Treasury Today Country Profiles in association with Citi

Treasury in the digital age

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What is digitisation and precisely how is it impacting the day-to-day work of the corporate treasury function? In this opening Section, we look at the drivers behind digital treasury, as well as exploring some of its most common incarnations.

Today, the number of connected mobile devices exceeds the global population. We live in a truly digital world. And at the heart of digitisation is the internet, which is used by an estimated 3.17 billion people – with web giant Google conducting over 4 million search queries per minute. All of this has happened within 60 years of the world’s first general purpose computer, ENIAC, being created in 1946.

The sheer scale of the world’s digital transformation means that it has changed many aspects of human life, from how we communicate to how we spend our time. It has also changed how business is conducted – creating new models, processes, opportunities but also risks. So, how has digitisation impacted the treasury, where are we today, where have we come from, and perhaps more importantly, where are we going? These are just some of the questions that Treasury Today seeks to answer in this Handbook.

What is digitisation?

Although the word ‘digitisation’ is frequently used in day-to-day business conversation, its definition is versatile and often changes depending on who is asked and in what context. It therefore seems pertinent to start with the literal meaning of the word. According to the Collins English dictionary, digitisation is a noun of the word ‘digitise’ which means to transcribe (data) into a digital form so that it can be directly processed by a computer.

It could be argued that this process is something which has been happening for decades and in many respects this is true. The first treasury management system (TMS) for example, emerged in the mid-1980s, inspired by the advent of personal computers and this required digital data to function. The term ‘Big Data’ became popular at the turn of the century and electronic payments have been occurring in the corporate space for decades. Digitisation or as some say, digitalisation, can therefore be seen as just a natural progression inspired by the advent of technology. So, why is there now so much focus on digitisation?

“We are beginning to enter the second stage of digitisation,” says Enrico Camerinelli, Senior Analyst EMEA at the Aite Group. Companies already understand that they can move from paper to digital and from unstructured data towards more constructed data. What they are now beginning to understand and explore is how this gives them the power to understand the past in order to predict the future. “We are entering the age of treasury intelligence systems, of using the digital environment to provide strategic intelligence.”

But corporates cannot just simply jump to the ‘second stage of digitisation’. Before this level can be reached, digital tools and digital thinking must be applied to streamline and automate existing treasury processes. As Rajesh Mehta, Regional Head, Treasury and Trade Solutions EMEA at Citi explains: “Corporates are using digitisation to take their integration with counterparties to the next level and removing friction between themselves and the bank, for example. From this, corporates can leverage improved connectivity to drive efficiency and eliminate the low-value processes that proliferated in the wake of the financial crisis. After that, they can then begin using digitisation to drive business intelligence.”

Of course, to obtain the benefits brought by digitisation, treasurers must choose the right tools. And solutions are being offered from a range of different sources, so the decision is not always straightforward. These tools, such as apps, portals and mobile devices, must therefore also be considered as part of wider definition of digitisation. As George Zinn, Corporate Vice President and Treasurer at Microsoft explains: “One aspect of this digitisation is reflected in how we leverage technology to enhance productivity in a mobile work place. These technologies include devices which allow us to stay connected and productive no matter where we are, our intelligent cloud, both Azure and Office 365, keep all our devices like PCs, tablets and phones synced.”

How is digitisation changing the role of the treasurer?

In many aspects the focus on digitisation directly correlates with the ever-expanding role of the corporate treasurer, something that arguably began at the turn of the century, but which has rapidly accelerated post-crisis. Where traditionally the treasurer’s primary focus was in transactional matters – bank relationship management, funds procurement (mainly short-term) and the investment of surplus cash – the remit of treasury is now much wider. Activities such as risk management, corporate finance and financial control are all now commonly found in treasury functions. But more vitally, the treasurer is expected to be a strategic business partner – constructing and co-ordinating a coherent treasury policy to make best possible use of a company’s assets and the latest treasury products, services and trends and then communicating this to the board.

The following highlight a few key areas where digitisation has influenced the role of a corporate treasurer:

  • Leveraging Big Data

    Although digitisation itself hasn’t actually changed the role of the treasurer, it has helped treasury leaders to be more effective strategic business partners. For example Zinn points out that assets at Microsoft has grown to over $108bn, and the treasury has taken on a broader mandate supporting the myriad of businesses, yet the headcount of the team has expanded very little. “Digitisation has allowed us to do this,” he comments. “Not only has it eliminated many laborious day-to-day manual processes but it has also allowed us to leverage the data using Microsoft Power BI embedded in Excel to drive business intelligence and make critical decisions quickly and in the moment.”

