The corporate treasury function is undergoing tremendous digital and technological transformation, triggered by the emergence of new technologies that are redefining the way treasury functions are being conducted. The emergence of Instant Payments, Process Automation, Open Banking and APIs will propel the treasury function from ‘managing transactions’ to the higher trajectory of ‘managing strategic drivers’. This transformation will grow the remit of treasury managers to that of a finance technologist and drive working capital optimisation, proactive risk management, automation, and data analytics to support strategic business drivers.
These technologies have become cheaper and more accessible than ever, to rapidly deliver tangible value to treasurers and business heads alike. With a number of regulatory bodies rolling out initiatives that are geared towards real-time settlements and banks increasingly using technology as a differentiator, corporate treasury management is ripe for disruption.
Changing tyres on a moving truck
Despite a conducive ecosystem and easy access to technology, treasurers may face several challenges in embarking on the transformation journey. These challenges range from legacy infrastructure and fragmented ERP/TMS deployment to lack of awareness on how to leverage technologies. For example, Excel spreadsheet continues to be one of the dominant tools used by treasury in various companies. In addition, treasurers are having to deal with the growing cost of compliance, geo-political unrests and fluctuating interest rates which push transformational initiatives and corporate IT investments down the priority list. As a result, treasurers often refrain from making transformational changes to their systems and business processes.
How can treasurers adopt technology and banking innovations to their advantage, while not disrupting their business? Can treasurers ‘change tyres on a moving truck’?
Modernising treasury – one step at a time
Large scale technology transformation should start small and be driven by a strong business purpose. Fundamental banking activities such as generating end-of-day account statements from banking portals, tracking of intra-day cash positions, reconciliation, initiation of payments, and receiving notifications are great candidates for automation. Banks such as Standard Chartered offer standard API solutions to execute these activities on a real-time and on-demand basis.
In one example, a regional low-cost airline carrier leveraged our credit notification API to give their agents instant limits to issue tickets across the counter. The API-powered solution cut the lead time experienced by their agents from 48 hours to near real-time. In another example, a large multinational lubricant manufacturer used our instant payments API to pay cash incentives to their end customers in real-time. In both these instances, clients leveraged our APIs to address a real business challenge which their customers faced, that is the time lag in their financial value chain.
APIs also help embed digital corporate banking services within corporate ecosystems in an open, trusted, consistent and scalable way thus allowing corporate treasury managers to access banking services from their internal environment, either to issue instructions or collect information.
At the same time, ERP platforms have transformed to become cloud-native, allowing treasurers to move their IT infrastructure to cost-efficient virtual servers. A cloud-based infrastructure delivers significant reduction in costs by eliminating the need for physical servers, AMC fees and hardware licences; and enhances business continuity and scalability.
The next stage of treasury evolution will involve use of advanced technologies such as machine learning and data analytics. However, the fundamental requirement for all this is to have a centralised data repository (often termed as a ‘data lake’) to store curated and indexed data. Analytics based on large volumes of historic and curated data can be invaluable in understanding business patterns, managing currency and counterparty risks and automating investment decisions. Banks are increasingly playing an advisory role in this space by offering value-added services such as self-service liquidity management modules, cashflow forecasting tools and working capital analytics through their flagship digital banking platforms. Data analytics, coupled with technologies such as robotic process automation, will lead to a truly intelligent and efficient treasury function.
In our opinion, it is indeed possible to change tyres on a moving truck. Adoption of new technologies such as APIs and data analytics should be fit-for-purpose and solve a real business problem. Addressing the right problems with the right technological tools can deliver up to 50-60% automation, freeing up significant bandwidth and brainpower for the treasury teams to focus on strategic business drivers. However, the success will be driven by breaking down large scale transformation into smaller, manageable phases and executing it in an iterative and incremental manner leveraging the digital corporate banking tools offered by banks.
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