The core treasury practices around cash, liquidity and trade are increasingly demanding. The notion that technology is some kind of cure-all is prevalent today, but there is more to optimising performance in each of these areas than simply implementing the latest tools. Subject matter experts from Citi discuss the role of digitisation in the real world and assess the anticipated benefits of innovation for the global treasury community.
Director, Head of Asia Trade Finance, Citi
When working with corporate clients and their extended supply chains to meet trade financing needs, Kanika Thakur, Director, Head of Asia Trade Finance, explains that Citi takes a holistic view, encompassing the full spectrum of product and service offerings.
A major area of client focus today is the creation of more balance-sheet efficient liquidity to optimise their working capital across both buy and sell sides. If the bank can help extend payables, decrease sales outstanding and reduce inventory held, clients could benefit significantly from improved working capital metrics, with liquidity and balance sheet health boosted, and counterparty risk and relationships better managed.
At a macro level, clients are also challenged by the current fractious nature of politics in global trade. Citi is primed to monitor the space closely. It understands how trade tensions impact clients and the resultant geographical diversification of trade flows; it is ready to advise on the most appropriate response.
Arguably, technology holds the key to unlocking required efficiencies. The volume of conversation has risen notably in recent times around innovations such as artificial intelligence (AI), robotic process automation (RPA), big data analytics and distributed ledger technologies (DLT) such as blockchain. The number of fintechs surfacing has increased options massively, creating a real buzz of excitement. In Citi’s trade team, there is now a strong focus on moving towards an integrated digitised future, not just for clients but for the whole ecosystem.
This creates a digital agenda aimed both at streamlining client interactions, and the bank’s own operations. With Citi currently one of the few banks using optical character recognition (OCR) to automatically extract data from trade documentation, it has led to a stepping stone for the wider adoption of AI and the extended roll-out of RPA.
The nature of trade though is that there is a significant dependence within the ecosystem on third parties such as shippers, logistics firms and customs agents. This is where solutions such as blockchain will become critical, at least in the medium term. Enabling all parties to access a common secure platform is essential for the digitisation – and thus optimisation – of the ecosystem.
Citi has established trade sector projects to promote interest and uptake amongst its own corporate and institutional clients, as well as engaging with wider industry collaborative efforts. It also has three innovation labs for its Treasury and Trade Solutions (TTS) business to stimulate innovation and help identify potential partnerships in the fintech community.
The reason for such involvement is clear: an ecosystem of partners has to take the digital pathway if it is to be successful; it cannot be a unilateral effort. The immediate benefits of doing so include easier and quicker transacting and enhanced risk management and controls, this paving the way for the application of AI and increased automation.
Of course, the movement of the entire ecosystem to intelligent digital processing suggests bank services will be largely commoditised. For Citi, differentiation comes in part through its scale, with a footprint in over 100 countries. The need is to harmonise across these locations and the bank has been diligent in rolling out universal offerings on its global platforms.
Understanding clients’ trade ecosystems, drivers and goals is key to delivering real-world digital solutions. Citi’s ‘co-creation’ process engages fully with its wide network, setting up whiteboarding sessions, for example, to deep dive into specific client, sector and industry needs. From here it will leverage its pan-industry understanding to offer best practice coaching and the most appropriate solutions going forward.
With access to its vast TTS network, Citi’s trade function draws heavily on curated data and statistics to bring industry KPIs to the attention of individual clients. At the sharp end, this may help them, for example, reduce their DPO whilst simultaneously helping their own suppliers’ cash flows by introducing supplier finance programmes.
As the transformative power of digital rolls out across the trade space in the next few years, integrated products and services that have a familiar ‘look and feel’ will become critical to the success of trade ecosystems across Asia (especially along the Belt and Road corridors).
Citi’s role as a trusted partner is seeing it bring real-world solutions to bear as it continues to monitor and respond to the shifting macro environment in which clients operate.
MD, Head of Core Cash Management, Asia Pacific, Citi
Three words capture the combined focus of Citi’s cash management clients, according to Morgan McKenney, MD, Head of Core Cash Management, Asia Pacific. These are Instant, Intelligent and Personal.
The development of an ‘Instant’ backbone for Citi has seen it plugging into each new instant payment scheme as it is rolled-out. This is making bank account-to-account transactions for low-value domestic payments achievable anytime, on demand.
