Insight & Analysis

Dusting down the crystal ball

Published: Dec 2023

As we approach the end of another tumultuous year in the world of corporate treasury, market participants offer their predictions (and the occasional request) for 2024.

Focus on crystal ball to tell the future

Many of the key treasury themes over the next 12 months will inevitably be a continuation of those that have exercised finance professionals during 2023.

For example, Richard Garry, Group Treasurer at publishing, business intelligence and exhibitions group Informa refers to the continuing influence of the macro-economic environment and whether central banks can bring down inflation while avoiding recession, managing debt in a world where interest rates are not held close to zero, and the impact of geopolitics.

“In terms of specifically treasury themes, the key questions are how can (and should) treasury harness AI, how to make better use of data – which includes considerations around ISO 20022 – and the further impact of ESG,” he says.

The artificial intelligence (AI) boom (and, in particular, the growth of large language models such as ChatGPT and Bard) has caught the attention of businesses seeking innovative ways to streamline operations and cut costs. Many treasurers believe AI could be the next step in the digital transformation of treasury management.

However, it also has the potential to cause headaches for treasurers dealing with AI-based customer support, warns Laurent Descout, Founder and CEO of challenger bank Neo. “Treasurers have complex and rapidly evolving needs and personalised relationships with providers will remain essential,” he says. “When treasurers have a problem, whether that is a payment or FX query, they want it solved quickly and having an expert human support team available to help is essential.”

As we approach 2024, treasurers should be thinking about whether now is a good time to raise funds or if new funding rounds can wait until interest rates ease again suggests Erik Smolders, a Treasury Advisory Services Managing Director for Deloitte Risk & Financial Advisory.

“Treasury teams are still struggling with managing bank risk management after the US regional banking issues from earlier this year,” he says. “Treasurers should consider baking best practices from supply chain risk management into their bank risk management approaches in 2024 – assuming they haven’t already – to help better insulate cash and other bank holdings.”

Predicting currency movements is difficult at the best of times. But according to HSBC, the US dollar should be resilient in 2024 while the slowdown in credit growth in the eurozone and UK is a hallmark of how the transmission of central bank tightening is weighing on demand, which is one reason to expect further weakness for the euro and the pound.

This challenging outlook also incorporates China (where the ongoing property malaise is adding to a challenging global growth outlook), Australia and South Africa.

“We have emphasised that our strong US dollar outlook is based on soft global growth and relatively firm US yields,” says Paul Mackel, Global Head of FX Research at HSBC. “It does not take much for a soft landing idea to become something more discouraging. A soft landing data run might just be a stepping stone to a hard landing. After all, the global growth outlook is uncertain as it is hard to calibrate how much impact is to be felt from the tightening that has already occurred.”

According to Kjeld Herreman, Head of Strategy Advisory at RedCompass Labs, 2024 will be a year of evolution rather than revolution in digital payments.

“The most innovative changes that we see are related to the use of AI and machine learning, which can help banks increase their straight through processing rates, increase their insights into their clients’ transactions, and deliver on changes more cost efficiently,” he says. “It will be a year of experimentation, with the most promising AI initiatives coming to fruition in 2025.”

Herreman also expects payment service providers to reduce the costs associated with their payment operations whilst simultaneously upgrading their real-time capabilities and looking for ways to connect the various payments rails and closed loop wallets.

On a slightly different note, Save the Children Treasurer Edward Collis would like to see more focus on applications suitable for smaller treasury markets.

“One of the biggest challenges we face around the world is access to treasury technology,” he says. “There are many applications for North American, European or G20 currencies but as soon as you start moving into more frontier-type markets the technology is much less readily available.”

Save the Children is in effect facing a similar challenge to that faced by developed markets maybe ten years ago in terms of access to technology, adds Collis. “It would be great if there were more treasury technology vendors active in the emerging and frontier market space,” he concludes.

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