HSBC explain why Singapore is a breeding ground for next generation treasury management and outline how treasurers can take advantage of Treasury 4.0.
Despite being a small island nation, Singapore is a heavy-hitter on the global stage. The city-state is the largest foreign exchange hub[1] in Asia Pacific, the fourth largest financial centre[2] in the world, and the number one location for APAC treasury operations[3].
The country’s tax rate incentive (currently 8%) on income from qualifying Finance and Treasury Centre services/activities[4] has long been an attraction for regional treasury hubs. But the island’s cash and liquidity management landscape is becoming even more compelling as the nation’s willingness to embrace smart technologies shines through.
Next generation treasury
As Singapore gears up to adopt the new manufacturing techniques brought about by the Fourth Industrial Revolution, or Industry 4.0, the treasury profession is also readying itself for an era of smarter, leaner, and more automated treasury management – what we at HSBC like to call Treasury 4.0.
From Industry 4.0 to Treasury 4.0
Industry 4.0 is bringing the digital and physical worlds together, combining the skills of machines and humans, and altering the way we work and interact.
Examples of technologies driving the Fourth Industrial Revolution include:
- Internet of Things (IoT)
- Robotic Process Automation (RPA)
- Application programming interfaces (APIs)
- Distributed ledger technology (DLT) or blockchain
- Artificial intelligence (AI) and machine learning (ML)
- Big data and advanced data analytics
- Cloud computing
Treasury 4.0 is essentially next generation treasury. This will see treasury departments work in real-time, with highly integrated, automated systems. Data will drive forward-looking decision-making and treasury teams will have the opportunity to exchange manual work for strategic thinking.
Recent market developments which are fuelling the rise of Treasury 4.0 in Singapore include:
- Real-time cross-border payments. In July 2019, SWIFT successfully completed a global trial to integrate SWIFT gpi Instant, the co-operative’s cross-border instant payments service, into Singapore’s domestic instant payment service, Fast And Secure Transfers (FAST)[5]. The quickest payment in the trial, from Australia into Singapore, took just 13 seconds[6]. This puts Singapore at the cutting-edge of real-time cross-border payments, a key ingredient of Treasury 4.0.
- Setting the e-payments standard. The recent introduction of the Singapore Quick Response Code (SGQR), as part of Singapore’s Smart Nation[7] drive, is another step towards Treasury 4.0. SGQR is the world’s first unified QR code that aims to combine multiple payment QR codes into a single multi-tenanted ‘label’[8]. SGQR can be used in conjunction with PayNow once integrated later this year. PayNow is an enhanced funds transfer service available to consumers, corporates and government entities, which enables payments to be made using a Unique Entity Number (UEN) or PayNow QR rather than bank account details[9]. As well as fostering e-payments competition and innovation, SGQR will help increase the use of instant payments as a mode of collection – thereby leading to quicker payments processing[10], improved cash management, and the potential for increased treasury automation.
- Next generation virtual accounts. Earlier this year, HSBC rolled out our innovative next generation virtual accounts (ngVAs) in Singapore, enabling corporates to consolidate hundreds of physical bank accounts into just a handful of accounts (or even one) for each currency that they use. Transactions flow through the underlying physical account(s), with the virtual accounts acting as ledger records – a perfect example of Treasury 4.0 in action. This saves treasury teams the operational cost of managing cash across multiple accounts and reduces the need for complex cash sweeps and pools. In addition to the self-management of virtual accounts, clients can receive near-real-time reporting on transactions, through HSBCnet[11].
- Fast track to FinTech innovation. The Monetary Authority of Singapore’s (MAS’s) new Sandbox Express[12] for FinTechs will allow even faster testing of innovative financial products and services in the market. This will likely filter through to treasurers in the form of API-led services as open banking becomes more established in Singapore. In the Treasury 4.0 world, open APIs offer seamless, real-time connectivity, enabling systems and organisations to collaborate in a converged ecosystem – presenting treasurers with operational and cost efficiency opportunities.
- Cybersecurity crackdown. One of the flipsides of Treasury 4.0 is the growing threat of cyberattacks. As treasury becomes more digital and increasingly real-time, cyber defences must become more sophisticated. Treasurers can take some comfort in the fact that the MAS has just issued a set of legally binding requirements to raise the cyber security standards and strengthen the cyber resilience of the nation’s financial sector. The requirements come into effect on 6 August 2020[13] and demonstrate how seriously the nation takes good cyber hygiene – another critical component of Treasury 4.0. Nevertheless, treasurers must increasingly take responsibility for cybersecurity within their own organisation too.
Recipe for success
While it’s easy to think that Treasury 4.0 is just about technology, it’s also important to focus on people. Humans are key to extracting maximum value from Industry 4.0 technologies, since they bring the insight, inspiration, and instinct that machines lack.
But to make the most the of the digital treasury environment, new skillsets and mindsets will be required too. Organisations may therefore wish to explore the positive correlation between innovation and workforce diversity[14] more closely as they prepare for next generation treasury management. And, once again, Singapore offers an advantage here, being a true hub of diversity[15] and home to the most technologically-savvy nation in the world[16] – all of which bodes well for the advancement of Treasury 4.0.
Discover more about Treasury 4.0:
Great Expectations: From Industry 4.0 to Treasury 4.0
Great Expectations: From Industry 4.0 to treasury 4.0 – Shanghai, April 2019
Time to Level Up: Reaching Treasury 4.0
Next Generation Treasury Management: From Industry 4.0 to Treasury 4.0
Notes
[1] https://www.mas.gov.sg/development/foreign-exchange
[2] https://www.longfinance.net/publications/long-finance-reports/the-global-financial-centres-index-25/
[3] https://www.ey.com/sg/en/services/tax/ey-singapore-a-strategic-regional-treasury-location
[4] https://www2.deloitte.com/content/dam/Deloitte/sg/Documents/tax/sg-tax-applying-for-gov-incentives-in-singapore.pdf
[5] https://www.swift.com/news-events/press-releases/swift-sees-success-with-global-instant-cross-border-payments-with-singapore_s-fast
[6] https://www.swift.com/news-events/press-releases/swift-sees-success-with-global-instant-cross-border-payments-with-singapore_s-fast
[7] https://www.smartnation.sg/what-is-smart-nation/initiatives/Strategic-National-Projects/e-payments-1
[8] https://www.fomopay.com/2019/02/18/sgqr-taskforce-worlds-first-unified-payment-qr-code/
[9] https://www.abs.org.sg/consumer-banking/pay-now
[10] https://www.fomopay.com/2019/02/18/sgqr-taskforce-worlds-first-unified-payment-qr-code/
[11] https://www.finextra.com/pressarticle/79091/hsbc-launches-next-generation-virtual-accounts-for-corporate-and-institutional-clients
[12] https://www.mas.gov.sg/news/media-releases/2019/mas-launches-sandbox-express-for-faster-market-testing-of-innovative-financial-services
[13] https://www.mas.gov.sg/news/media-releases/2019/mas-issues-new-rules-to-strengthen-cyber-resilience-of-financial-industry
[14] https://www.weforum.org/agenda/2019/04/business-case-for-diversity-in-the-workplace/
[15] https://www.michaelpage.com.sg/advice/management-advice/diversity-and-inclusion/what-makes-singapore-hub-diversity-and-inclusion
[16] https://www.microserve.ca/the-top-5-most-tech-savvy-countries-in-the-world/
