Morgan McKenney, Head of Core Cash Management for Asia Pacific, Treasury and Trade Solutions at Citi, likewise emphasises the scale of the change brought by digital disruption. “The pace of digitalisation across all industries and societies is rapid and accelerating,” she says. “It’s a cultural and commercial phenomenon in every aspect, likely more so than for any other region.”
McKenney says the explosion in e-commerce across Asia is an accurate reflection of the fast-growing impact of digitalisation across the region. The Asian e-commerce market will be worth US$1.4trn3 by 2020; 59% of e-commerce transactions are currently via mobile4; and mobile wallet transaction volume is expected to total US$60trn over the next five years5. Eighty percent of Asian millennial purchases are influenced by social media6, while time spent on online shopping in Southeast Asia is twice that of US consumers7.
McKenney says digitalisation across Asia and the explosion in e-commerce means businesses are rapidly switching to direct-to-consumer models. At the same time, the payment landscape is becoming ever more digital. Even if there is a lot of cash in Asia, it is digitising at a much faster pace than anywhere outside the region, she notes, while banks, consumers, and merchants are increasingly shifting from batch to real-time.
Asia’s digital environment poses some key questions for treasurers, she says. “Firstly, what’s the impact of new business models on treasury? If your business is moving to sell direct to consumers, that means lots of new consumer payment capabilities, it means more real-time treasury management. Secondly, what opportunities are offered by innovation? And thirdly, how does treasury remain agile in this new landscape?”
McKenney points to Citi’s recent Treasury Digitisation survey, which reveals that amongst the over 70 treasury and finance respondents based in Asia Pacific, over half (56%) are exploring new digital technologies with a view to support the transformational change and development that is happening in their businesses, whereas a majority (64%) are doing so with a view to drive transformative development in their treasury function so as to enable them to assume a more strategic role within their enterprise over time.
So, what are the new technologies that might impact treasuries in the near future? “APIs are here now, and their impact to treasury is expected to be felt over the next two years. At Citi we are investing heavily in them,” says McKenney. “They can help re-engineer workflows and provide real-time information.” She explains that clients can access their balances via API, with the information automatically populated into the treasury management system and constantly updated.
Results from Citi’s recent Treasury Digitisation survey reveal that over 55% of the respondents from APAC are currently exploring or pursuing API technology to obtain real-time visibility over their bank account balances. Treasurers are also exploring or pursuing APIs to facilitate payment status inquiries, initiate payments, and obtain credit notifications in real-time.
RPA, ML and AI
A lot of Citi clients are also focusing on robotic process automation (RPA), McKenney says. “It’s helping to automate manual repetitive processes, for example aggregation of bank statements and analysis of cash positions. Many manual tasks in the end-to-end payment process can be considered for RPA. We do see a lot of clients with keen interest in using RPA.”
As for a more tangible impact for corporates from machine learning (ML) and artificial intelligence (AI) to augment decision-making and improve control, McKenney is eyeing a timeline of one or two years. The present emphasis for APAC treasurers exploring or pursuing ML and AI appears to be on cash management and forecasting. “Citi itself has really made its big data platform differentiated now in terms of quality of data,” she says. “It’s able to provide more intelligent recommendations, whether it’s for cash application/collections reconciliation or to improve controls over payments.”
The bank is applying sophisticated ML and AI technology in its Citi® Payment Outlier Detection service, an advanced data analytics tool that assesses all transactions that flow through its system against a client-specific behaviour profile. It triggers real-time alerts for transactions that do not conform to the routine patterns and behaviours of the specific organisation. The service also constantly updates the client-specific profile to better detect future erroneous payment and potentially fraudulent events.
As for blockchain, McKenney regards it as more “bleeding edge than leading edge” and says it’s a technology that is very much for the longer term. She is, however, enthusiastic about its potential in, for example, digitising the documentation involved in payment processes or in trade. “One of the big potential benefits of blockchain besides being able to move an asset is that you can also be much more thoughtful about workflow organisation,” she says. “You can have different certifications by different parties along a workflow with common visibility of the status. That’s why blockchain is being looked at in trade finance, as an example.”
More broadly, McKenney expects that in three to four years, progress towards truly real-time, intelligent treasuries will be evident. “You’re going to have information that is available wherever you need it, whether it’s in TMS, merchant platforms or other systems,” she says. “There will be more flexible access and greater connectivity with banks for various information and transactional level initiations. There will also be smarter tools to manage cyber risk.”
While technology is destined to help define corporate operations in Asia, Citi’s global clients are clear with their operational priorities and how the bank can help them: “They want operational efficiency and balance sheet optimisation of all their treasury functions and capabilities. That’s always been the bread and butter in transaction banking and we’re very focused on helping treasurers do that.”
The other two are “super exciting objectives,” and relate to helping Citi’s clients grow and improve their own clients’ transactional and service experience. “It feels very rewarding to help our clients achieve sales efficiency,” comments McKenney. “Citi is helping them grow their business with our capabilities and plugging into all these new clearing houses and instant rails, paying into wallets, collecting from wallets. This, especially in Asia, will be a defining feature of business growth.”
McKenney adds that Citi supports a lot of digital and e-commerce clients, noting that creating a virtuous circle between them and their own clients is key to unlocking growth. “It is about making our services more flexible and embeddable to help make our clients’ clients’ experience frictionless and rewarding,” she concludes.