Technology is transforming corporate treasury, introducing a new level of speed and data quality to payments and cash management. In the first of a series of three podcasts, Standard Chartered’s Steve Pairman, Head of Cash Product, UK and Marion Reuter, Regional Head of Transaction Banking Sales Europe, explain how digitisation and technology is transforming the role of treasury via the provision of both real-time, and unprecedented rich and informative data. A treasurer really needs to think how they are going to use this new data to both better manage treasury and help the wider business perform, explains Pairman.
In the past, treasury departments typically made their own, long-term strategic decisions. Today, real-time data allows treasury to get much closer to the business, adjusting strategy in response to instant payments or online collections. Elsewhere, it allows treasury to tweak funding levels in response to changes in financial markets highlighted during the COVID crisis, acting on a more ad-hoc and flexible basis that moves in line with the dynamic needs of the business. “Technology allows treasury to react to disruption much more quickly as things become less predictable and get closer to what is going on in the business,” says Reuter, explaining that this technological ability also encapsulates today’s 24/7, self-sufficient or future-proof treasury. “Treasury teams won’t be in the office 24/7. Your system has to have the right level of automation and be as self-sufficient as possible,” he says.
Today’s access to rich real time data brings the ability to process as you go, rather than wait for certain transactions, details Pairman. For example, real time data allows firms to update their liquidity positions in an interactive way, fund their positions in real-time rather than subject to restrictive cut off times, or ensure real-time reconciliation of receivables, ticking off transactions as they arrive through the day against working capital and transforming intra-day cash management.
Real-time data is also changing multi-banking relationships. Digitisation allows instant intra day cash management across multi-banking systems, giving unparalleled real-time oversight, or as Pairman says, a “good grip” on all banking positions globally across payment types. “It’s not just cross border wires and the actual balances; more payment types are being used both on the sending side but also receiving side and this is an important source of real-time data,” he explains.
In another example, real time information allows automation around report generation, providing all the details for systems to generate a report for legal entities around automatic funding or repatriation, explains Reuter. However, she warns that real-time APIs also hold challenges for treasury teams with multiple banks – the API technology behind real time data is still bank, or system, specific. Clients need to have a uniformed and audited way to ensure that their systems are picking up the details from different bank and system providers, she says.
Technology is driving transformation in firms’ supply chains, allowing companies to remove the amount of paper in their supply chains and associated documentation. “Technology is improving supply chain visibility around goods delivery and invoices details, settlement expectations and real time information on the movement of cash and how goods are progressing throughout life cycle,” says Pairman.
However, he cautions that the quality and correct understanding of data is vital. “Bad data leads to poor decisions on working capital; understanding the data is key,” he says, linking this to the need by many corporates to beef up internal teams’ skills and resources to better manage data analysis. Incorrect data can disrupt the supply chain leading to incorrect planning around pay cycles or invoice management, and poor forecasting. “What does the data mean? Have we got the right data analysis to use it in the right way?” he asks. AI and blockchain technology are helping, however blockchain depends on all parties using it for the security benefits. Moreover, he said, single and shared databases are still the way forward for a lot of firms.
No one size fits all
The need to link and combine multiple systems across a company has posed one of the biggest challenges to treasury digitisation. For some companies one large system provider is commonplace, but these solutions are often too costly for smaller companies which tend to have various systems in place, explains Reuter. “There are tools in the market in terms of consolidation around these systems,” she says, but counsels that there is no perfect solution, and progress is slow. Moreover, concerns about cloud-based solutions have also slowed the pace of digitisation. “Everything” is now in the cloud, but firms’ migration to cloud based systems over local data storage has been cautious. “Companies need to migrate to a new world in terms of systems. For a long time, there were concerns about cloud which didn’t help.”
From the top
Reuter also highlighted that the key impetus to corporate digital transformation must come from the top. “Treasury is not a department that can work in isolation,” she said. Corporate boards need to be across the role of digitisation in lifting a company and provide the human and financial resources to truly automate processes. “Digitisation is more than just payment flows and financial streams,” she said. “It is about how the company is digitising the products it sells and has a broad scope. Treasury alone can’t move the needle; it has to come from the top.”