Turning up the Heat: Treasury Transformation in Mexico

Mexico is now seen as a regional and global fintech hub with high growth potential. As the country embraces digital innovation, especially in the financial sector, treasury management is also poised to make a leap forward.

Mexico now boasts one of the strongest fintech ecosystems in Latin America and is rapidly being recognised as a hotbed of digital innovation. HSBC’s recent Global Liquidity and Cash Management Forum, held in Mexico City, told the story of digital evolution in the country. The event not only highlighted the ways in which the Fourth Industrial Revolution, or Industry 4.0, is driving widespread changes to existing business models, but also how this is leading to a new era in treasury management: Treasury 4.0.

In his introductory remarks, Juan Carlos Perez Rocha, DGA Country Head, Commercial Banking, HSBC, noted how technological innovations have helped improve the performance of corporate treasuries in Mexico. As technology and services have been advancing, data is becoming increasingly important. This is opening up new opportunities for digital-savvy treasurers.

Following Rocha’s introduction, Lance Kawaguchi, Managing Director, Global Head – Corporates, Global Liquidity and Cash Management, HSBC, took to the stage to underline the key elements of Industry 4.0 and what treasurers need to be aware of. As well as exploring the transition from Industry 4.0 to Treasury 4.0, Kawaguchi also noted that the momentum behind Industry 4.0 has the potential to be used as a force for good. Digitisation, for example, opens up huge sustainability opportunities, he said.

The point was made that businesses need to have corporate values that go beyond looking after the interests of shareholders. They must take responsibility for other stakeholders, too: their customers, employees, suppliers and communities. For treasury leaders, part of that means looking after the wellbeing of their teams – freeing them up from repetitive manual tasks and helping them to be more productive and strategic – and technology plays an important role in achieving this.

Redefining the treasury lines

Thomas Halpin, Managing Director, Global Head of Payments Product Management, Global Liquidity and Cash Management, HSBC, then picked up the theme of innovation and what is possible for treasury in the Industry 4.0 world. Halpin spoke about fintech collaborations and the importance of mining data in a new digital world. He then went on to talk about payments innovations – from real-time payments, which are already live in Mexico, to SWIFT’s global payments innovation (gpi) initiative.

“A great advantage of SWIFT gpi is the ability to track cross-border payments end-to-end,” Halpin commented. HSBC is not just investing in industry-wide payments innovations, however. “We are innovating alongside SWIFT gpi, because our vision is not just to deliver payments tracking through our portal but to also have a payments alert capacity for corporates in the future.”

HSBC is also redesigning its payments architecture. Halpin explained how the bank is investing in cloud-based solutions and creating ‘microservice packages’. This infrastructure will enable the bank to innovate more swiftly and provide corporates with a more holistic HSBC experience. When a client purchases a service, the idea is that the customer experience is scalable across multiple markets. These ‘microservices’ can be applied to mobile payments, collections, and accounts receivable, he explained.

Halpin also spoke about how open application programming interfaces (APIs) in financial services are empowering multi-banked corporates to view data via a single portal. Regulations have helped in this regard, he explained, with PSD2 in Europe and Open Banking in the UK frequently cited as examples of this trend. Halpin pointed out that similar regulatory change is also being seen in other parts of the world, such as in Bahrain, Australia, and in some parts of Asia.

Wrapping up his presentation, Halpin emphasised how important it is to apply new technologies to a specific challenge, rather than deploying technology for technology’s sake.

Industry 4.0 Best Practices

Víctor González, Global SSC Finance Director at Kodak Alaris, then shared his corporate perspective on building an optimal treasury structure; and how it takes not only technology but also people.

Kodak Alaris has a centralised finance function that is based in Guadalajara, Mexico, he explained. “This is the headquarters for a number of the company’s financial functions, including accounts payable, travel and entertainment (T&E), treasury, trading, and collections. General ledger and accounting requirements for more than 27 countries, as well as controllership functions, are also handled from Guadalajara – using a single set of standards.”

The Guadalajara office manages financial services for 15 European countries, seven in the Asia-Pacific region and five countries in the Americas. González said that when it comes to hiring, the company looks for people with a global vision. “Of course, we want to hire talented people, but we also want people who will embody the culture of the company and help us to improve the organisation,” he explained.

“As such, employees are empowered to have their say around innovation. Suggestions are actively listened to and a number of the ideas will be applied. The company also promotes best practices and lean office workshops so employees can identify where process bottlenecks occur. Technology may be deployed at this point, in order to achieve process improvements,” noted González. One such technology is robotic process automation (RPA) and Kodak Alaris is currently considering how this could be deployed to the company’s advantage – particularly in transactional operations such as accounts payable and accounts receivable.

Looking ahead, González says his team will continue on the journey towards ever greater standardisation and centralisation, leveraging people and technology to run a best-in-class financial shared services centre.

Finance 4.0: turning over a new leaf

Following a short networking break, the spotlight turned to another key trend in the evolving financial services landscape: the rise of sustainable finance. Luis Guimaraes, Strategy and Planning LAM/MEX at HSBC, began by setting out the challenge, namely the stark situation facing our planet. Earth’s temperature has risen by a whole degree in recent years and ice in Antarctica has shrunk by 30%. Biodiversity is also being lost. “At the same time, 400 million tonnes of plastic are going into the oceans on an annual basis,” he explained.

