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Software & Systems

Treasurers Look to the Tech Horizon

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August 31, 2017

And there’s a lot coming at them. The NeuGroup’s European Treasurers Peer Group takes a look.

E-commerceTreasurers have been confronted with a tidal wave of new technology and fintech making its way into the finance and treasury market. This wave includes treasury in the cloud, big data, blockchain, mobile money, payment digitization and behavioral risk analytics, among other things. What does this mean for your treasury? Is virtual treasury possible? Should you work directly with fintechs or via your bank? What can be practically leveraged and what is just hype?

In a session at a recent NeuGroup European Treasurers’ Peer Group meeting, members took part in an interactive debate and attempt to define a practical path forward for any bemused treasurers out there.

So what trends and innovations will drive change? Several megatrends have the potential to significantly impact banking and treasury, including the payments evolution, the digitization of transactions, the cloud, the rise of fintech, and robotics and automation. Within those trends, technological innovations like APIs, fast and traceable payments, mobile money, distributed ledger (blockchain), machine learning, artificial intelligence and many more tech-enabled developments will drive momentous change in how treasury will be conducted in the future. The question is how to leverage all those trends and technologies to improve treasury and help the broader business.

What more do treasurers need right now? In a quick poll at the meeting, members agreed that the biggest impact of those trends and innovations will likely come in trade and supply-chain finance, where integration and a common platform can be transformational. They said the biggest impact on their treasury own operations in the next few years would be on payments and collections rather than, for example, debt or risk management, or cash investments. In addition, one of the members noted that he needs to become more attuned to what treasury needs to do when different things happen, link that to the business continuity plan (BCP) and develop the ability to execute on that within 48 hours. For that to be operational, he feels he needs longer-horizon dashboards, for example, and the ability to automate scenario analysis.

Virtual accounts are beneficial but they still have one big flaw. After a video on global virtual accounts, members discussed the many potential benefits they can bring, from driving down cost to allowing a great reduction in the actual bank accounts a company needs to maintain. However, virtual accounts are still saddled with some inefficiencies from a corporate point of view. If account numbers could be assigned by the corporate (driven by the ERP account numbers), and accounts were transferrable between banks, adoption would likely see a significant uptick.

So what’s not ready for real-time? The migration from batch-processed to real-time payments is underway but corporate systems and, more importantly, processes are not ready for it. While real-time sounds good, there are forecasting and liquidity management issues with it, and the loss of the float on regular batch payments is still a hurdle for corporates, according to NeuGroup cash management discussions that took place in the first half of 2017. But even if real-time is not an immediate priority, other payments trends can bring significant efficiencies and visibility, such as “track and trace” payments, mobile-money ecosystems, one-stop payment gateways and offline to online e-commerce, providing richer payment information, faster reconciliations, standardized reporting and more. Forging partnerships with these new payment channels enables banks to offer cashless payments and collections for corporate use.

There is much debate about the future of treasury in a digitized and data-driven world. And the nature of treasuries’ relationships with their banks when fintech innovations and cost of capital may drive a wedge between them. Now is the time to assess what needs treasury has for the future and forge strong relationships with banks to ensure smooth delivery of the services and capital that matter.

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