Demystifying Digital Treasury - Lessons from the UAE
By Eleanor Hill, Editor
Knowing which technology innovations to invest in now, and which to put on the back burner, is a challenge for any treasurer. But it is particularly difficult for those operating in the United Arab Emirates (UAE), where the real-time digital infrastructure is still developing, and paper-based payment methods remain popular.
There’s no doubt that the UAE is making significant strides towards becoming a smart, cashless society. Local governments across the country are implementing schemes to encourage residents to settle their utility bills and pay for public services via digital platforms. And with a relatively young population, and high smartphone penetration, the country is well-placed to take advantage of digital innovations.
It comes as no surprise, then, that fintech firms are starting to flourish in the UAE. The support network around such start-ups is growing too: the Dubai International Financial Centre’s (DIFC) FinTech Hive is proactively encouraging innovation in this space, as is the Department of Economic Development of Abu Dhabi, in partnership with the Abu Dhabi Global Market. With the rise of these new entrants, the country’s financial ecosystem is starting to show signs of disruption, and innovative financial solutions and systems are now coming to market.
For corporates, these new technologies bring significant efficiency opportunities, but they also bring risks, and a requirement for new strategies and implementation resources. What’s more, for time-pressured treasurers, knowing your API (application programming interface) from your AI (artificial intelligence) can be both distracting and daunting. With this in mind, ADCB and TMI hosted roundtable discussions in Abu Dhabi and Dubai in November 2018 to help local treasurers demystify the latest technology developments – and to understand how they can prepare for the forthcoming wave of digital innovation.
If there is one technology upgrade or investment to pay attention to now, cybersecurity has to be top of the list, the audience agreed. As for the other innovations discussed during the roundtable, Morais summed up the feeling among corporate attendees perfectly, saying that: “There is no need to use all of these technologies – or to get on board with all of them today. It’s a question of picking the innovations that are most relevant for your business and getting in place a business strategy to ensure that treasury can take advantage of these trends two or three years down the line, as a basis for treasury transformation.”
Likewise, she said: “Banks also need to evolve for the digital era. That means partnering with fintech firms, but also working closely with corporates, to develop next-generation services and solutions that deliver on functionality, usability and security.” Isaac Thomas agreed and in his closing comments emphasised that, as with any evolution, “technology transformation is a journey – one that requires a clear roadmap and a leader with the ability to execute on that plan, whilst being flexible enough to adapt as circumstances change”.
Treasurers have those skills in abundance, he said. “And it is important to recognise that technology change cannot happen without the human element. People will always be needed to support and enact change – and even machines need humans to train them. But people also add value over and above technology. Embracing digital innovation in treasury isn’t about replacing full-time employees, it’s ultimately a question of enabling the treasury team to focus on more strategic tasks and delivering levels of growth that would not be possible in an analogue world.”
Cutting through the hype
Following a lively introduction from Colin Fraser, Group Head, Wholesale Banking, ADCB, and an insightful economic overview from Monica Malik, Chief Economist, ADCB, discussion at both roundtable events kicked off with an analysis of how APIs and AI are changing the face of treasury. As in other regions, it was clear that APIs are regularly cropping up in treasurers’ strategic conversations with board members and in-house technology teams, as well as banks and vendors. This is driven in large part by the global move towards open banking and the rise of the API economy.
Nevertheless, many treasurers are yet to fully discern the potential that APIs offer to improve treasury systems and processes. On this point, Neale Croutear-Foy, Ecosystems Design Lead, ADCB, explained that, “since APIs provide a means of connecting systems together seamlessly to allow real-time transfer of data, APIs could enable treasurers to build a fully customisable dashboard that draws multiple data feeds into a single window. This dashboard could aggregate data from multiple banks and fintechs to provide a complete overview of cash and liquidity,” – which the roundtable participants agreed would be a significant benefit, especially for those treasurers without the budget for Treasury Management or Enterprise Resource Planning (ERP) systems.
An additional point of interest raised during the discussion was that APIs could potentially replace direct host-to-host (H2H) connections to banks, or at least lead to next-generation H2H connections where all data is transferred in real-time, and the capabilities extend beyond payments. These next-gen connections should also be able to be rolled out far more quickly, easily, and cost-effectively than traditional H2H set-ups, making them more accessible for smaller corporates.
Thomas Baxendale, Programme Manager, Digital Transformation, ADCB, outlined how “the ability of APIs to enable systems to speak to one another in a simple, standardised manner could also be leveraged by treasury to eliminate re-keying of information, freeing up personnel for more strategic tasks”. Similarly, AI is also “enabling treasury teams to focus more of their energy on adding value to the business,” he said. Comments from the audience echoed this, with several treasurers outlining their experiences of using AI to improve automated reconciliations and cash flow forecasting.