The treasury management landscape is evolving rapidly and it’s not just the preserve of the major global corporates. For Douglas Rochman, Treasury Management Consultant at Capital One, it is very much a reality for treasurers at mid-sized companies to be receiving cash faster, more efficiently, and with more accuracy, with little-to-no human intervention.

“Innovations in the payments, receivables and liquidity spaces that were once limited to large multibillion-dollar corporations are making their way down to companies in the middle-market,” he notes.

Innovations such as electronic payments, APIs, tighter and more integrated receivable channels, and virtual accounts are delivering benefits even to treasurers with limited IT budgets and minimal excess headcount capacity.

Here’s his quick overview of how innovation is facilitating mid-market treasury evolution and enabling a more confident approach to the call to ‘do more with less’.

Electronic payments

Historically underserved in the B2B payments space, mid-sized companies are beginning to see an increase in electronic payment options that meet their unique business needs. According to a Capital One-sponsored study from Harvard Business Review-Analytic Services, 50% of middle-market companies have now digitised about half their payment volume.

While these companies were previously happy to cut and issue a cheque, Rochman notes that “many are beginning to see the benefits of initiating payments electronically – particularly, as the cost and risk of fraud of paper cheques continue to rise”.

APIs/open banking

Lack of compatibility with existing financial/ERP systems is a common deterrent to adoption of new technologies. However, says Rochman, the Revised Payment Services Directive (PSD2), which set the stage for ‘open banking’ in the EU, has pushed banks across the globe to support and develop application programming interfaces (APIs) which can provide companies with real-time visibility into all of their banking activity without the need for a third-party intermediary.

“While there hasn’t been an official open banking mandate in the United States, initiatives in Mexico, Singapore and Australia, as well as PSD2 in Europe, have pushed financial institutions of all sizes to invest in tools and technologies that allow their customers to realise increased operational efficiencies,” he explains. “This allows firms to initiate payments without the need for a third-party payment processor.”

Using APIs certainly makes sense for most middle-market treasurers, as they are more affordable than customising or building out existing enterprise solutions, require fewer IT resources and cost less to set up. What’s more, notes Rochman, they provide easier scalability as the company grows.

Though the payments landscape continues to evolve, there is some evidence that new open banking initiatives will make it easier for companies of all sizes to take advantage of cheaper and more efficient electronic disbursement methods.

Integrated receivable solutions

Integrated receivables solutions could include anything from a single file containing a company’s receivables information across all payment channels, to an Electronic Bill Presentment and Payment (EBPP) solution, to an invoice reconciliation product. All are relative newcomers to the treasury space, notes Rochman.

“Although electronic payments provide the speed and convenience treasurers are looking for, the price of admission in the past has been maintaining multiple systems to support siloed cash application processes,” he observes. “But today, robotic process automation and artificial intelligence can be leveraged to improve manual, repetitive tasks within the accounts receivable and credit space that have long been the frustration of treasurers with steady or shrinking headcounts.”

While anecdotal evidence shows that these tools are working well for larger corporates – those capable of receiving thousands of B2B payments on a monthly basis – they have generally been cost prohibitive to companies in the middle market.

Nevertheless, says Rochman, some companies are partnering with banks to sell solutions with the same aim of reducing the human touch in receivables reconciliation, giving treasurers the same tools as their larger corporate brethren.

Although the notion of integrated receivables has been a hot topic in Capital One’s US homeland, especially given the relatively slow adoption of ISO 20022 XML messaging standards domestically, fintechs and banks are starting to look overseas for engines of growth in this space.

Indeed, notes Rochman, they are going beyond supporting just lockbox/ACH/wire payment-advice reconciliation, but also providing services for RTGS transactions, offering multi-bank SWIFT reporting capabilities and local language support.

Virtual account management

Virtual account management (VAM) – which allows a company to segregate its funds under a single physical account using one or more notional accounts – has for some time been available to EMEA- or APAC- based corporates or organisations with a large global presence.

However, VAM is slowly making its way to the Americas, allowing companies in the middle market with only a local geographic presence to realise the benefits of this relatively new technology. Transaction banks have taken notice, with a few having launched a VAM solution and more likely to do so.

“For banks of all sizes, a VAM solution makes sense: it reduces the administrative cost and effort of having to maintain multiple cash management systems and platforms, often the result of legacy mergers and acquisitions,” explains Rochman.

For treasurers, VAM offers self-service capabilities and flexibility to manage their account structure on the fly, he continues. Some solutions can extend beyond a single bank and provide visibility across multiple financial institutions.

“This improves not only straight through reconciliation rates but also provides improved visibility of funds and control over working capital as well.” Ultimately, VAM can reduce the need for smaller companies to maintain multiple bank accounts with numerous financial institutions, either domestically or across the globe.

With new technology, tools and systems to improve and automate manual processes making their way from the large corporate space to the middle market, treasurers in many more organisations are at last able to do more with less without buckling under the pressure.