Insight & Analysis

Transform or fall behind: ACT Cash Management Conference 2020

Published: Mar 2020

The key themes at this year’s Cash Management Conference, hosted by the Association of Corporate Treasurers, were inevitably focused around the technology of the future and what it means for treasury.

Evolution of a butterfly

We’re currently experiencing one of the most volatile macroeconomic climates in the last decade. Between Trump’s trade war, the coronavirus outbreak and the ongoing Brexit situation, there’s a lot going on in the world. Add to that the increasingly rapid technological advancements being made, and treasurers have a lot to contend with.

These were the key themes at this year’s Association of Corporate Treasurers’ (ACT) Cash Management Conference and the attendees were keen to hear one another’s thoughts. The first panel discussion of the day, ‘The new imperative to a more strategic cash management’, saw the speakers discuss the rapid shift of economic and political activities in Europe.

It was noted that the biggest headache for treasurers at the moment is not negative interest rates, but the coronavirus outbreak, and the advice given, which largely stands for all businesses, given the uncertainty it poses, included locking everything down and making as much money as possible within the constraints.

Adapt or fail

The various ways in which technology is used in treasury was discussed at length in almost all of the sessions – and with plenty of different perspectives. One speaker noted that “Automation is seen much more as a blessing than a threat”, while another mentioned that the dependence on technology providers for ERPs and treasury management systems (TMSs) is not necessarily a good thing. “You can name all the providers on one hand,” noted one attendee. The dominance of the same providers could cause treasurers to miss out on innovative services from other, smaller providers.

When the question arose of ‘is a treasurer’s job becoming harder because of technology?’, one respondent was confident that no, it will not be made harder. The speaker pointed out that “You can run as fast as you want with technology,” and a treasurer doesn’t have to adopt everything if they don’t want to. This was a discussion point throughout the day amongst plenty of delegates, who noted that whilst adoption of technology isn’t compulsory at the moment, most are certain that it will be in the next few decades. Many suggested it could be anywhere from ten to 50 years, but there will be a time when businesses have to adapt to the digital imperative or risk falling behind.

Collaboration, not competition

With the rise of fintechs, having previously been seen as a threat to traditional banks, a key takeaway from one session was that innovations in treasury systems cannot be about fintechs competing with banks, but rather collaborating with them.

It was also questioned whether the increasing demand for faster payments and more sophisticated systems and processes was down to generational changes more than any other cause. As millennials and Gen Y-ers begin to claim their places in the professional world, they expect the same level of technological power as they experience in everyday life: instant payments in personal banking, clear visibility of bank accounts and quick, simplified systems.

Rules and regulations

Another key topic was one that treasurers know well: the regulation headache. From KYC and AML, to regulatory challenges in different geographies, the topic was widely discussed. Attracting a large focus was SWIFT’s KYC registry, and what benefits it will bring to treasurers. It was speculated that having the registry may reduce the amount of KYC issues treasurers have by 70-80%. Some questioned whether that was worth it, but others, especially financial institutions, noted that dealing with 20-30% was far preferable to dealing with the full 100%. Overall it seemed that the registry is being welcomed with open arms.

With a discussion about the second Payment Services Directive (PSD2), the meeting was filled with opinions and questions about open banking and the challenges and opportunities that come with it. Key takeaways were that adoption of open banking is a slow burn, and that PSD2 is not open banking, but rather open banking standards are rolling out to supplement the implementation of PSD2.

One belief was that open banking will come into its own when open finance truly begins. Another view contradicted that, stating that open banking and open finance are the same thing. One point was agreed on though, that using APIs to get bank statements does not equal open banking.

BACS, CHAPS and faster payments

With the rising demand for faster and real-time payments, it was agreed that treasurers need to adapt the systems that they use. According to data from UK Finance, non-cash payment methods accounted for 66% of all payments made in the UK in 2017, up from 39% in 2007. Usage of BACS and CHAPS has been consistently steady and is expected to remain so over the next decade.

But there has been a significant rate of change in technological innovation in payment methods. The mass migration to online banking, mobile banking and contactless payments are evidence of this, and there has been strong growth in faster payments since 2008. In fact, volumes of faster payments have now exceeded volumes of BACS payments, at around 221 million per month, in comparison with the 180 million of BACS.

The appeal of instant payments is mostly the speed and efficiency, especially for smaller businesses where using faster payments avoids the need for BACS integration. However, CHAPS is still the primary payment system for large corporations, owing to its lack of limit on values of payments. However, limits are rising on faster payments, and the length of time until faster payments are the norm was heavily discussed.

For treasurers, the benefit of real-time payments comes largely from improving the working capital usage. Faster collections reduce the amount of working capital required. “To manage your intra-day liquidity fluctuations, you need to move to a real-time treasury,” noted one attendee.

One thing was clear though: real-time is the future for all aspects of treasury, and technology is the only way to get that, which means treasury transformations are inevitable.

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