Digital Focuses Treasury Vision

Rapid adoption of bank APIs promises not just to make treasury more efficient, but to shift more customer account management to online and mobile environments.

Corporate treasurers are an adaptive lot. They have to be, given that the job requires them to manage cyclical trends and associated risks, stay on top of geopolitical and macroeconomic events, and meet new regulatory requirements, all the time keeping ahead of a rigid reporting calendar.

Lately, their task has been further complicated by the need to get in step with their organization’s digital transformation efforts. Two-thirds of global treasury professionals who participated in Citi’s 2018 Digital Treasury Transformation Survey said they currently have a digital strategy in place at enterprise level. A similar number said that digital transformation is a priority as their organization pursues opportunities that new technologies are opening up across the core business and treasury function.

The greatest barriers to treasury transformation are legacy technology and integration issues, says Terry Beadle, head of corporate development at GTreasury, citing legacy bank connectivity’s “need for host-to-host connections, myriad security tokens, and inflexible batch systems.” Making the transition easier are application programming interfaces (APIs) for banks, which accelerate access to multi-bank balances, statement data, and payment services. “This is reducing the cost and speeding up implementation of TMS [treasury management system] deployment,” Beadle says.

“TMS systems have been helping treasury departments automate processes for a long time, notes Niklas Bergentoft, a Deloitte risk and financial advisory principal in treasury. “But the technologies available today go much farther. “Leading organizations are using robotic process automation to augment a TMS for a greater level of automation,” he says. “The most important technologies adopted by treasury departments are visualization tools that help enable advanced analytics for enhanced treasury effectiveness: for example, helping to drive enhanced financial performance for the organization.” Embedded data visualization software, such as, Qlik or Tableau, for example, bring both visual analysis of treasury information and the ability to access big data—providing treasury with a much wider and more in-depth range of information to leverage than has been available previously.

The Age of APIs

The rapid adoption of APIs reflects both a shift to real-time banking and evolving client business models, states Mayank Mishra, Citi’s global head of channel services, treasury and trade solutions. “The benefits of seamless integration using APIs with the ability to self-test are key to driving operating efficiency,” he says. “Additionally, we are excited about the power of artificial intelligence, which combined with design thinking, is helping us drive towards even more simplified client experiences.”

The potential for real-time treasury is becoming increasingly attainable. “The availability of big data, deep learning, and other accompanying data-backed mechanisms allows the modern treasurer to adopt technologies like artificial intelligence for more accurate forecasting today in a totally automated manner,” states Idrees Kolabhai, head of cash management at Standard Bank. Real-time/instant payment instruments with increasing limits are being adopted around the world, creating the potential for further change. In particular, the impact on downstream activities “will mean access to liquidity in real time or in helping the move to a more real time treasury function,” says Kolabhai.

Treasurers today are still being stymied by the tension between the real-time transactional environment experienced by consumers and the manual and generally slow movement of funds in corporate banking. “With regulators pushing towards open banking, access to banking services and information via API’s is creating a more self-service, real-time experience, which in turn will put control back with treasurers,” says Kolabhai. “Open is the new normal for financial services, and the drive towards greater openness in banking and payments is impacting how money moves.”

Cash On The Move

A handful of relatively mundane operations—payments and receivables processing, cash forecasting, and liquidity management—topped the ranking of processes that treasurers expect to feel the most impact from digital transformation in Citi’s Treasury Transformation Survey. Interestingly, trade finance was ranked last, suggesting that treasurers have not yet bought into the promise of blockchain.

The more profound change to banks’ corporate customer service models, however, could come from technologies like virtual account management, says Kolabhai, which enable them to provide a complete, self-service suite of cash and liquidity management offerings. “The virtual accounts can be configured to reflect the organizational hierarchy and use transaction information to enable straight-through processing (STP) reconciliation,” he says.

Citi recently launched CitiDirect BE Cash Concentration, which allows clients to digitally manage their cash concentration needs through the bank’s online treasury management tool. “Think of it as STP for target balancing, both to Citi branches as well as to other banks,” says Michael Berkowitz, global product and North America head of liquidity management services at Citi Treasury and Trade Solutions. “Now clients can modify their structures at the touch of a button, on a 24/7 basis. In addition, we will soon be offering the ability to add accounts.”

When it comes to cash concentration, clients primarily make changes to their liquidity structures offline, which is often a complicated process, according to Berkowitz. “The process often requires many manual back-office processes,” he says. CitiDirect BE Cash Concentration leverages digital capabilities to enable a more responsive and real-time effect for clients.

Last year, Stanbic Bank, a division of Standard Bank, launched MobyCash in Ghana, an easy-to-use application loaded onto a tablet or mobile device. It enables small shopkeepers and market stall traders to connect securely to the bank to upload cash pick-ups and deposits in real time.

Technology like this is fronting a new drive toward greater efficiency and productivity, says Kolabhai. Prior to the deployment of MobyCash, customers would only realize cash deposits into their accounts at close of business, i.e., at the point when the cash in transit companies returned to the cash processing centre. “The client only received value post the validation of the physical cash before it could be deposited into the customer’s account. From a client perspective,” he says, “these delays impacted their working capital, as they would not have access to much-needed liquidity to complete other payments required to keep their business going until possibly end of day or next day.”

As more bank services become available via API, and as fintech vendors disaggregate bank services, Beadle predicts the corporate TMS system will increasingly be the platform that aggregates and delivers all banking services. “In the future, TMSs will deliver bundled foreign exchange, asset management, fraud detection, payment and credit banking services,” he says. “GTreasury plans to offer a wide range of bank services through fintech partnerships to all of our customers as an integral part of our cloud platform. This will include services such as payments, FX, fraud and asset management.”

Banking-as-a-service ecosystems such as these will be a key differentiator in TMS choice. “The integration of third-party, bank, and vendor processes into a seamless workflow will be essential to the scale and efficiency of treasury operations,” Beadle says.