The Future of Treasury Is Now – Are You Ready?

Everyone loves a sneak preview, and here Michael Spiegel, Head of Cash Management, Deutsche Bank, gives Eleanor Hill, Editor, TMI, an exclusive peek at the results of one of the hottest treasury surveys going. Read on to discover what your peers really think about the role of AI and blockchain within the treasury function. Also learn about emerging threats and opportunities for treasurers to prepare for, from regulation to new business models.

Eleanor Hill, TMI (EH): You will be launching the results of the annual corporate treasury survey by the Economist Intelligence Unit, sponsored by Deutsche Bank, at EuroFinance in Geneva. Tell us a little bit about this year’s survey – what does it focus on?

Michael Spiegel, Deutsche Bank (MS): Well, the title of this year’s survey is The Future is Now: How Ready is Treasury. 

So, it’s a really exciting topic that highlights how treasurers are readying themselves for change resulting from new technologies, new business models, and the emergence of new regulatory initiatives. 

As well as being relevant from a thematic perspective, the survey is a comprehensive piece of research, with views from 300 senior treasurers across the globe. We also built on the results with a number of in-depth interviews with group treasurers at leading multinationals to really bring the findings to life. As such, it’s an insightful read.

EH: Let’s address treasurers’ readiness for new technologies. There is a lot of talk about technology innovations and how treasurers stand to benefit, but is this being translated into action? Are treasurers proactively embracing new technologies? 

MS: It’s a good question, and you’re right that there is a lot of noise around new technologies. The survey results show that treasurers are certainly interested in new tech and digital innovation. For example, 30% of treasurers are looking to upgrade their TMS, and 36% are seeking an ERP upgrade. Meanwhile, 31% of respondents are considering moving their in-house systems to the cloud.

That said, 36% of respondents intend to rely on their existing ERP and 35% on their current TMS for now. Before passing judgement, though, it is important to stress that the treasury function is not necessarily the best place to test out entirely new technologies. The role of treasury is so integral to the everyday running of the company, that it is essential to be prudent from a technology perspective.

This does not mean that treasurers are standing still when it comes to technology. They certainly recognise the opportunity that comes with digital innovation. But they are also conscious that being a fast follower, rather than a technology leader, may be beneficial. 

EH: It’s hard to talk about treasury technology and innovation without mentioning big data, artificial intelligence (AI) and blockchain. But how are treasurers planning to put these technologies to use – and what might the benefits be?

MS: There are a lot of buzzwords. And it’s not always clear what they mean in concrete terms for treasurers. So, let’s look at each of the three themes you mentioned, starting with big data. 

Interestingly, 56% of respondents think big data, and related data analytics, will be the most beneficial technology for their organisation going forward. In terms of practical applications, 46% plan to use big data for asset management, and 42% for cash management. That is extremely promising because treasurers are now embracing the practical applications of big data. 

However, only 8% said they would use application programming interfaces (APIs) in this area, which seems a little on the low side. This may, however, reflect the fact that APIs sit behind the scenes and are often used unknowingly, as a means to get to the data in the first place. So, personally, I believe APIs are more important, and more frequently used, than the survey results perhaps suggest.

The numbers coming out of the survey around AI, meanwhile, are promising. Half of treasurers (50%) say that they plan to use AI to better understand supply chain bottlenecks and 49% would like to use AI to forecast working capital requirements. What’s clear from these results is that treasurers are forward-looking around AI. They understand that it can potentially lower the cost of operations, boost productivity, increase insights across the company and help find new business opportunities. Although the willingness to embrace AI is there, though, the how and when of its implementation still remains something of a mystery.

Finally, let’s talk about blockchain, or distributed ledger technology (DLT). This is definitely one of those buzzwords that treasurers have heard so much – and perhaps in some cases too much  – about from a theoretical point of view. What they want to see now are practical applications of the technology which leverage blockchain’s ability to track multiple changes in one place. 

