, managing director of cash-forecasting solution CashAnalytics, points to challenges for treasurers around more accurately forecasting their future cash and liquidity needs. “The biggest forecasting challenge is managing the large number of moving parts involved in creating a reliable output on an ongoing basis.” This is where Deegan believes specialist systems with RPA technology can help, as they “allow for these data sources and moving parts to be streamlined,” he explains, “laying the foundation for a sustainable process while providing clear insight into the cash needs of the business.”

Smarter Ways To Reduce Costs

Outside of their own operations, treasurers’ interactions with their banks are also being transformed by regulation. Standardized Application Programming Interfaces (APIs), developed as part of the European Union’s open-banking initiative, will allow treasurers to easily switch banking providers based on intraday considerations, such as who can provide the best FX rate on a given transaction. “This will place the power of choice in the hands of corporate treasurers rather than bankers,” says Prabhakar. But APIs can also create tighter relationships between companies and their banking partners, he adds, by allowing treasuries to directly “plug into” API ecosystems created by banks and third-party fintech providers—all with the aim of lowering transaction-processing costs and making treasury more efficient.

Prabhakar says banks need to find ways to better differentiate themselves. He believes the answer lies in them becoming more customer-centric, providing value-added services that embed the bank into the workflow of their customers. “Cloud and API technology have an important role to play in both these areas,” he explains. “For both corporates and banks, moving key operations to the cloud, and consuming services that are cloud-based rather than requiring data-center infrastructure, is a smart way to reduce upfront costs, turn capex into opex and increase operational agility.”

Both corporates and banks stand to gain, says Prabhakar, from eliminating the test and upgrade cycles endemic to in-house installed software solutions, and reallocating IT resources to more strategic activities in their respective organizations.

Synergies And Strengths

With banks under pressure to improve their cost-to-income ratios in order to be successful in the new digital era, Serrala’s Lindemann says white label solutions and banking-as-a-service are not a contradiction for banks. “The two approaches complement each other perfectly,” he says, “as it’s an opportunity to offer new value-added services that clients are willing to pay for, which generate new income streams for banks.”

It also allows a bank’s corporate clients to manage all key payment processes, including receiving and processing payment-status messages and managing payments using one central platform, which provides greater transparency and efficiency. “Cloud solutions can be implemented quickly and be easily augmented with managed services,” says Lindemann. “Banking-as-a-service can cover client-facing solutions, as well as a bank’s internal IT infrastructure to manage processes and customer business.”

Anders la Cour, CEO and co-founder of Banking Circle, says APIs can help corporate treasurers drive automation within treasury departments. “APIs are already providing banks with added value by streamlining their underlying legacy infrastructure, without adding significant cost,” he explains. “APIs’ flexible and scalable architecture means banks are now able to offer innovative ways of delivering products to customers, without the significant investment it would take to fully overhaul their legacy technology. APIs will be key for the future of banking.”

La Cour does not see banks being replaced by other service providers anytime soon. “But their role is changing,” he says, “and they are no longer the only solution for all of a company’s finance needs. If I were a corporate treasurer today, I would take time to fully assess my options based on the size of my business and the demand.” Compared to most fintechs, traditional banks have access to larger balance sheets and liquidity, and companies are likely to continue to use banks for these services. Yet, la Cour says fintechs provide greater flexibility when it comes to payments. “If I were a small to midsize company, I would also assess the fintech industry for access to working capital,” he adds.


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