Tom Durkin, Global Head of Integrated Channel Solutions, Bank of America Merrill Lynch (BofAML), explains how cloud services will provide new opportunities between corporates and banks.

What do you think are the major trends in treasury technology today?

The past decade has seen increased take-up of technology by corporate treasury departments. Treasurers in larger enterprises will certainly be working with: an enterprise resource planning (ERP) solution such as SAP; a treasury management system (TMS) from vendors such as SunGard or Kyriba; and possibly one or more SWIFT service bureau providers such as Fundtech or Bottomline Technologies.

At the same time, however, other parts of the business have gone even further. Many have moved business-critical functions from software they own, running on ancient servers, to solutions hosted by outside vendors on servers in remote locations and owned and managed by parties that have this specific focus.

The move from on-premise IT systems to alternatives hosted in the cloud is gaining pace. Switching to cloud solutions may offer tangible benefits but the implications for corporate treasurers and the banks who serve them is significant.

What has driven the uptake of cloud?

Cloud hosting allows technology vendors the chance for expedited development of new features and more frequent updates without having to get inside clients’ systems to make the changes. Yet, so far, corporate treasuries have been slow to make the switch. Some have been held back by security or reliability concerns; others have been waiting for technologies to mature or providers to evolve.

Reluctant or not, most treasurers took at least a small step into the cloud when banks moved to web-based electronic banking (e-banking) solutions for clients. Now the migration is gaining pace within the treasury department, with solutions as critical as accounts payable (AP), accounts receivable (AR) and human capital management transferring to the cloud or hosted applications.

What new opportunities does cloud adoption present for banks?

The cloud presents fresh challenges and opportunities for banks, especially surrounding critical requirements such as security, compliance and privacy. As corporates run payment files out of cloud-based Treasury- and ERP systems, the ability to offer them more efficient connectivity will be a crucial differentiator for the banks who serve them.

Corporate clients are challenged by a long implementation time of six to 18 months to get everything up and running, from connectivity standards, format and contingency plans – and that’s before the legal teams engage. There’s an opportunity for banks – particularly those who work closely with cloud treasury service providers, to help streamline that integration and set-up process.

This ongoing dialogue with cloud providers is a crucial asset not only in helping to streamline the process but also building connectivity with multiple systems, as opposed to the point-to-point communication that characterised the previous generation of host-to-host connectivity.

Will all banks be able to provide such services for their corporate clients?

Not every bank has the scale or the experience to stay abreast of the rapidly-changing world of cloud-based financial services. In a regulated market, where the consequences of security breaches or reporting failures can be disastrous, the cost of compliance is very high.

Those banks with the ability to stay ahead will have a competitive advantage that will only grow with time, and not just in the corporate markets. Smaller banks who struggle to keep up with changing technology may also begin to look to outsource some core banking functions to cloud vendors or larger bank partners who can carry the burden of investment.

After several years of relatively low investment as banks rebuilt their balance sheets, there is now a need for many to upgrade their core banking infrastructure. For banks who want to serve a global client base, it’s impossible to remain stagnant. There will be a growing divide between those big enough to develop the big, in-house core banking systems and those that are going to have to outsource if they are to compete.

When a company moves their payments business, for example, they’re making a multi-year strategic decision. If it’s a major implementation, for a new business line or acquisition, they’re talking about consolidating their shared service centre (SSC) and making a commitment to their bank for up to three to five years. This makes a bank’s investment in overall technology, infrastructure and platforms critical for corporates.

Can you provide an example of where Bank of America Merrill Lynch (BofAML) is leveraging?

One example of building connections in the cloud is BofAML’s work with SAP on the Financial Services Network (FSN), an innovative on-demand solution that connects banks and other financial institutions with their corporate customers on a secure network owned and managed by SAP. The network offers multiple services over one single channel while supporting the deployment of new ones. For clients, networks like FSN hold out the promise of greater efficiency, provided banks, vendors and corporates can all work together to maximise connectivity between points on the network.

How can banks use cloud technology to solve corporate pain points?

In an environment in which treasurers have to fight for internal IT resources with every other department, the value banks can add through being a technology partner is growing every year. Take, for example, a company going through a series of mergers and acquisitions (M&As). By using the latest investments in technology and its connected network, the bank can now use technology to help accelerate integrating the new business line.

There’s more to it than efficiency, however. The greater volume of electronic data generated by a modern treasury also offers opportunities. BofAML is working to offer clients value-added services which use that data to support better analytics and dashboards.

For corporate treasurers, the new world of cloud solutions seems to promise greater efficiency, better connectivity and a chance to improve business processes. Yet those gains will only come if treasurers are prepared for a much greater role in choosing and managing technology.

How can treasurers pave the way for cloud?

The world of outsourced solutions is all about effective governance, due diligence, and vendor management. That sounds like basic, nuts-and-bolts sense; but if you’re a treasury professional, are you brought in to manage working capital or manage vendors and IT processes? That’s something treasurers have to be aware of.

Clients have to make sure they get what they buy. It’s about discipline and the treasury team being focused on things that weren’t really part of their traditional role.

So, while the cloud brings huge opportunities, it may also change the role of the treasurer. With technology so embedded in the treasurer’s role, choosing the right partner and system is far too important for treasury not to be involved.

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