Digitising treasury in a real-time world

Byron Gardiner Executive Director, Treasury Solutions, Transaction banking

1 Apr 2019

Treasurers who explore emerging technologies and evaluate potential solutions will stay one step ahead.

Treasury has long been an adaptive function, but the current speed and scale of change is unprecedented. As corporates increasingly embrace digital strategies, there’s an expectation that treasury will step up and become more value-accretive. Many of the characteristics of wider business transformation (including the greater use of real-time data) are common to treasury – creating a spectrum of opportunities.

The tech new-normal

Treasury teams’ ability to focus on strategic initiatives is often constrained by conflicting priorities and objectives of other key departments in the organisation. For example, treasurers are measured on working capital efficiency while to a procurement team, success means achieving the lowest spend. This mismatch in success metrics and priorities within the company often gives rise to conflicts of interest and misalignment in determining and delivering on corporate objectives.

However, technology has the potential to revolutionise this by automating and calibrating day-to-day processes, providing enhanced visibility and analysis of liquidity and risk, and connecting the two through triggers and rule-based actions and events.

Emerging technologies such as robotic process automation (RPA) and machine learning (ML) are already facilitating automation in treasury. The data within an RPA environment brings further potential – applying artificial intelligence (AI) to transaction data that is consistent and complete could yield valuable new opportunities for treasurers to better understand market trends and client needs.

Along this vein, by using open application programming interfaces (APIs), treasurers can collect insightful cashflow forecast data, such as for banks and supply chain partners. RPA and ML tools collate, standardise and enrich this data – giving treasurers a complete and timely picture of future cash and liquidity management needs. Enriching this with AI-based capabilities to understand trends is even more powerful, enabling better decision-making around hedging or intercompany financing, for example. 

Embracing real-time treasury

With more than 40 schemes now live globally, fast or instant payments are altering the liquidity landscape. The initial impact has been domestic, but increasingly this will extend across borders as initiatives such as RippleNet and SWIFT gpi (global payments innovation) are more widely adopted.

This shift to real-time transactions necessitates real-time data, with APIs enabling treasurers to engage and exchange data with their banks and internally in real time, replacing the scheduled and batch processing of the past. The ability to manage liquidity intra-day, potentially year-round, has huge implications for external investment and credit facility management. Intragroup financing, supply chain management and the support of new business models are all further benefits.

The use of APIs allows treasurers to be far more selective and precise in the way that they exchange data, including embedding banking capabilities directly into other applications. For example, customer payments can automatically trigger the release of goods and an adjustment to credit limits, facilitating more business.

Transformation – not one size fits all

Many larger or more sophisticated treasury functions are already starting to take advantage of these and many other opportunities. Similar benefits also accrue to smaller treasury functions for whom the value proposition can be even more compelling, given that their resource constraints are more acute. The barriers to technology adoption for treasuries of all sizes are falling. Onboarding is often far more straightforward than the large-scale technology implementations of the past, with new RPA, ML and AI capabilities increasingly incorporated into existing solutions, and/or delivered as cloud-based, software-as-a-service solution. Ultimately, adopting new solutions is likely to effectively become ‘plug and play’. Furthermore, the return on investment is often very short, particularly once the added value of treasurers’ time has been factored in.

Yet implementing such new technologies should not be a case of ‘a hammer looking for a nail’, but value-driven. The focus by treasury teams of all sizes should be on resolving pain points, reducing friction and supporting evolving digital business strategies that drive new revenues or reduce costs.

Engaging with trusted partner banks on pilot and proof of concept (PoC) projects can help treasurers explore the potential of new technology, but with lower risk and cost than going it alone. It also gives treasurers the opportunity to gain direct experience of new technologies, to participate in the development roadmap of the technology as it progresses towards commercialisation, and to determine the potential implications for their business. In so doing, treasurers build confidence, experience and insights into how best to free up resources and explore new ways of supporting and driving growth and business success in an increasingly digital world.

Collaboration is key 

To keep up with the fast changing fintech landscape, collaboration is crucial.

Recognising this, SC Ventures – the bank’s innovation, ventures and investment unit launched in early 2018 – seeks to deliver new industry solutions and business models through co-creation with clients, partnering with fintechs and investing for scale. A notable project under way is a digital bank in Hong Kong, currently in the build phase. Two other ventures at seed funding stage include a platform to provide SMEs with financial and other business services, and a plan to “plug” the bank into e-commerce to provide financial services to customers.

Treasurers too can collaborate with their banks, technology and other partners to address existing inefficiencies or pockets of friction and streamline supply chains, which can then form the basis of a digital strategy and implementation roadmap.

However, with the speed of change and the lack of time that treasurers have for exploring emerging technologies or evaluating potential solutions and providers, it is not always easy to identify the right opportunities or the next steps to take in their digital transformation journey. Treasurers who can do that are set to be at the fore and reap the most benefit from the transformation.

This article was also published by Euromoney.