How soon is now? The value of real-time treasury operations

Published: Jan 2019

For many treasurers, real-time financial services are yet to make any headway in the corporate world. Is it time for real-time? We consider some of the advantages and drawbacks for treasurers.

The idea of ‘real-time’ treasury seems like a distant dream when there are still siloed operations, manual processes and operational bottlenecks challenging many corporate finance functions. But slowly the bad old days are ebbing away as new technologies are rolled out and essential real-time infrastructure developments are being brought to life by regulatory decree.

The chatter around automation, virtual accounts, artificial intelligence and even machine learning in a treasury context is reaching fever-pitch. It may be the peak of the hype phase, but next comes delivery and, in a real-time world, these tools could make a huge impact on the way treasuries function within their organisations, and how organisations function within the world.

With downward pressure on finance function budgets, and the pressure of compliance and having the right checks and balances in place bearing down on them too, finding the “sweet spot”, where fragmented treasury systems can come together, seems more than ever like an imperative, says Alok Tyagi, Chief Product & Technology Officer, GTreasury. Without it, he says the job becomes increasingly difficult; with it, treasury can become “a true strategic partner”.

The initial challenge here is to identify the key areas requiring integration, says Tyagi. Only then can connectivity be undertaken in earnest. It’s not an easy task, he warns. “At one end of the spectrum, every function wants to see data in its own way, and at the other end is the strategic vision of what the organisation’s best practice workflows and business processes will look like.” Without detailed prior analysis, these micro and macro demands can seem irreconcilable.

Evolution in action

The idea that real-time has a future at all also demands major infrastructural change. With 41 countries live with an instant payment set-up, and 12 in planning (according to the InstaPay Tracker), the payments space is clearly leading the way. It is also the catalyst for wider change, with developing concepts such as request-to-pay, for example, presenting an alternative to traditional consumer and business ‘push payments’ but also forming part of a broader shift from batch to real-time processing. This is important in the grand evolution of real-time for corporates.

Organisations receiving incoming flows, and accompanying data, in real-time will be able to access their funds sooner, plan outgoing payments based on these flows more accurately, and reduce the liquidity management buffer required to ensure adequacy of funds for their day-to-day obligations. This could result in reduced counterparty risks and, where credit lines are quickly cleared, increased sales opportunities.

What’s more, instant receipts and payments could facilitate more accurate cash flow forecasting and better cash visibility across countries, with faster cash concentration through real-time intra-day sweeps. All this enables organisations to put idle cash to use faster, reducing cash management risk and finance costs. Imagine too that cut-off times and the need to build clearing time into payment schedules are no longer necessary. It all seems too good to be true. There is a caveat.

Real-time systems mean real-time crime. It’s not the technology that is the problem, it is the people. The concept of ‘strong’ or multi-factor authentication adds resilience to any system, says Tyagi. And configurable real-time systems, some now using AI and machine learning, can capture many issues (including sanctions list infringements), checking and monitoring more data than any human can. But employees still do things they should not do. Unless there is a major educational programme – not an online box-ticking exercise but a real open discussion – that brings about a cultural change, cyber will remain a huge and growing threat in an increasingly digital world.


Of course, before companies start planning their fabulous futures or worrying about unseen threats, the whole financial ecosystem has to connect fluidly. For that to happen, a collaborative mindset – with banks, vendors and corporates sharing ideas – needs to prevail. There are stirrings already.

In November 2018, Deutsche Bank published a white paper, ‘Preparing for real-time liquidity’, which put forward the notion of an industry-wide framework for real-time liquidity management. It said such a framework would enable banks to provide a range of value-added services, including real-time currency conversion and hedging, instant cash concentration solutions, intraday cash pooling and optimised short-term investments.

If the industry, and its clients, are to enjoy these benefits it argued that “banks must look to evolve their clearing and settlement architecture, collaborate with TMS and ERP vendors to ensure complete end-to-end efficiency of operational processes, and help corporates develop their own real-time-ready systems”.

Treasury, with its view over the banking relationships, is at the heart of the business transformation.

Jon Williams, Principal Consultant, Mk2 Consulting

The idea of real-time treasury – encompassing real-time payments, liquidity management, FX management and cash flow forecasting – is often seen by treasurers as a long-term vision – “nice for the future-gazers, but with no short-term, practical implications”, says Shahrokh Moinian, Head of Cash Products at Deutsche Bank.

