Deel augments in-house TMS to enhance global liquidity

Published: Jun 2024

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J.P. Morgan Payments logo

Global payroll company, Deel, helps its clients pay employee contracts across the world in 150 currencies. To get the most out of its liquidity, it rolled out a bespoke multi-currency notional pool.

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Launched in 2019, Deel provides a payroll platform to pay staff or contractors’ salaries around the world, helping its clients transcend national borders to access the best talent wherever they may be. Its treasury structure includes 710 bank accounts for more than 120 wholly owned subsidiaries. Each month, it receives customer funds in 27 currencies and pays out in 150 currencies.

Timing is a critical aspect of payroll as salaries have to be paid on time. However, different countries have different payroll cycles: some pay on a monthly basis, such as in the UK; others twice a month, like in the US; or every week as in Mexico. Deel’s challenge was to have the money available locally to execute the payment on time.

“We must always ensure that the money is in the account in local currency to cover payroll on time, with no room for error,” explains Dor Barda, Senior Director of Finance at Deel. “We receive pay-ins of US$800M a month and pay out the same amount, but in 150 different currencies. Sometimes the money gets stuck at an intermediary bank, and we don’t know where it is.”

The company uses its own cash to prefund the local accounts up to two months in advance, which is critical – especially in countries where the central bank needs to approve the currency exchange.

“This led to local liquidity buffers, which could not be utilised by Deel’s central treasury. The risk of local overdrafts with the associated costs meant cash [was sitting idle]. These were the main areas we focused on when we began to develop a structuring solution in partnership with the treasury team,” says Vivek Chikballapur, Head of EMEA Liquidity and Account Solutions Specialists, J.P. Morgan Payments.

As a first step to enhance Deel’s global liquidity, the company decided to build its own treasury management system (TMS) to deliver the functionality and visibility it required. J.P. Morgan Payments assisted with SWIFT MT940 statements for end-of-day bank account balance and transaction information, increased automation in the treasury processes and rolled out application programming interfaces (APIs).

“Today, we can see all of our cash and execute payments and foreign exchange (FX) conversions and so on from our centralised TMS,” says Barda.

Following its TMS overhaul, Deel then moved to a single entity multicurrency notional pool, based in Luxembourg, where the liquidity consolidates in multiple currencies across the globe in one place, completely under the purview of the treasury team. Impressively, the solution was implemented in six months.

“Centralisation and visibility were at the forefront of our minds when we were designing this bespoke solution,” says Chikballapur. “Having one liquidity structure in a single place, where Deel could gather the majority of its global liquidity in multiple currencies, was a top requirement. The multicurrency notional pooling solves that problem and helps Deel make better corporate decisions.”

The last leg of the solution is leveraging liquidity in one currency to make payments in other currencies. “This hub-and-spoke model – the hub being the centralised notional pool, and the spokes being payments made from different local accounts in different countries – is what we designed alongside Deel and tailored to their needs,” he explains.

The advantage of a multi-currency notional pool is that the company doesn’t need to do an FX conversion for each payment. For example, if Deel has liquidity in U.S. dollars but not enough liquidity in euros, then it can still make the payment in euros because it has liquidity in U.S. dollars.

“The business can decide when it’s the right time to make the conversion, as it has complete flexibility when it comes to volumes, timing and the markets it uses to execute the FX transaction,” explains Chikballapur.

The solution also changed the way Barda views Deel’s liquidity policy. “The new solution allows me to fund the accounts in a very short period. Plus, we are now receiving interest on our liquidity,” she says.

“Additionally, instead of using spot rates to convert, we can be more strategic and use derivatives to anticipate currency volatility,” she says. “We develop our forecast, do our cash sweeping through the API, convert our currencies and buy derivatives, which is another layer that we are building on top of the structure.”

Barda was most impressed with J.P. Morgan Payments’ APIs. “We can sweep funds from our many pay-in options in different currencies into the notional pool, which is done via APIs and Swift. I can see the amount that I need to fund and action it with the press of a button.”

She uses the example of a shortage of funds in Deel’s Netherlands account when it needed to make a pay-out. “We made a call to sweep and in two minutes my funds were in the Netherlands account, so I didn’t miss my payroll deadline,” she explains.

The combination and interoperability of the technologies that come together in one robust solution is impressive, according to Chikballapur. “The API on top of the structure is giving that set-and-forget structure to enable a DIY treasury management culture. This is the direction of travel for treasurers.”

Barda adds, “I am now so flexible that I can offer my customers payments every day. So if they want to hire someone, I don’t need to specify a cut-off day for when customers need to onboard employees because we can calculate and pay all the time.”

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