The ‘always on’ commercial imperative has also seen Citi launch a suite of API connectors facilitating ‘instant’ processing. In addition, Citi has extended its virtual card accounts footprint, using existing credit card rails, which is already garnering favour with Asia’s burgeoning online travel agency players who use it to pay hotel and airline suppliers.
The theme of ‘Intelligent’ plays out through Citi’s global data lake, itself built around the trillions in value of payments transactions it processes daily. Each can be tracked via SWIFT’s gpi to give treasurers transparency over payment status and the conditions under which they are being processed (such as fees and FX rates applied). Data from gpi is being embedded into the CitiDirect BE® front-end for pilot clients today, with broad commercial release shortly.
Data and AI are also being brought to clients in new solutions to help them better manage their payments activity with the upcoming launch of Citi’s Payment Outlier Detection service. This configurable AI-based solution, built in Citi’s Dublin Innovation Lab, monitors customer transaction behaviours, detecting and reporting outliers in advance of the payments being sent. Applied across a shared service centre environment for example, this could prove invaluable in screening industrial-scale payments activity.
Emerging from Citi’s investment in the fintech, HighRadius, Smart Match applies third-party AI know-how to help customers reconcile incoming payments, using intelligent software to significantly increase the efficiency of processing even the most ‘data-challenged’ of receivables.
Related to the ‘Personal’ theme, with digital disruption impacting almost every industry, Citi’s corporate clients are increasingly able to reach their retail customers directly, leveraging Citi’s instant payments and collections capabilities globally. Using wrappers such as digital wallets and now QR codes, businesses can now reach retail consumers how they want to pay in a specific market while immediately associating each transaction with the relevant individual customer, creating automatic and immediate reconciliation in their system of record.
The shift from traditional B2B-only to include B2C and C2B marks an important shift in the cash space. It is shaping Citi’s product development areas of focus and enabling treasurers to become the sales enabler for their business.
Whether working in-house or with fintech partners, embedding innovations such as AI, RPA and DLT into Citi’s solutions and deploying an internal ‘data horizontal’ model (covering the broadest sweep of functions) enables the bank to deliver competitively differentiated solutions and great customer experience for their clients. This includes facilitating a customised approach to optimising balance sheets, data-driven decision-making, optimising treasury, powering sales growth and supporting clients’ digitisation efforts to respond successfully to digital disruption.
Innovating in this space requires early prototyping with clients as well as co-creating with customers to make innovation mainstream. Citi co-creation workshops with clients are providing innovation insights to support how customers are re-imagining business models and processes end-to-end.
Treasury has been the traditional buying centre for cash-focused solutions. As new business models are necessarily being created to meet the onset of digital, Citi is now engaging more with operations, product, marketing and sales teams. Treasury is now at the heart of a much deeper and broader ecosystem and the cash management products being offered by Citi – and the way they are collaboratively developed with fintechs and clients who are often disruptors in their own space – reflect this.
The need to differentiate in the cash space, where digital could arguably commoditise processes, has seen Citi adopt a ‘digital delight’ programme. In essence, digital must be executed better than the competition.
Consumers know when something works well; treasurers are no different. Delivering the right experience is therefore Citi’s differentiator both for new digital natives operating solely in the e-commerce space as well as for existing ‘traditional’ clients.
Having an innovation ecosystem that reaches across Citi’s network of over 100 markets, which itself represents a depth of experience and knowledge of customer behaviours, is a source of ideas around the newer technologies that can be shared and leveraged for clients right across the board, from commercial, to consumer, to institutional.
Cash management in the future will continue to reflect the disruptor-driven reshaping of business models. No industry will be spared.
The next decade or so will be about connecting devices and using AI to automate flows. The Internet of Things (IoT) will become the source of information and status about almost anything, from healthcare to car care.
In the treasury management space, Citi’s strategy is thus set on building a connected financial ecosystem for global commerce to support its clients. In cash management terms, intelligent and real-time payments network connectivity, and simplicity and optionality for customers is driving innovation to the point of becoming ‘business-as-usual’.
MD, Regional Head, Liquidity Management Services and Financial Institutions, Citi
Digital disruption is impacting practically every industry and it is becoming a key factor for every treasurer and CFO to navigate, says Sandip Patil, MD, Regional Head, Liquidity Management Services and Financial Institutions.