  • Driving straight through processing

    In the critical area of treasury operations, the Microsoft treasury team’s use of digitisation and Azure based tools has enabled them to achieve extremely high levels of straight through processing. For example, 98% of Microsoft’s trades are auto matched and cleared. Consider this in context of the fact that Microsoft’s treasury operations team clears almost $400bn of trades each year. “Leveraging Microsoft technology has allowed the team to focus on managing counterparty risk and putting in efficient processes to meet with the growing regulatory changes such as Dodd-Frank, EMIR, SEPA and Basel III. The team has created automated dashboards which track key metrics to drive risk mitigation and timely decision making; not waiting for end of the month accounting numbers but rather having real time, aggregated, cash and position information,” says Zinn.

  • Treasury on the move

    The expanding role of the treasurer has also meant that those at a senior level are travelling a lot more than before, but again digitisation has provided a solution to this. “Tablet devices have proved very popular with our clients,” explains Munir Nanji, Managing Director and APAC Sales Head at Citi. “They have provided treasurers with the mobility they require and also allowed them to digest information quickly and efficiently.”

Revolution or evolution?

Is all this really revolutionary however, or more evolutionary? For Damian Glendinning, Corporate Treasurer at Lenovo it is the latter: “We see digitisation as moving to the modern ways of doing things and as a company we do this whenever we can,” he says. “But digitisation as a whole is not revolutionary, it is just a case of trying to find the best and most cost-effective way of doing something, and in most instances this doesn’t involve paper.”

In this respect, digitisation hasn’t dramatically changed the role of the treasurer, and instead just made processes more efficient. “Most of what has happened is simply taking manual systems and putting them on a computer,” he says. “Although this has made work in the treasury less resource-heavy, there have been very few processes that have been redesigned to coincide with the developments, they are just manual processes which are automated.”

The dangers of digitisation

Whilst digitisation presents treasurers with new opportunities, it also exposes them to new dangers and concerns. As Citi’s Nanji explains: “With lots of devices and information being passed around there is, unfortunately, significant potential exposure to both internal and external threats and treasury cannot escape this.” Cybersecurity and education is therefore a big topic for Nanji, just as it is for many bankers, who themselves can be exposed to a corporate’s sub-optimal cybersecurity. “Increasingly, we are providing advisory to clients on what they should do to protect data and improve data privacy. We also help set up robust monitoring tools and processes for our clients’ treasury systems. One example is the payment risk analytics tool which looks at past trends and flag any payment outliers so management can decide if indeed this is usual or not.”

And although the Mitsubishi Corporation International (Europe) treasury team and its Treasurer, Gary Williams, have benefitted from the move to digital, he is acutely aware of the new risks that this opens up to treasury as well. “Cybersecurity is now an issue that is too big to be ignored,” he says. “We have seen numerous news stories in recent months about people or organisations that have encountered this issue and this is sending out a warning shot to corporates.” For Williams, there is still a large element of the unknown when it comes to digital. “More work needs to be done exploring the systems, exposing their weaknesses and educating treasurers about them.” Cybersecurity is explored in more depth in Section 9 of this Handbook.

Adoption of digitisation by treasurers therefore cannot be viewed through a narrow lens. As Marie-Laurence Faure, Head of Marketing Channels Products at BNP Paribas Cash Management explains: “Overall, the treasury market is very interested in how digitisation can transform their treasury and ways of working. But there remain some clients who are attached to the traditional ways of doing things and push back on digital. I think in many cases this is down to the age and usage of technology in a corporate’s personal life.” For Faure, these will become the minority once the next generation of treasurers rises to the top.

Driving the digital agenda

Traditionally, the treasury technology space has contained limited players, with the banks and a handful of technology vendors at the heart of this. Fingers have been pointed at certain banks with industry commentators claiming that they only offer what they believe to be suitable for their clients – in other words tried and tested solutions. So when the term ‘innovation’ is banded around, what it often actually means is an existing product tweaked or repackaged.

The banks aren’t entirely at fault, however. “The majority of corporates are not demanding enough, and accept whatever the banks offer,” says Glendinning. “Banks then think that corporates are happy with the solutions they are offering.”

Glendinning provides the example of online banking portals – a solution which the majority of corporates use. “Retail online banking platforms are excellent, so as a corporate customer, you would expect that the corporate solution will be equally as good, if not better. But this is not the case and it is lagging far behind.” In his opinion this is because banks don’t have the incentive to invest in corporate online banking platforms (they did in the retail space in order to save money by removing branches). “The only way to change this, in my view, is for corporates to come together with a collective voice and demand better solutions, until then we will just get what suits the banks.”

Yet, the era of digitisation has given rise to a plethora of smaller players, with new products to bring to the market, commonly referred to as ‘FinTech’ firms. These small companies, often dotted in clusters around the world in locations such as London, Hong Kong and Silicon Valley, are typically funded by venture capital and are continuously developing solutions in niche areas of finance, including those that impact the treasury. While these firms do not yet have the scale or resources to impact the big players in the market, they have certainly made the banks sit up and take notice.