“This is far from the truth. There are tangible steps that treasurers can take now to start building their real-time treasury capabilities – whether it’s integrating instant FX conversions and even instant hedges, or establishing instant cash concentration through solutions such as virtual accounts. These solutions can all add value today.”

It is surely then a matter of letting the market know that most of the technology needed to power real-time treasury is already available. “Whether it’s been noticed or not, the industry has assembled the pieces for businesses to begin constructing their own real-time treasuries,” says Moinian. “For treasurers, it’s a question of reaching out to their partner banks and working in tandem to piece the jigsaw together.”

For Jon Williams, Principal Consultant, Mk2 Consulting, the real-time imperative is gathering pace and treasurers are advised to get on board. Whether or not they want to make use of real-time payments, their wider adoption challenges all businesses to become more real-time. “Treasury, with its view over the banking relationships, is at the heart of the business transformation.”

Not there yet

However, whereas real-time information could become a necessity for all, real-time payments will only be of use for some. “Unless a company is consumer-facing, its business is not about 24/7 operations,” explains Marcus Hughes, Director of Business Development, Bottomline. “In any case, switching to real-time requires a big shift in culture and business practices.” For now, with the current relatively low limits of immediate payments systems (UK and Singapore are leading the push for higher limits), B2B is still entrenched in batch, he notes. And whilst real-time high-value funds transfers are available for corporates in the form of central bank RTGS systems, these are still subject to normal cut-off times.

And whilst real-time liquidity management could be beneficial, “same-day is still okay because corporates aren’t being charged intra-day interest, yet”, notes Hughes. That may come, he adds, but until then, using SWIFT gpi to execute, settle and confirm cross-border, cross-currency transactions in around 30 minutes is sufficient for many.

Indeed, the information that gpi gives is possibly more important than the speed of payment, Hughes adds. With the planned roll-out in 2019 of a gpi iteration that offers a single view of a corporate’s multi-banking activities, it may be all that’s needed in B2B for now. The gpi platform will become real-time if the world’s immediate payments systems become interoperable. This will enable 24/7 for corporates, “but only if the demand is there”.

It seems that although there are advantages for all, the immediate pressure to get on board with real-time is in the consumer payments space. Indeed, as Williams notes, “customers now expect to know immediately when they have paid, and to see that reflected on their statements”. Efficient cash application procedures and systems are becoming extremely important.

“With many businesses still working on daily cycles, the always-on, connected nature of commerce does not seemingly lend itself to end-of-day statements and reconciliation,” Williams comments. For this reason, open banking or access to accounts via APIs will go hand-in-hand with the new instant payment schemes if the ‘instant corporation’ is to be brought to life.

To this end, core system vendors such as GTreasury are making headway. “We are really proactive with our API library as a major foundation of what we offer as a product,” explains Tyagi. “We want to have as many APIs with the banks as possible, but it helps to have a client-sponsor in that process to work with their banks and drive the programme.”

Some banks are less advanced in this respect than others, notes Tyagi, batch systems still sitting behind their processes. This suggests to him that “a value argument” is still to be made over what is real-time – what delay is acceptable for treasurers – with some feeling that ‘real’ real-time is perhaps not entirely necessary.

Limited interest

Indeed, for Fabrizio Masinelli, Panini’s Group Treasurer – Accounting Department, real-time payments are generally “of little interest to treasurers”. He accepts the advantages to retail operations or where cash-on-delivery is the model but for medium to large B2B operations “they will not deliver any real added-value”. He is, however, concerned that where real-time payments could create new problems around cyber fraud, treasurers “will have to change the way they work”, necessitating a major revamp of policy.

Alexandre Bousquenaud, Senior Director, Head of Treasury Advisory Continental Europe, Redbridge Debt & Treasury Advisory is concerned too that, for an international business, the value of real-time payments will be limited unless foreign exchange exposures are managed in real-time. For group companies that are net payers, adopting real-time may experience an increase in their working capital needs, potentially requiring additional external financing, intra-group funding or guarantees.

The earlier we receive a payment from our customer, the sooner we can make the delivery. Parcels often get held up in customs because there is a surcharge that must be paid.

