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.
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.