The pandemic has accelerated the adoption of digital treasury and payments solutions – so what should treasurers bear in mind when embarking on a digital journey? J.P. Morgan’s Lia Cao shares her views.
Lia Cao
Head of Wholesale Payments Solutions and NAMR Corporate Sales
Going digital: what treasurers need to know
To what extent has the pandemic accelerated the adoption of digital treasury and payment solutions?
Digital solutions and digital transformation have always been top of mind for treasurers. What I think the pandemic has done is greatly accelerate that trend – some people say by three to five years; some people say by as much as ten years.
We did some client surveys right after the COVID lockdown, and 70% of the treasurers we spoke with mentioned digital transformation as a key priority. For one thing, COVID has really emphasised the need for automating manual processes. Another driver is the need to have digital tools that can provide visibility, transparency and control over cash balances and liquidity.
In terms of digital solutions and tools, APIs are relatively easy and quick to implement, and can provide immediate support, so we are seeing an increase of 60% or more in the number of users on our APIs. Another example is the adoption of electronic signatures, which has been greatly accelerated by the difficulties involved in getting physical signatures during lockdown.
Why do treasury and payments leaders need to adapt, and what does that mean in practice?
Where business models are concerned, a lot of clients have had to adapt, particularly by pivoting to ecommerce and online interactions with consumers and suppliers. Even diversified industrial companies are now launching B2B marketplaces.
Treasury and finance teams need to be able to support these changes to business models, alongside the process changes driven by COVID lockdowns. There are six dimensions to this:
- Automation of manual and physical processes using solutions such as e-signatures and APIs.
- Preventing and detecting fraud and cyberattacks, with heightened demand for account validation services as well as the use of AI and machine learning.
- Greater focus on visibility and predictive tools that enable companies to produce timely and accurate cash flow forecasts, and thereby optimise and manage their cash efficiently.
- Optimising liquidity structures, for example by using virtual account management (VAM) solutions to mobilise liquidity globally.
- Reducing cross-currency and counterparty risks in a volatile environment with multi-currency pooling and FX solutions that support local payments without the need for local accounts.
- Being able to pivot quickly as the business model changes – treasury is a strategic partner for the business, and it needs to enable the necessary changes to payments, receipts and FX management.
We are seeing many clients take action across all six categories.
What role can treasury play in connecting internal stakeholders, and why is this an important component of digital adoption?
In the past, treasury teams were often completely separate from payments teams or business teams – they didn’t even know each other, let alone work together. But they are much more powerful when they do work together.
In our treasury discussions, technology is now part of the discussion, especially around APIs and real-time payments. And we also see treasury and procurement teams partnering with each other – the procurement team is in charge of supply chain mandates, and treasury has a very focused interest in that, because of the implications for working capital discussions.
In addition, we are seeing more focus on environmental, social and governance (ESG) KPIs and the role the procurement team can play in delivering those KPIs by ranking suppliers on their ESG performance. We can then design solutions so that more ESG-focused suppliers get advantageous financing rates as a reward for their behaviour.
How should treasurers approach a digital adoption initiative?
When we discuss digital adoption with clients, we often suggest that they start small, but start today. In some people’s minds, it’s a big transformation that requires money and technology resources and disrupts their existing processes. But by starting small, we can look at specific pain points and co-create things that can fit in with clients’ existing processes and technologies.
For example, implementing an API Excel plugin doesn’t require an understanding of coding – clients can download it like an app and use the functionality right away to help them with their day-to-day activities. That way they can see immediate benefits, which can help with the internal business case when it comes to the next step.
It’s also important to pick the right banking partner or fintech partner, so you have someone who is with you on that digital journey. So treasurers should look at the strength of their potential partners, as well as their commitment to investing in innovation. Our strategy is to be a global one-stop-shop – a global, integrated banking partner that can help our clients throughout the entire digitalisation journey.
How is J.P. Morgan supporting companies as they adopt these types of solutions?
We have a broad spectrum of clients, from firms in industries that are concentrating on keeping their heads above the water, to clients that are growing exponentially. When it comes to supporting them, we really just focus on their needs and on how we can help them do what they need to do in a way that is fast, easy and secure.
One focus is on freeing up the treasury team from the manual processes involved in aggregating reports to get a liquidity position, so that they can think about more strategic tasks. We are also doing a lot to make payments easier and help clients simplify their account structures using virtual accounts and global pooling solutions. Where virtual accounts are concerned, step one is to move away from manual processes – but step two is to implement even more advanced solutions like algorithm-driven decision making.
FX is another important topic. A lot of clients still have a team dedicated to managing FX risk using manual spot trades, but there may be better tools that can automate the process, like sweeping solutions.
At the same time, we are offering our clients more choices and helping them design solutions that really meet their needs. Within those choices we are very focused on industry-specific solutions – that’s why we acquired InstaMed, a highly digital solution for healthcare clients, and WePay, which is a tailored solution for ecommerce clients. We also partner with over 100 fintech companies within our ecosystem so that we can offer more services and options to our clients.
Last but not least, we are excited about exploring what’s coming next. Developments here include Onyx, our new business unit that focuses on next generation payments opportunities powered by blockchain technology. We are also having very active discussions with clients about moving cross-border payments on the blockchain in a real-time, seamless manner.
