Preparing Treasury for the Future: Key Takeaways from EuroFinance Geneva

No-one wants to re-live every moment of a conference (especially not the after party). So, here is TMI’s take on the top themes coming out of this year’s EuroFinance International Cash Management conference, held in Geneva from 26-28 September, without the blow-by-blow account.

Reflecting on an insightful few days in Geneva, it’s clear how much has changed in the industry; and yet how little has moved on for treasurers at a fundamental level – especially when I think back to my first EuroFinance International experience ten years ago.

Of course, the operating environment is very different from a decade ago – talk of the financial crisis has been replaced by frustrations over Brexit negotiations getting nowhere fast. Crisis-driven regulation and the push towards financial transparency has also led to a variety of challenges and opportunities for the treasury community, including the rise of one of the hot topics at this year’s conference: open banking.

Elsewhere, the technology treasurers have available to them has moved on enormously – becoming far more targeted, accessible, intelligent, and, frankly, much better suited to the job in hand. Banks too have evolved. As we will explore later in this article, they are embracing their advisory role with gusto, helping treasurers to become more strategic, and collaborating readily with fintechs, corporates, and even each other.

Despite all of this change, however, many treasurers are still grappling with very basic issues and struggling to get the fundamentals of their job done well, with limited resources. Judging from talk on the conference floor, and interest in the sessions, cash flow forecasting remains a major challenge for corporates of all sizes. Setting up a payments factory is still a pipe dream for many. Getting the right treasury structure in place is a headache. KYC is an ongoing issue. Cross-border payments remain a frustration. And the list goes on.

What was also clear at this year’s conference, which was themed around ‘preparing treasury for the future’ is that as much as corporates are interested in hearing about innovations coming down the line, they also want practical, tangible, and reliable solutions that can help them achieve efficiencies right now – today, not just tomorrow. As such, there was a great deal of debate (rightly or wrongly) around how ready treasury teams are to change, and whether they can truly afford to invest in innovation.

Ready for change?

As Enrico Camerinelli, Senior Analyst, Aite Group, told TMI: “Conversations with delegates touched upon the question whether treasury offices are truly ready to leave the comfort zone of running daily repetitive (and manual) tasks that keep people busy, and move to the open – and unexplored – ocean of innovation and continuous transformation.”

This theme was picked up in one of the busiest sessions at the conference, which saw a panel of experts discuss the new annual Economist Intelligence Unit treasury survey supported by Deutsche Bank, entitled ‘The future is now: How ready is treasury?’.

On the technology side, it appears that treasurers are slightly cautious around innovation and its broader impact. Only 55% of the 300 treasurers surveyed said that technology was disrupting the operational part of their business and therefore impacting their role. 

One of the least recognised technologies by treasurers taking part in the survey was application programming interfaces (APIs). Rather than a reflection on the usefulness of API technology, however, it was evident from discussions at the conference that there is a lack of awareness around APIs and their potential benefits for treasurers, as well as the broader open banking movement that is fuelling conversation about them.

Ireti Samuel-Ogbu, EMEA Head Payments & Receivables, Treasury and Trade Solutions, Citi, took part in a panel session on this topic and noted the need for an education piece. In an exclusive interview with TMI, she said that “As banks evolve from compliance to creating commercial opportunities under open banking, it was interesting to observe how few corporates at EuroFinance were aware of the potential benefits to aggregate information from multiple banks in real time or the ability to collect from consumer bank accounts in real time.”

Furthermore, Samuel-Ogbu believes that “with open banking and real time payments gaining traction globally, this could revolutionise visibility and  just-in-time payments, and create new collection alternatives in Europe and beyond. In my view, it’s essential that banks capitalise on the open banking opportunity to deliver new and compelling financial services for corporates.”

And it’s clear that some banks are starting to do this already. Joanne Towers, Head of Product, Europe, Global Liquidity & Cash Management, HSBC, said: “The changes and accessibility of technology, notably with API technology will open the way to greater collaboration between banks and fintechs. HSBC expects to offer multiple services through APIs in the near future, including but not limited to, payments and account information (HSBC and third-party banks) as both a provider and a receiver of information and instructions.” The advent of open banking is also bringing an industry-wide shift to the adoption of APIs across the various channels that banks use to interact with customers, she explained.

