The Future Of Treasury

A tsunami of technological progress is forcing risk-averse corporate finance executives to confront changes in the environment.

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The objective of most corporate treasurers is to preserve excess capital, minimize risk and attain the best yields on their investments. The low-interest-rate environment that has existed since the onset of the 2007–2008 global financial crisis and central bank quantitative easing programs have made the search for yield all the more challenging for treasurers.

Regulations such as Basel III have forced banks to seek longer-term deposits, leaving treasurers with far fewer places to park money overnight. But if rates rise when central banks apply the brakes on quantitative easing, and countries like China stop buying US treasuries, the quest for liquidity, particularly for less cash-rich companies, could see treasurers seeking to source funds from alternatives to traditional banks.

For some time now, cash management banks have encouraged treasurers to free up working capital by better managing their accounts payable and receivable or through reverse factoring and discounts for early payment. But it will be difficult for treasurers, who are normally risk averse, to contemplate a future where they are less reliant on their banks. After all, most cash management deals between banks and corporate treasurers hinge on banks providing a line of credit in return for corporates handing over a portion of their cash management business to the bank.

Despite the tsunami of technological change that is sweeping the financial services industry, corporate treasury and cash management is still largely shielded from these developments. Treasurers are not rapid adopters of technology. At EuroFinance’s International Treasury Management conference in Vienna last year, the treasury community appeared bemused by talk of blockchain, artificial intelligence, peer-to-peer lending and robotic process automation. These new and potentially disruptive technologies may be the darlings of venture capital investors, but corporate treasurers are unsure about how or even why they should adopt them. Do they ignore these tools at their peril?

Blockchain has limitless applications in areas that require multiple parties to cooperate—capital markets, trade finance, loan syndication, securitizations—and could deliver greater cost savings and transparency and reduced risk for all parties, including corporates. Artificial intelligence can combat fraud, speed account opening (a major bugbear of treasurers) and help lenders make faster, more intelligent lending decisions. It is already being used by challenger banks and non-bank lenders to extend financing and provide a more user-friendly account-opening and management experience to small and mid-sized companies, which have not always felt well served by the incumbent banks.

What is going to be the “killer app” that makes treasurers take this new wave of technology more seriously, or even better, start adopting it to significantly transform their business? Or are we just in another technology hype cycle that will bring change at the fringes, but no major transformation?