As the modern financial system has become increasingly complicated, treasury solutions have evolved accordingly to help teams manage FX risk, cross-border payments, inflation and reconciliations, says Ola Oyetayo, CEO at cross-border payments platform Verto. During the past 15 years, digital treasury solutions “have really beefed up and become pretty sophisticated”, he adds.
“The adoption of innovative technologies within treasury is still at an early stage, the signs point to much broader adoption over the next three to five years as the relevance of these technologies to treasury becomes much clearer,” says Himashi Soriano, Managing Director, APAC at the Association for Financial Professionals (AFP). “The move towards predictive and prescriptive analytics will elevate treasury performance and help mitigate several current risks, from forecasting to cybercrime. Modern technologies will certainly redefine what is possible.”
Eric Aillet, Product Manager, Financial Messaging Marketplaces, Finastra, says there is a “clear appetite” for treasuries to switch to the latest technology, but the transition can be slow for a number of reasons. “As a cost centre, treasury needs to justify return on investment to trigger the related investment in technology,” he says. “Additionally, not all treasury ecosystem players, including banks, software providers and internal systems are at the same level of readiness.”
Another factor is risk – because treasuries are by their nature risk averse, many do not want to be first movers, but prefer to adopt proven solutions. This is a point also made by Singapore-based independent treasury consultant David Blair. “Because treasuries tend to be risk averse, most do not rush into new technologies, preferring to be fast followers.” Compared to other functions of a business, treasury “is in the middle of the pack” in its use of advanced technology.
Stephen Randall, Global Head of Liquidity Management Services, Treasury and Trade Solutions at Citi, says of treasuries’ use of technology: “As you’d expect, there’s a wide spectrum out there.” Drawing on Citi Treasury Diagnostics’ global benchmarking survey, he and colleague Duncan Cole, Principal, Client Advisory Group in the Treasury and Trade Solutions division of the bank, say there is good news and “not so good news” about the use of technology in treasuries.
The good news is that companies are continuing to deploy technology to advance treasury, with 68% of survey respondents having already deployed a treasury management system (TMS) or enterprise resource planning (ERP) treasury module. Almost two-thirds of respondents are looking at transformative opportunities across both their core business and treasury function.
“Less than half of respondents now report multiple e-banking platforms at each location, which indicates a shift to data transmission from banks, rather than reliance on accessing multiple bank portals,” says Cole.
The not so good news is that many companies have “significant gaps” in deploying technology, with low levels of automation and connectivity. For example, only 63% of companies concentrate cash at a global or regional level, despite the availability of automated global pooling solutions from major banks. Nearly a quarter (23%) of companies have incomplete (less than 75% of total cash) daily visibility over cash positions. This is despite the fact that visibility and centralisation of cash and risk are a “core mantra for treasuries”, say Randall and Cole.
Randall adds: “Straight through processing is key for timely decision-making and reducing the risk of fraud. However, 79% of companies have not fully integrated their TMS/ERP platforms with banks despite existing well-established standards. This extends even within the firm: 64% of companies report that their TMS is not integrated or only partially integrated with their ERP.”
Another shortcoming is cash forecasting inaccuracy – a “key pain point for liquidity planning” says Randall. Of those surveyed, 80% were reliant on spreadsheets within their technology stack for forecasting. “While it is true that more than half of companies find their TMS technology does not support cash forecasting, today, fintechs and banks (sometimes in partnership) provide viable solutions.”