Nevertheless, there is still a marked lack of interest from treasurers in open banking and APIs. So, the banks (and magazines like TMI) have more work to do in convincing treasurers to spend some time understanding these trends and their potential for organisations in both B2C and B2B worlds. Getting real-world use cases out to the market will be vital. There is also a significant need for standards around APIs, as Samuel-Ogbu highlighted during the panel session – and as Deutsche Bank discusses in a new white paper called ‘Unlocking the opportunities in the API economy’.

Smarter ways of working

A technology of more interest to treasurers at EuroFinance was artificial intelligence (AI). But, again, treasurers were keen to see use cases, not just chat about the theory of AI and potential applications. Bank of America Merrill Lynch’s (BofAML’s) new Intelligent Receivables solution, which was launched in August 2017, was therefore of great interest. 

 The solution uses AI, machine learning, and optical character recognition to help companies vastly improve their straight-through reconciliation (STR) of incoming payments, enabling them to post their receivables faster. It is primarily designed for large or complex companies that are seeking to reduce costs, decrease days sales outstanding (DSO), and improve cash forecasting as well as their end-customer experience. 

 The solution is powered by HighRadius, a fintech enterprise software-as-a-service (SaaS) company, demonstrating once again that banks now understand the need for collaboration in order to bring practical applications of innovative technologies to the treasury world. And as Deutsche Bank’s Head of Cash Management, Michael Spiegel, observed: “As an industry we are embracing the fintech challenge and a new ecosystem will emerge as a result.”

Another great example of this is the new partnership between BNP Paribas and Cashforce, a fintech company, offering digital cash flow forecasting and working capital services to corporate treasurers. Through this partnership, BNP Paribas will offer its clients Cashforce’s next-generation cash forecasting and treasury management solutions, focused on analytics, automation and integration. 

Banks hold their own

Not all innovation discussed at the conference was powered by fintech collaboration, though. The banks are collaborating among themselves too. In fact, Emma Loftus, Head of Global Payments and Receivables, J.P.  Morgan Treasury Services, took some time out from her busy schedule to discuss the Interbank Information Network (IIN), which is a live application of blockchain technology by a group of banks. 

“The pilot for IIN launched in 2017 and we’ve seen significant interest from correspondent banks since then. In fact, we now have more than 80 banks who have signed up to be part of IIN, which is the largest number of banks to join a live application of blockchain technology. The aim of the network is to minimise friction in the global payments process by reducing the time correspondent banks spend responding to compliance and other data-related inquiries that delay payments,” explained Loftus.

“Currently, these kinds of inquiries can take anywhere between two hours and two weeks to respond to. It’s a highly manual process that involves tracking down data from various parties in the chain. But IIN leverages Quorum, a permissioned-variant of the Ethereum blockchain, to ensure that each bank in the payment chain has simultaneous access to all of the relevant data, so that queries can be responded to in a timely manner – often within a matter of minutes,” she noted.

 “For corporate treasurers, IIN should significantly improve the efficiency of cross-border payments, particularly as more banks participate and we evolve the functionality and use cases beyond compliance-related inquiries,” Loftus added. “Alongside IIN, we will continue to support industry initiatives such as SWIFT gpi since we recognise that different clients require different solutions,” she said.

Tech vendors are getting in on the collaboration action as well. BELLIN, for example, announced the launch of a Partner Programme for existing and prospective partners to offer the company’s treasury management solutions to their local market.

Of course, collaboration isn’t replacing the need for proprietary developments. And the banks made a number of announcements during the conference about new investments and solutions. BofAML, for example, is accelerating its investment in mobile capabilities and announcing a second wave of enhancements to improve the CashPro Mobile user experience.

 As Hilani Kerr, Head of North America Large Corporates, GTS, BofAML, explained: “As a society, we are spending more and more time on our mobile phones – including for business use. By 2020, more people will have mobile phones (5.4bn) than electricity, running water or cars. Just look around you at the conference: everyone here still needs to do their day jobs, so being able to initiate or approve a payment via a secure mobile app is incredibly helpful and increasingly appealing.”