Pilots and even live blockchain transactions are starting to happen in the trade and payments space, which is reflected in the survey results: 57% plan to use DLT for the delivery of payments and goods and 46% think it will be most useful in issuing and tracking documentary letters of credit. 

EH: It would be interesting to know how well-prepared treasury teams are for this technological change. So, what did the survey results show around their preparedness? Do they need more training? 

MS: Honestly, I was a little surprised by the responses we received around treasury’s preparedness for technological change! Eighty percent of those surveyed believe they already have the right level of skills in their teams to stay on top of new technologies and innovation. Only 4% think that substantial training is required to ensure their teams stay ahead of the curve.

In my view, a little more investment into the creation of the next generation treasurer may be required, particularly from a skills perspective. But at the same time, we have to recognise that, as I mentioned earlier, treasury functions are not really the place to test completely new, innovative technologies. 

EH: You said that the survey also looked at the impact of new business models. To what extent are treasury departments being disrupted by changes to operational models? And what are the major sources of this disruption?

MS: Business disruption is very real. And it’s happening now: 55% of respondents say disruption is causing their company to change its operational model. And treasury is not immune to these changes, which include multi-channel payment providers and mobile-based solutions.

For treasurers, the main sources of disruption are: new technologies (39%); changing business models along supply chains (38%); changing internal business models (38%) and digitisation and cyber-risk (36%). All of these factors, whether directly or indirectly, are changing the face of tomorrow’s treasury function.

EH: What about fintechs as a source of disruption? Are treasurers ready and willing to use the services provided by fintechs?

MS: Absolutely. Already, 60% of survey participants have used a fintech for payments, while 34% have leveraged fintech for supply chain finance, and 22% for core services like risk management. These results point to the development of a new ecosystem, whereby banks and fintechs work together to serve the needs of customers in the best way possible.

For anyone who thinks that fintechs may still displace the banks in some areas, the survey results suggest that the power of fIntechs’ partnerships with banks should not be underestimated. While 75% of treasurers say they will work with fintechs, 59% say that they will only do so if recommended by a bank or partner. So, the trust and credibility that banks bring to this space are extremely important – and we will continue to work closely with fintechs going forward.

EH: The regulatory landscape is also shifting significantly. What did the survey results say about treasurers’ top regulatory concerns? And which areas of treasury are most affected?

MS: Compliance with regulation concerns us all. The major challenge is that the regulatory and compliance landscape continues to change with new rules coming into effect regionally and globally. And uncertainty around requirements, obligations, and processes is having a big impact on treasury departments’ structures, policies, and strategies. What’s more, even regulation directed at banks often has an indirect impact on treasurers – so there is a significant amount of change to deal with.

The regulatory concerns and government-driven initiatives that are top of mind for treasurers over the next 12-18 months are: US tax reform (28%); IFRS 9 – the new accounting standard for financial instruments that is changing hedge accounting (25%); and increasingly stringent AML/KYC regulations (25%). 

In terms of areas impacted, treasurers are seeing regulatory changes hit their capital allocation and group capital structures (35%); liquidity structures (31%); and cash/liquidity policies (28%). One of the best ways in which treasurers can prepare for these changes is to familiarise themselves with the regulations, and plan ahead of time. Banks are also going through many of the same challenges, so they can be a source of knowledge and support in this area – collaboration is the order of the day.

EH: Finally, how can treasurers use these survey results to help them plan ahead and future-proof their operations?

MS: Treasurers can use these survey results to benchmark themselves against a universe of 300 of their peers. This will help them understand how well prepared they are for the changes arising from new technologies, business models, and regulations – and where they may want to dedicate more resources in the future, in order to be prepared for the operating environment of tomorrow’s treasury.

That said, it’s positive to see from the survey results that many treasurers are already proactively preparing for the future. After all, these are not just passing trends. They are here to stay – and, perhaps most importantly of all, they are happening now.