The good news is that groups around the world – from governments to corporate clients, suppliers and investors – are now reacting to these shocking statistics and demanding change. “Sixty per cent of investors and 50% of insurance companies already have an environmental, social and governance (ESG) strategy,” Guimaraes commented. “People want change and are prepared to put their money where their mouth is”.

“There are three reasons why companies should change,” Guimaraes noted. “It is the right thing to do; investors are demanding it; and there are commercial advantages.” This is leading to business model changes – which will ultimately impact treasury. Some corporates are also financially incentivising their suppliers to act more sustainably. Guimaraes cited HSBC’s work with Walmart as a powerful example of how banks and treasurers can work together to help the transition towards more sustainable business practices.

The Journey to Treasury 4.0 

Last but by no means least was a panel discussion bringing together a number of industry experts to discuss making the transition to Treasury 4.0.

Dr Othon Moreno, Policy and Monitoring Payment Systems Manager, Bank of Mexico (Banxico), began by reflecting on the new Cobro Digital (CoDi) payment platform that Banxico began rolling out this year. The idea is to take advantage of real-time payments and reduce cash transactions by generating a request to pay.

“With CoDi, a salesperson can generate a QR code, NFC code or an internet message. The buyer scans this with their mobile phone and that triggers an instruction via an electronic banking platform or app to make the payment. This triggers a transfer and then it is processed through SPEI if it is an interbank transaction, or through the infrastructure of the bank, if it is within the same bank. The process takes seconds and will bring numerous benefits for treasurers, including greater information, certainty of payment, real-time electronic transfer of funds and greater levels of automation.”

Diana Gage, Corporate Treasurer, Danone, is looking forward to using CoDi as a means to reduce the amount of physical cash treasury has to deal with as collections in Danone’s consumer area are typically 90% cash. Meanwhile, Garza noted that “CoDi will be much more applicable for our distributors than ourselves. But once the value limit increases, our interest is likely to grow.”

CoDi could integrate well with the digital transformation work already undertaken by Cemex. “Two years ago, we embarked on a journey to create a model of interaction with the client that is fully based on a digital application called CEMEX Go., accessible on smartphone or computer,” he explained. “With CEMEX Go, interaction with our customers is now 100% online” continued Garza.

“From the app you can manage your credit and your orders for multiple job sites. If you ask for a concrete truck, you can see, like Uber, how your truck is driving to your facility. You can also manage your accounts payable and pay them online. Today, the payment modules for CEMEX Go in the US and Colombia are more robust than in other countries. We would like to see more B2B digital payment methods in Mexico.”

Conversation then turned to the new technologies that are powering Industry 4.0 and Treasury 4.0. Mario Chavero, CFO, Chubb noted that robotics replacing human beings in business processes – to speed them up, make them more accurate, and less burdensome. “We issue thousands of policies per annum and this results in millions of transactions per annum to reconcile because we can have up to 12 transactions for a single policy,” Chavero said. “On top of that, we have changes in the policies and cancellations, and so on. So, we are looking for ways to be more efficient, which either means employing more people or automating processes via robotics and artificial intelligence to identify payment characteristics and match the payment to the policy.”

Garza noted that banks are investing quite widely in artificial intelligence. There is also a lot of investment coming from technology companies, as well as fintechs coming to the market with different solutions, so artificial intelligence has applications in treasury.

“There are some banks developing some AI applications as we speak,” Garza said. “We are taking baby steps in this field, but I have seen some services applied to corporates – to detect fraud, for example, or to assist with matching, as described by Mario. Yes, you have to guide the machine to start with, but with accuracy of up to 95%, the potential results are very interesting.”

Carlos González Fillad, Managing Director, Regional Head of Latin America, Global Liquidity and Cash Management, HSBC, said that artificial intelligence can also help corporates when it comes to forecasting cash flows. For many treasuries this is a headache, particularly regarding collections. “Banks and fintechs are collaborating on such projects and HSBC is working together with new partners on this topic.”

Garza encouraged the audience to be more open-minded when considering working with fintechs. “We need to be neutral when it comes to technology and vendors. And we need to make good use of the competitive differences between providers.” Here, Gage picked up on the topic of customers that prefer to make their payments using cash, and suggested that fintechs could help in this regard.

Whether through fintechs, banks, or in-house projects, all the panellists agreed that we will see further automation of treasury activities going forward. González Fillad predicted that this could mean “employing fewer people, who will have to be more versatile on a number of topics”. Garza agreed and added that one future requirement for treasury will be full integration with IT. “We need to have the support from experts in IT, and people that know how to use treasury systems – without forgetting the strategic function of the treasury.”

Closing Remarks

Following the lively panel discussion, Nuno Matos, CEO of HSBC Mexico, added his closing remarks. Commenting on the importance of Mexico to HSBC, he said: “Today’s event demonstrates our commitment to the Mexican market. We will continue to grow the relationship with our customers across all segments in Mexico and build a new business ecosystem that will generate more innovation opportunities. What’s more, we have invested $250m in our cash management platform for payments, collections, liquidity, and trade receivables.”

Matos also confirmed that HSBC Mexico will integrate CoDi as part of the development plan that it has with Banxico. “We are also developing several APIs that will enable HSBC to continue to offer leading products and services for transactional banking in Mexico, helping you, our clients, to embrace the era of Treasury 4.0,” Matos concluded.