Carola Schmitz-Becker, Vice President, Corporate Treasury, DHL

What’s more, he says, real-time payments systems are “yet another type of payment added to the long list of payment options open to corporates”. This can “further complicate their daily cash management activities”. He concurs with Masinelli, noting that treasury functions will require a regular review and amendment of processes and controls to mitigate new risks, maintain efficiency, and provide appropriate staff training.

Nevertheless, Bousquenaud believes that real-time incoming payments “can help improve the client experience as they may enable the faster delivery of products and services, providing the treasurer with the opportunity to play a more commercial and strategic role to the organisation”. Even if real-time payments are not widely used within an organisation, they can still “act as a last resort solution”, to avoid missed payments that can lead to penalties and reputational loss.

Opportunities aplenty

The view that real-time presents risk as well as benefits is espoused by Jonas Hedman, Associate Professor at the Copenhagen Business School. As an expert in how digitisation is transforming businesses and society, he sees that banks have a potential issue too. Their ‘old world’ was defined by batch processing and cut-off times, allowing them to predict how much money would be on their books at the end of each day. “In the real-time world, payments happen 24/7, so this is no longer the case. And the implication is that if banks cannot get a control over this, it might make them a bit more reluctant to lend to individuals and businesses.”

Whilst instant payments are a positive development for end-users, there are risks and challenges that the financial ecosystem needs to think through and solve. Nonetheless, Hedman is certain that the world will become real-time and that eventually all countries will be operating an instant payment and clearing infrastructure. More cross-border instant payment systems will emerge but, he says, “what will be most exciting is the value-add services that banks and fintechs build on top of these payment rails”.

One business that is embracing the real-time opportunity is Deutsche Post DHL. Carola Schmitz-Becker, Vice President, Corporate Treasury at the firm says her team started investigating real-time in 2017. “Particularly, we are interested in implementing a real-time zero-balancing system that would enable us to do intra-day sweeps from local subsidiary accounts into a master account,” she says. “This would give us an immediate overview of our aggregated liquidity positions across countries, which would help us better forecast cash flow and deploy free cash.”

The idea of real-time payments too is seen by Schmitz-Becker as a potential benefit, speeding up Deutsche Post DHL’s operational processes. “The earlier we receive a payment from our customer, the sooner we can make the delivery,” she explains. “Parcels often get held up in customs because there is a surcharge that must be paid. Instant payment means there is no additional lag introduced to this process and the shipment can get back on the move.”

The possibility of rolling out new channels using real-time payments is one that she is exploring. “It is very applicable to eCommerce. We operate several online shops and I see instant payments and the fact you can debit directly from a customer’s bank account potentially replacing expensive credit cards schemes in this domain, or at least putting pressure on their pricing.”

Currently, low per transaction limits, referred to previously by Hughes, restrict the applicability of most instant payment schemes to treasury operations, says Schmitz-Becker. These are slowly moving upwards (the UK, for example, is now £250,000 and Singapore at $200,000, and counting). But, like Hedman, she says banks also have to develop their own instant payment offerings further. “I am yet to find one that interfaces with our ERP system. This is crucial for us in order to deliver efficiency and promote straight through processing.”

Whilst no one can be certain of the outcome of the real-time trend for corporate treasury, Schmitz-Becker believes that there could be a lot more standardisation and automation in treasury departments. This will likely be driven by new technologies that are fully integrated, using APIs, building a digital ecosystem.

With the likes of the EU’s PSD2, the UK’s CMA Open Banking, and the Hong Kong Monetary Authority’s draft Open API framework all facilitating open banking, closer integration moves a step nearer. It is the tip of the iceberg in real-time terms, but for the large corporates with SWIFT access, Bottomline’s Hughes points out that they will “really need to see a significant value-add from open banking before they run after APIs”. If suitable progress is made, Schmitz-Becker suggests that “it might reach the point where treasurers are just dealing with exceptions and spending most of their time focusing on pure strategic matters”.

Time to act

Real-time clearly has a lot of unfinished business to attend to. Lothar Meenen, Global Head of Corporate Cash Management Sales at Deutsche Bank believes that it is important now for treasurers to analyse what is happening in their industry to stay ahead of their competitors.

“There is also a need to engage stakeholders in the business, especially around IT, to make sure that the business is ready to adapt and change in line with market forces. On top of that, treasurers need to develop a real-time mind- and skill-set,” he advises. “This is a lot of work, but instant payments and real-time treasury are not passing trends, they will become the ‘new normal’. Treasurers must prepare for this”.

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