Over the last 12 months, the number of users accessing CashPro Mobile has jumped more than 180%, and the number of payment approvals has risen 392%. “Treasurers are becoming more familiar with the mobile channel and appreciate its convenience, as well as its security,” added Kerr.

 Another product area that a number of the banks have been investing in, and which was a hot topic on the conference floor, is virtual accounts. Some banks have had these capabilities for a while now, others are working on them for launch asap – and Citi announced the go-live of their virtual accounts solution at EuroFinance. Despite their growing popularity, however, there’s quite a bit of confusion as to what the term ‘virtual accounts’ encompasses.

As Deutsche Bank’s Vanessa Manning and Paul Cuddihy explained during an interview with TMI back in August, what many banks and treasurers call ‘virtual accounts’ are in fact virtual IBANs. Meanwhile, the term ‘virtual accounts’ is also sometimes used to refer to administrative ‘subaccounts’ of one physical bank account, usually known as the ‘Master Account’. Under the Master Account, corporates can open, close, and modify as many virtual accounts as required by the business. They can also organise account hierarchies as they see fit. Since the Master Account forms part of the cash management bank’s ledger, this kind of solution is increasingly known as Virtual Ledger Management (VLM). 

One of the main benefits of VLM is that cash can be earmarked as belonging to a particular virtual account. This means that corporates can allocate funds without needing to segregate them physically. VLM can also help with overcoming some of the challenges associated with payments/collections on behalf of (POBO/COBO) structures. With this in mind, we expect to hear a lot more about virtual accounts over the coming months.

Taking treasury digital

The virtual accounts topic naturally forms part of the digitisation agenda that was discussed at length during the conference. Aite Group’s Camerinelli had many discussions with delegates around this theme. And, for him, “One of the most significant findings from these conversations was that corporate treasurers are looking at digitisation not only because digital automation helps to cut costs by optimising processes. Treasurers are also aware that processes must be optimised because change requires treasurers to do things in real time, and digital transformation is the solution,” he said.

When rolling out digital solutions, however, treasurers have an evolving – and demanding - list of requirements. Camerinelli found that, “Corporate treasurers assert that they often prioritise the ‘time to implementation’ of a software solution over the richness of applications and features. ‘Real time’ implementation is the criterion used by treasurers to select software partners. Implementation must be agile, fast, effective, and not intrusive. The future does not wait.”

Corporate treasurers also expect to “better service their own clients through digital solutions that the bank must develop and bring to the table. The digital transformation must start from the bank,” he noted. Another imperative for banks as digitisation spreads is helping to keep corporate assets safe.

“As treasury becomes increasingly digital, cybersecurity is naturally a growing concern for treasurers,” said Serina Hourican, Head of Commercial Sales, GTS EMEA, BofAML. “There is a definite trend towards the consolidation of bank relationships – and alongside all of the usual product, price, reach, and service factors, treasurers are increasingly including the bank’s cybersecurity credentials in that decision,” she noted.

Indeed, cybersecurity was one of the four main themes outlined in this year’s Journeys to Treasury (JTT) report, which is the result of a partnership between BNP Paribas, PwC, SAP and the European Association of Corporate Treasurers (EACT). The report (well worth a read, in particular for the corporate case studies) goes so far as to say that “protecting the organisation’s financial and data assets has become treasurers’ number one priority.”

How to prepare

With all of these different responsibilities to juggle, it is perhaps understandable that treasurers are not always firmly focused on innovations that are yet to bear fruit. Rather than future solutions, they want ways to make their lives easier now. But, when they can snatch five minutes away from the day-to-day, of course treasurers recognise that ‘now’ will soon be the past and the future will soon be ‘now’.

And as Lola Adebanji, eCommerce Manager, EMEA Payments & Receivables, Treasury and Trade Solutions, Citi, noted: “The future of treasury will be defined by how treasurers can leverage digital innovation to solve specific problems at scale - not only for efficiency and risk management benefits, but increasingly to enable new business models that many companies are pursuing, e.g., going direct to consumers.” 

Now more than ever, concluded Adebanji, “it’s essential for treasury to proactively market itself to the business and to have a seat at the table early on as business models transform. A closer collaboration with the business also provides treasury with insights into emerging technologies that the business is already using (e.g. robotics, AI) and a platform to assess opportunities for leveraging these to solve treasury challenges.”