As corporate treasuries continue to play a vital role in managing cash flow and liquidity, how is digitisation changing the treasury function and what will it look like by 2020?

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The word ‘transformational’ can cause much rolling of the eyes, even in the mildly sceptical, when referring to technology. But the treasury space is different. Today, the opportunity exists to call upon a multitude of digital services provided by banks, vendors and other organisations that not only automate many core processes but, in so doing, convert the role into one that demonstrably adds value to the business.The emphasis here is on progress through partnership. No treasury is an island, least of all when it comes to deriving positive results from technologies that can only have been forged through years of close-at-hand and yet wide-ranging specialist experience that few treasurers have the time to amass.

Against a backdrop of widespread digital transformation, Niall Cameron, Global Head of Corporate and Institutional Digital, HSBC, sees the pace of development in most sectors picking up “at a rapid rate”. Whilst some companies are being forced “reactively” to adapt to the new world order, the real leaders are pro-actively changing their business structures to fit. Regardless of approach, companies are increasingly expecting to see the provision of digital financial services evolving in synchronisation. In essence, digitisation is one of the great movements of our time.

Influencing the sea-change in and around the commercial space is the way in which personal relationships with technology have evolved in the past decade, notes Cameron. Now, with the adoption of mobile devices, he believes that the rise of social media and the seemingly inexhaustible use of the internet having permeated individuals’ professional lives, that clarion call for corporate digitisation is inevitable. “It is a trend that is not about to stop as the so-called ‘millennials’ move into senior roles, bringing their digital expectations with them.”

The direct impact of change on the corporate treasury community can be seen as mobile banking, cash pooling and web platforms have all made it easier for treasurers to handle larger volumes of activity across multiple geographies and jurisdictions, comments Brian McKenney, Global Head of Innovation and Business Management, Global Liquidity and Cash Management, HSBC. “And they do so more efficiently and effectively than ever before.”

“Combined with advancements in data management and analytics, these developments are allowing treasurers to spend more time providing meaningful insight and advice to C-Suite decision-makers, ultimately informing strategic direction.” This, McKenney adds, enables businesses to rethink legacy business models, to consider new opportunities, to redeploy excess capacity created through digitisation, not just for cost-savings “but also for sourcing new opportunities and revenue streams”.

As information flows from data, consideration must be given as to how vast repositories of data may be harvested and interrogated in order to provide useful intelligence, notes Cameron. “Although from a technological perspective this is a relatively straightforward process, the real challenge is to know what you are trying to find,” he explains. “With today’s ‘big data’ analytics effectively offering both a periscopic and a microscopic view, corporates can access an impressive depth and breadth of understandings, from the structural to the granular.” Indeed, from this standpoint, he observes that a series of tiny incremental improvements can help to deliver major successes at the corporate level “as companies are able to stand back and critically appraise aspects of their work that they would not normally see”.

As a practical example, McKenney explains such a view could help optimise working capital management by facilitating wide-ranging visibility over, and subsequent action on, all liquidity positions – from debt, investments and cash positions, to the impact of foreign currency and interest rate movements. In the security and fraud detection realm too, he has seen clients interested in exploring ways to absorb bank data to better enable the detection and pre-empting of events.

Multiple drivers

In considering how to remodel treasury processes to best effect, it is important to know that it is not just technological innovation that is driving change; there is also a regulatory imperative. This is intent on delivering transparency over great swathes of corporate and banking data structures, and is likely to have even greater impact going forward. This twin advance is none more evident than in the payments space.

With today’s ‘big data’ analytics effectively offering both a periscopic and a microscopic view, corporates can access an impressive depth and breadth of understandings, from the structural to the granular.

Niall Cameron, Global Head of Corporate and Institutional Digital

With strategic opportunity in mind, McKenney draws attention to advancement in Application Programme Interfaces (APIs). These technical protocols define how computer programmes talk to each other, providing corporates and other institutions with, amongst other things, far easier access to banking systems and infrastructures. “A major driver behind this – and evidence that the regulatory piece is working to the greater good – has been the arrival of PSD 2 [Payments Services Directive 2]. This is changing how banks interact with customers and other providers within this space.”

Related to this is the adoption of real-time payment infrastructures, with a number of markets already offering or actively implementing new solutions, including Singapore, Australia, Hong Kong, Europe and the US. Furthermore, the rise of distributed ledger technology (also known as blockchain) is, McKenney feels, ushering in a new way of thinking about payments processing, tracking and security, both domestically and cross-border. “Together, these changes could have a major impact on corporate cash management and wider operations, especially in terms of how they facilitate automated payments initiation and customer collections.”

What’s more, McKenney believes that derived from the increased adoption of, and adherence to, innovative technologies, the corporate user-interface and experience within the realm of financial services will persist in being influenced by the standards expected by personal users of modern technologies. “The level of product sophistication offered to businesses will need to at least match that of the consumer and this is now a focus for HSBC. Customers are expecting a much higher standard.”

This returns the notion of digitisation to the need for collaboration. Just as no treasury is an island when it comes to thinking ahead of the curve, no bank can stand in isolation either; the most progressive are working with the best-in-class providers (as HSBC’s recent partnership with Kyriba attests). “Collaboration is a very positive way forward for us,” states Cameron. There is a “fantastic array of partners out there”, he feels, from the classic fintech start-ups to the more established players. And whilst he says HSBC can innovate, he candidly accepts that if it restricts itself only to in-house development, it risks limiting what it can do for clients.

HSBC is acutely aware of how the collaborative approach helps to bring to the surface the real-world view of what is likely to meet client needs; it is not, states Cameron, about technology for its own sake.

Ultimately, all digital technologies must gain strong momentum to survive. An embodiment of this notion is data visualisation technology which had struggled to gain ground over the years but is now quickly moving up the agenda as corporate professionals, subject to global volatility, demand information from multiple sources at their finger tips.

Join the race

For some corporate treasurers, the pace of digital development may at times feel like they have unwittingly entered a race and as a result may feel daunted by the prospect of keeping up. There is no single answer as to how to deal with ‘future shock’, says Cameron. However, he reports that common ways of thinking are emerging. One of these is the concept of ‘agile technology’. This requires every stakeholder to be consulted – often in the same room at the same time – regularly and often so that development takes place with short, sharp bursts of energy. This agility is starting to impress upon the way business decisions are taken too, he notes. When approached collaboratively with the technologists it is, he reports, possible to reduce a process that once took months, or even years, down to a matter of weeks.

Compression of timelines is one of the key changes likely to arise from digitisation. But to achieve this, Cameron warns of the need for a willingness to accept a higher percentage of failure. “In the digital economy there is an understanding that a low failure rate often means teams are not pushing hard enough,” he says. “This is not easy to accept but it will become an important part of managing the digital future.”

There will also be a challenge for larger companies trying to promote digitisation, particularly as the experimental nature of the digital economy does not always sit well within a rigid structure. One approach has been to ring-fence teams of talent, but within HSBC the model has focused on total organisational engagement. Regardless of tactic, corporates and banks are going to have to learn different ways of doing business in the future, cautions Cameron. “We all need to become far more adept at dealing with change and we must also accept that digitisation is increasing that rate of change dramatically.”

When adopting transformational technology, collaboration is key. A global player such as HSBC will have its finger on the digital pulse and be well-positioned to cross-pollinate ideas from multiple client types and locations. In so understanding the dynamics of the market, its proactive banking approach will, says Cameron, keep delivering the kind of digital experience that treasurers need.