Innovating With the Client, Not Just For the Client

Key treasury developments in Europe, with a special focus on the critical themes and innovations in Belgium and Italy, were the subject of discussion in the TMI podcast studio recently between Michiel Radder, Head of Cash Management, BNP Paribas Fortis, Belgium, and Sergio Ammassari, Global Transaction Banking Tribe Leader, BNL BNP Paribas.

Ask a panel of treasurers what it thinks will be the priorities ahead and more often than not these days the top answer will be cash visibility. A recent BNP Paribas Treasury Board in Belgium, comprising a number of the bank’s corporate clients, confirmed just this, says Radder.

Indeed, he reports a notable need to have a better understanding of financial exposures, as well as a drive to improve cash forecasting, as many treasurers are taking a more proactive stance on the management of excess cash now that interest rate rises are back on the agenda. Many are naturally thinking in terms of the treasury fundamentals, with improving their capital structures and security of funding still hot topics.

Of course, risk mitigation remains to the fore, especially around FX and liquidity, but treasurers are now more acutely aware of the impact on their role of fraud and cyber-security. For Ammassari, there is a necessary balancing act for treasurers to perform as they try to resolve the most appropriate trade-off between rapid innovation in treasury and other functions across the business, and the security of corporate cash and data.

Innovating with focus

The adoption of innovative technologies offered to treasury is far from a given: it has to have purpose. When the recent BNP Paribas Belgian Treasury Board touched on certain innovations – notably instant payments – the reception was somewhat muted, recalls Radder. Many believe their current payment runs can easily be augmented by an urgent Eurozone payment with the same-day value, so many feel instant payments are already covered by SEPA functionality. But where real-time payments leave the Eurozone, value dating by local beneficialry banks can become a challenge – so a harmonised approach may be benenficial here.

There is a serious underlying driver for many treasury system deployments. “Even if banks and vendors invest deeply in development, whenever we come up with a new product or service, we are always being asked for it to be cheap as well,” comments Ammassari. It creates another unavoidable balancing act for banks and vendors between necessary innovation and acceptable cost.

While technology is often seen as a panacea, and the assumption may be that every treasury will be ready and willing to adopt the latest tools if the price is right, this is clearly not the case. Banks and vendors need to bring every client along with them, states Ammassari. This is why many innovations cater to everyday needs, the aim being to improve the efficiency and efficacy of the fundamentals so that treasury departments can choose to shift their focus towards value-adding opportunities.    

In terms of innovation among the fundamentals, Ammassari identifies several main areas of interest. First is the standardisation of KYC management. This is a pain point, especially for large international corporates, that is a work in progress for BNP Paribas’ cash management competence centre. Another interest is STP, with a focus on speed and efficiency around processes such as the management of banking orders. It touches on a number of areas the bank is working on to deliver ’instant activities’.

One area of vital importance for every digital solution is cyber-security. Discussions with individual clients are frequent, Ammassari says, “but there is a call for more inclusive seminar-style communications, facilitating a wider understanding of the risks they face”. This format is especially useful in assisting businesses to understand and protect the weakest points in their ecosystems.

Power of co-creation

The fintechs bring their in-depth understanding of these core activities, the banks bring, among others things, the clients and the trust, investing in and integrating fintech solutions, where appropriate, to better the overall client solution design.

With an activity such as cash forecasting, using fintech to ease treasurers away from their traditional manual spreadsheets enables the integration of a wider range of data sources and analytics. This can make a significant improvement in the process.

“That’s something we are working on,” says Radder. “We have a partner solution that we have now rolled out in Belgium and France. It is a co-design between a fintech and BNP Paribas Fortis. Because it is available as a cash forecasting module in our electronic banking platform, its implementation for our clients becomes a simple standardised effort.”

Fintech ingenuity can improve even routine processes, he continues. “In the corporate card space, for example, app-based digitalised onboarding can help businesses to manage their own cards in-house. And technology is available to help reduce return or reject rates in the direct debit environment. These tools are simple but very much appreciated.”

Making life easier and smoother for treasurers is a constant goal of those providing the solutions. It’s why banks and vendors make the investments in areas such as KYC that treasuries are reluctant to take on, comments Ammassari.

That reluctance in some cases – for example, where 24/7 trade is facilitated by real-time payments – stems from the added demand on the business to run all connected systems at that level. Failure to do so diminishes its value but represents a major additional investment. Radder points out that while such innovative initiatives are generally valued by clients, each must be presented as an easy integration if it is to meet the constraints of the limited resources and budgets within which clients often work.

Strong use case

Of the current wave of technologies most pitched at treasurers, the standout one for Radder is APIs. Not every treasurer agrees. “Ease of connectivity is what it’s all about so when we asked the Treasury Board attendees if they are already focusing on API technology, the answer was rather disappointing, I must say. But we have to remember that tech changes like this are often ‘owned’ by other departments, such as IT, or even procurement, so this may reflect why APIs are not yet near the top of the treasury agenda.”

A similar muted response was found by Ammassari for the treasury take-up of DLT. “They don’t yet see the benefits of exploring or investing in this technology,” he notes. “We run a number of co-creation events with clients. It’s interesting because whenever we put them in front of a demo or a prototype in order to see what they might like, they always discuss the simplest things; they don’t want to engage with complexity.”

One area where Radder sees a lot of work being carried out with clients stems from the introduction of SWIFT gpi. Its success, he says, is based on its simplicity. Clients making a payment without it could not see the progress or cost of their cross-border transactions. Using SWIFT gpi means originators (but not beneficiaries) can obtain this information from their participating banks. The gpi for Corporates (g4C) update means payers can directly access this data.

