Advantage Evolution

Deloitte Treasury Technology Market Intelligence Report 2019

Automation, sophisticated analytics and rich data visualisations are putting powerful new tools in the hands of treasury teams. The treasury function is moving from routine reporting to embracing predictive analysis and fundamental business forecasting. In many businesses this is already a reality and the function has become more strategic. But for most, there are still critical choices to be made. How should a business map out the treasury journey, and what is the chosen destination? Which of many competing treasury applications are relevant to business? How should businesses go about evaluating technology vendors, and implementing their services?

This article outlines the principles of successful future state treasury technology strategy and design and provides a critical review of available technologies and their providers. It is an experience-based and market-based review of current and future treasury technologies, combined with Deloitte’s current thinking on strategy formation and technology implementation for the treasury function.

The treasury technology challenge is an opportunity to deploy creative solutions that deliver simple, transparent, and efficient treasury processes. Internal and external pressures are combining to demand both cost reduction and more financial visibility from the treasury function primarily through automation. To meet these pressures companies need to conceptualise and plan their treasury transformations in three important areas:

1. Understand the technology
Effective technology implementations will enhance controls, harmonise processes, centralise and automate data handling, and extend the reach of treasury talent. Evaluation and selection is critical. Deloitte considers that some digital technology trends will play a central role in the future of treasury system architecture, including advanced analytics, cloud and Software-as-a-Service (SaaS), application programming interfaces (APIs), machine learning, process robotics, and visualisation tools. Other digital technologies (e.g. blockchain applications and virtual assistants) are evolving more slowly and appear less likely to gain traction as quickly.

2. Understand the vendor market
Deloitte tracks Treasury Management System (TMS) vendors, their offerings and their performance. Our data shows that the market is moving from a single-licence model to client-tailored systems, with significant differences in the implementation effort depending on whether services are embedded on-site or delivered remotely. Similarities between vendor offerings are greater than the differences, with exceptions: functionality on financial instruments, market data, valuations and transaction management differs significantly. The TMS market is demand-led with potential for buyers to shape the offer.

3. Set your strategy
Implementing new digital technologies will give treasury more insight into the business, pushing the function towards a more strategic role. This outcome can only be achieved in the context of an explicit technology strategy. Companies should assign values to the different elements of new technology implementations. They should give weight to strategic benefits intended for competitive advantage, core functional benefits intended to achieve industry best practice, and foundational benefits intended to standardise operations at low cost. Companies should make vendor and technology decisions that ‘best fit’ their businesses. This includes a vendor that understands your requirements, has the right deployment model, can integrate the best resources of both teams, and provides an application where the ‘feel and fit’ is in tune with the existing application landscape.

Understanding the technology

The treasury technology landscape
Treasury technology should be simple, transparent, and efficient. These are the principles that should govern the design, implementation and operation of a fit-for-purpose treasury technology landscape. As shown in Figure 1, the aim is to place the TMS as the anchor-point of the treasury landscape, with connections to multiple platforms and data sources embedded in the wider business. The ideal state is intelligent centralisation: the centre must depend on the systems that complete the architecture, with stable and reliable connectivity to make it tick.

Focusing on these principles allows the treasurer to:

The real-world challenge is how to execute this strategy in a market saturated with vendors and technology solutions. That is the challenge this article addresses.

The impact technology can make
The decision to implement or transition to a new Treasury Management System (TMS) represents a significant operational challenge with strategic business implications. Vendor and technology selections are critical. The right TMS, and supporting technology, can reduce short-term implementation costs and long-term operational costs, allowing treasury professionals to focus on being more strategic and acting as change catalysts. A technology-led change project provides an opportunity to reassess the purpose of the treasury function and realise its potential to the business. Begin with the end in mind to deliver both an improvement in current service levels and the ability to expand in new directions. Analyse functional requirements, end-to-end processes and the insights that the business needs.

But there is no silver bullet. Selecting and implementing the right mix of treasury technology solutions within an established timeline and budget is difficult and requires care. Clear vision from day one and access to dedicated resources who can take time away from their daily activities are essential. Getting it right will echo right through the organisation. Benefits include:

Digital is no longer just ‘the future’
The adoption of digital technologies by corporate treasuries, financial institutions and technology vendors is accelerating, enabling the treasury function to evolve: it is becoming a data-consumer and insights-producer for the rest of the organisation. But not all technology is equal.