Strategic partnering

This may be where the FinTech firms rise to the fore, as they are regarded as more nimble and less bound by legacy technology and thinking than the banks. Yet, as we are already seeing, to have an impact they are having to partner with the banks. According to Faure: “Although big banks may be more traditional in their approach, we have the trust of the market which the smaller players often don’t. It therefore makes sense in some cases for banks to partner with these so we can leverage their strengths and vice-versa.”

For Aite’s Camerinelli, partnering needs to happen because as it stands, there is more technology available than is needed. “Banks, vendors and FinTech companies are all pushing their own agenda rather than addressing the real needs of corporates,” he says. “A spreadsheet is still the number one tool in a treasury department and for the most part only 20% of its functionality is being used and this is the same with most treasury technology.” He argues therefore that corporates, banks and vendors may want to stop looking at new technology and instead make the most of what they have already, so that corporates of all shapes and sizes can obtain a greater benefit from them.

Find out more about the rise of FinTech in Section 8.

Technology for all?

Another way for corporates and vendors to get the most out of their technology is by considering new deployment models, such as cloud computing.

For instance, when treasury management systems where first launched they were installed on premise. While this allowed the solution to be built to fit, it required significant investment in the technology, its updates and the servers. There was also a high resource cost that was required from the company’s treasury and IT teams. “Today, the rise of cloud technology has been a game changer as it has removed hardware costs and provided a much more cost-effective way for a business to obtain the technology it needs,” says Citi’s Nanji. “It is also flexible and allows corporates to easily scale both up and down.”

The inexpensive nature of most cloud solutions has, therefore, helped to level the playing field in the treasury technology space. There used to be a huge gap between what the biggest, most sophisticated companies could achieve with their treasury technology and those at the other end of the scale. Now, thanks to the cloud, capabilities are becoming more equal.

The cloud has also offered treasurers a new way to work. As Microsoft’s Zinn outlined earlier, the cloud has enabled the Microsoft treasury team to be able to work on the go and on a multitude of devices seamlessly. This has provided a single source of truth for the team, allowed Microsoft to access the information they need when they need it and enabled treasury to become value added business partners.

The app advantage

Elsewhere, the rise of mobile technology in the treasury department has also prompted the use of apps which can be used to assist corporates in their day-to-day activities. With their low cost and user-friendly interfaces, apps are regarded as tools accessible to all. Most banks now have a mobile banking app which corporates can use and a plethora of other apps are available (some that may be useful can be found in the box below.) Yet, lots of question marks still hang over the use of mobile devices and apps in the treasury department, namely around their security and functionality – all of which we will explore later in Section 3 of this Handbook.

Despite the obvious concerns around digitisation, the message for treasurers is clear: “Overall the whole market is benefitting from the digital world,” says BNP Paribas’ Faure. “It has made solutions available to all and it has allowed both large and small companies to develop their treasury function in line with the changing demands of the role.”

In the following Sections of this Handbook, we will delve further into the doors being opened up by digitisation, and explore how treasurers can take advantage of this.

Apps for the corporate treasurer

In addition to the various offerings from banks and treasury software vendors, there are also a range of apps available in the Apple and Android app stores that the corporate treasurer might find useful. For example:

EZ Financial Calculators (iOS, free)

This app offers corporate treasurers – and other financial professionals – a quick and accurate way to perform many frequently used financial calculations including APR and ROI all from their iPhone or iPad.

Keynote (iOS, £7.99)

Imagine the scenario. You are moments away from delivering a presentation to a packed conference room at an international treasury conference. Suddenly, important economic data is released that might bolster your address. There’s no desktop computer to hand but that doesn’t matter as last minute edits can be made on the slides saved on your smartphone.

iSpreadsheet (iOS, free) or Google Sheets (Android and iOS, free)

No matter what up-to-date, fully integrated, STP-enabling software one buys, treasury will always need spreadsheets in some shape or form. With these apps the corporate treasurer can read, edit and save Excel documents on the go.

Bloomberg Business (iOS and Android, free)

Staying on top in today’s increasingly volatile markets requires constant vigilance from the corporate treasurer to spot signs of market stress. There are a range of apps out there providing financial markets news, data and portfolio tracking tools, but few better than this one from Bloomberg. One of the app’s many innovative features is the ability to create personalised views of the news by industry, region or popularity.

Treasury Today and Treasury Today Asia (iOS and Android, free)

These apps enable you to download the latest copy of Treasury Today and Treasury Today Asia for free, as well as the full text of our weekly Treasury Insights, featuring news and analysis of the latest treasury issues. The app every treasurer needs.

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