Based on this concept, BNP Paribas set up a co-creation project with L’Oréal. The resulting BENEtracker solution has been designed to enable payment beneficiaries to have the same tracking capability as payment originators. Opened up to all of the bank’s clients, it offers real-time visibility of international credit transfers from start to end. “It’s so simple but it’s what clients want. They don’t care about AI or DLT, they want straightforward solutions.”

While the appetite for instant payment tracking is strong, it was clear from the BNP Paribas Belgian Treasury Board, referred to above, that the same cannot be said for instant payments. “Most do not yet see the use case,” says Ammassari. The retail sector may be less resistant but he feels that many others prefer to stick with what they know.

In explanation, some may feel constrained by the value limits that are imposed in some geographies. While these may be at a level that suits B2C transactions, they may not be appropriate for the B2B environment. In addition, some see instant payments as unsafe: make a mistake and recovery is almost impossible. It’s a feeling that persists despite the prevalence of pre-validation technology.

While paying at the last moment before cut-off can bring a useful margin for corporates, the response today is driven “more by feeling than seeing”, says Ammassari. It is this view that is seeing treasurers taking innovation at their own pace: when the need arises, it may be useful. And what most feel today, he says, is the need to resolve the persistent pain points. “If we as banks manage to find the applications that manage their pain, then they will follow us immediately,” he says.

Sharing the journey

Clients may not directly see the benefit of a new technology or innovation, but they understand on a daily basis what’s not working for them, comments Ammassari. “We must help them to understand where to take these new ideas. We should be meeting and explaining to them the possibilities of new technologies.”

When it comes to leveraging Big Data, for example, Ammassari believes that better results can be achieved if the bank understands where its clients’ business activities are having the greatest impact – and if there are any weak points – so that the bank can more accurately target its solutions.

“To be able to do that we need to explore Big Data more, but we cannot do that effectively by ourselves,” he says. “By sharing the journey with fintechs it helps us accelerate our understanding of the potential of new solutions so that we can begin creating new services for our clients, and then better explain why they need them because until we create that need, they will not follow us.”

With treasurers frequently overburdened by the responsibilities of their day-to-day roles, Radder notes that progress through technology can all too often slip between the cracks. A recent workshop with a number of treasurers from MNCs highlighted the case of one that had invested in and implemented a cash forecasting module but simply did not have the time to establish proper governance around it. And despite repeated attempts to set up a meeting to help, the lack of available time for the treasurer has meant the solution, which will save time, remains dormant. The drive needs to come from the bank to ensure clients see the value.

Indeed, adds Radder, for something as simple as pre-validating customer name and bank account details, while services exist and work well in countries such as the Netherlands and the UK, in other territories corporates are not so well-served. Here he says fintech solutions are available but corporates are reluctant to pay. “The offer for these validation services needs to come from the banks, and as long as they ease the life of the treasurer, they will be valued.”

In the payments space, businesses are often not set up to manage receivables over weekends. But Ammassari believes that as banks are creating the need for and delivering 24/7 payments flows, then they should also be creating and delivering the range of peripheral solutions to support treasurers in this context.

On e-invoicing, he notes that while various domestic initiatives exist, some countries – including Italy – offer no facility to add services such as faster payments and instant reconciliations to the process. There is, he believes, a Europe-wide opportunity for standardisation being missed here. “It’s strange that there’s not stronger European control over innovation, because at the end of the day it will ease the life of the client when receiving invoices, preparing the ground for additional beneficial services such as supply chain finance.”

Working on the future

With much work to do, the future of treasury innovation, in particular in Belgium and Italy, is seeing BNP Paribas leveraging the opportunity to further co-create with clients. Radder reports on an initiative launched in 2022 to review transaction banking services through a dedicated working capital advisory group. There is, he says, strong client demand for working capital solutions that incorporate cash forecasting, helping to optimise both elements.

Its transaction banking business is also seeking to combine elements of its cash, trade, global markets, and factoring business with links to supply chain management. “We’re looking at combinations, so for instance offering factoring where the client can add different liquidity structures and a cash forecasting module.”

The same effort is being applied across BNP Paribas’ wider client offering. “We are spending €3bn over three years on the evolution of digital technology,” reports Ammassari. “It’s about investing in innovation to ensure the bank is running in the best possible way now and in the future, so we are making life easier for our clients.”

Having launched a full review of the customer journey in January this year, BNP Paribas is working on the redefinition and optimisation of its customer journey. This, says Ammassari, will deliver “new technologies and new products, and help us to rethink how customers can use our tools and interact with us”.

He continues: “The aim is to offer the most comprehensive and inclusive banking experience, from local to global. We want to remove silos so we can present the widest view possible of treasury life without overwhelming our clients with multiple technologies. This is why we are integrating all of our systems. Our remote banking cash management portal, for example, should provide clients with the same full functionality in each of their key markets, enabling them to manage everything they do, from finance to FX, through a single entry point.”

The work is ongoing which is why, in Radder’s view, cash management never serves up a dull moment. “The way we support treasurers is a never-ending evolution. Every year we ask, ‘Is there more innovation to come?’, and the answer every time is, ‘Yes, there is.’ Look at our initiatives around liquidity, connectivity, payables, receivables, reporting – the flow of ideas and investment does not stop.”

For Ammassari, that is indeed a step towards the best future outcome for bank and client. But he knows the next stage will be born out of the effective amalgamation of these innovations. “Clients want their systems integrated with our systems. They want to automate but they also want to be safe from cyber-attack; they expect results so we must show them results. If we can deliver efficiency and security, that’s 99% of our job.”