We see two categories of digital technology with implications for treasury operations. The first is more attainable, with application solutions moving from innovation through to proof-of-concept. These include advanced analytics that process and synthesise data from diverse sources, cloud applications, SaaS, machine learning and in-memory computing, process robotics, and data visualisation.

These technologies have clear use-cases in corporate treasury, an attainable business case and, crucially, there are available technology vendors in the market. For example, international treasuries have used process robotics and data visualisation tools to improve their understanding of cash across the business. Machine-learning tools have been layered on top of data to produce continuously improving forecasts and data clusters.

The second group of digital technologies are characterised by their lack of immediate applications to treasury, a lag in adoption rates or an absence of a diverse technology vendor population. We consider APIs, blockchain or ‘distributed ledger’ technologies, and virtual assistants to be within this group of technologies. These are ‘maybe’ technologies that are either not quite ready for prime-time, in the process of scaling, or are solutions in search of a problem.

Understanding the vendor market

The market
We identified a cross-section of the market to provide an overview of available key vendors. We prepared a concise overview of current key trends for technology buyers to consider, including key attributes per platform, range of delivery models and where vendors are investing to adapt or develop their products and services. We surveyed 8 internationally-leading vendors, covering 14 individual systems, based on the TMSs we observe most often at our clients. Our analysis was based on a 600-question RFP, covering areas we identified as core technology for treasury teams as well as their adoption of market digital trends. We used this information to analyse coverage of each, providing summary data on the level of coverage the individual platforms provide (refer to Figure 3).

With their co-operation, this information was consolidated into a review, focused on both individual vendors and market-wide analysis.

Analysing the market
Vendors offer a variety of services and functionalities, typically provided using one (or more) of the same three delivery models.

Refer to Figure 4 for the classification of systems by delivery method.

Regardless of how it is sold or delivered, a key decision on which system to select is the’time to go live’. Having a realistic expectation of how long the deployment will take allows the buyer to allocate resources accordingly. There are large deployment time-differences between single-tenant and multi-tenant systems, depending on the extent of software development, as shown in Figure 5. As multi-tenant and SaaS models are developing in functionality they are becoming more accessible, cost effective and comparable to the configurability of on-premise solutions. While this seems attractive, it must be assessed against the complexity of services that the treasury function must perform. However, we expect corporates to benefit from faster implementation times of similar platforms as competition and client requirements drive improvement. SaaS service offerings are expanding their capabilities to become more comparable to on-premise solutions.

There are two primary types of updates: Automatic and Manual. Multi-tenant solutions are updated automatically to maintain a common environment for everyone. On-premise and single-tenant solutions offer optionality in how or when a client upgrades.
Many vendors are moving towards more frequent upgrades, providing continual incremental change (refer to Figure 2). Not keeping up-to-date can lead to support issues. For ease, we will group our platforms into two types for the analysis that follows:

We reviewed the functionality of the systems. Based on responses, both platform types cover functionality in a similar degree across relevant treasury activities. Except for three functional areas, at least one vendor covers 100% of business capabilities straight out of the box. However, in the case of financial instruments, market data & valuations and transaction management, no multi-tenant or SaaS solution covered the full extent of business requirements.

Setting your strategy

Leveraging digital technologies will change the role and reach of corporate treasury functions. They will own more data, better visualisations, with faster throughput, and more visibility into the future. Treasury will be empowered with more insight into business direction, more time to formulate strategic responses, and an increasingly central role in long-term decision-making.

Some enabling technologies are still in development: most corporates and vendors are still in the process of raising their artificial intelligence game, pushing technologies from the ‘weak AI’ generation of reactive applications to the coming ‘strong AI’ applications that are autonomous or self-learning. Some enabling technologies exist today, and are gaining market traction:

How to get there
Having the right TMS means implementing a solution that best fits business and technical requirements and flexibly accommodates future growth and business changes. We find that businesses base technology investment decisions on some of the key areas identified in Figure 6. 

For the full Deloitte Advantage Evolution – Treasury Technology Market Intelligence 2019 report, go to:
https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/corporate-finance/deloitte-uk-advantage-evolution.pdf