To this can be added the currently heated nature of geopolitics and the impact of ongoing market volatility. The problem is that not every finance professional has the time nor the resources to fully manage these obstacles as they assist in expanding the business in this disruptive environment.
In a liquidity management context, treasurers always need delivery on the fundamental KPIs. With the changing environment meaning this is not always easy to achieve, Citi’s solution focus is set on helping realise these goals. Indeed, by establishing a parametrised universal platform within which treasury clients can automate responses to many of the external and policy variables, the challenge of assisting growth is solved.
Shifting surplus funding and matching currency needs of different entities within a group, for example, is being handled automatically (even across different banks), ensuring treasury is only using bank liquidity when needed and is always optimising their own internal surplus. Doing so ensures treasury’s policy and KPIs are met as a matter of course; assisting growth now becomes the focus, not worries about the day-to-day liquidity of operating entities.
To the cutting-edge
Even with a core platform capable of controlling group liquidity, there is still a vital role to play for cutting-edge technologies such as AI, machine learning, blockchain and advanced data analytics.
Take the latter, for example. Within Citi’s vast global transaction banking network, it is harvesting huge amounts of data from customer activities and cash flows. This activity is now being mapped and presented as one ecosystem to a client. This helps in the visualisation of their banking structures and patterns of liquidity within, enabling existing cash flow forecasting methods to be applied as inputs.
Treasury policy and governance programmes associated with liquidity data can then be fine-tuned. Perhaps more important is the industry benchmarking opportunity – for a host of KPIs including liquidity and forecasting efficiency – that this data presents.
Treasury always has an internal target but having access to sector and industry best practice – at a national, regional or global level – drawn from Citi’s client analytics, takes each of those KPIs to a new level of delivery.
However, even with Citi now engaging in various pilots and projects that are exploring the possibilities of AI, blockchain, data sharing and open architectures, the banking sector in general is only just scratching the surface of their potential. Collaborative development is the key.
Having long since developed a culture that promotes innovation as an inclusive activity, Citi works broadly with clients and other institutions (including ‘outliers’ such as the insurance sector) to turn possibilities into real-world solutions.
The bank understands that creating an industry-wide ecosystem based on new technologies will provide maximum benefit for all. Although many innovations are active across the sector, seeking to build such an expansive ecosystem will generate some tension between the collaborative and the competitive and this must be overcome. Naturally, players with demonstrable success in this space will lead the experimentation towards this end.
For Citi, by working with partners that are not in direct competition – those in non-overlapping regions or those in other sectors such as insurance, for example – progress is evident as it continues to integrate innovation within its own ecosystem.
Predicting the shifts of the regulatory landscape as new technologies emerge, and responding accordingly, is the next challenge. Having access to the authorities is advantageous in that it helps shape the future landscape in line with real client needs.
“Citi has always played a critical partnership role with regulators across all our markets eg in China’s journey of liberalising its economy, we have partnered closely with the Chinese regulators from free trade zone establishment to changing documentary processes. We continue to represent our clients’ current and emerging needs proactively. It has helped us bring a positive change in the regulatory paradigm and also helped our clients deploy the right solutions to benefit from the regulatory changes using digital tools.”
For treasurers, one of the most likely future scenarios is the dominance of real-time ecosystem from payments to foreign exchange and liquidity. In liquidity terms, value dates will become ‘value moments’ as treasuries become ‘just-in-time’ providers of liquidity across the group entities. Further, treasurers are looking forward to the expansion of open banking. By leveraging APIs, banks will be able to support customers with pooled data drawn from across the industry; bank-as-silo will no longer be sufficient. Citi continues to help its clients with multi-banking solutions. With the rise of AI and robotics in a changing and volatile world, it will similarly enable companies to attain an otherwise impossible near-perfect imagination of, and response to the future.
Blockchain is being lined up as the secure system of record for many different applications, and online marketplace-based economies will eventually allow investors and borrowers to create new private and public liquidity marketplaces. This will enable corporates to become participants in the secondary markets. Citi continues to incubate such ideas in its innovation centres.
Treasurers and CFOs need to be even more capable of operating in a dynamic world, staying alert to the possibilities of innovation as well as digital disruption. Citi’s strategy is about preparing such stakeholders for this environment, offering ideas and insights and, through effective collaboration with its partners and the industry, the means of future-proofing client business models with innovative real-world solutions. The future is here!