Treasury management systems have changed markedly over the past decade, with many adopting a broader range of functionalities as well as different deployment models. In theory, companies of all shapes and sizes are now able to leverage these solutions – but to what extent are corporates in Asia Pacific taking advantage of next generation treasury technology?
Treasury management systems (TMSs) are the mainstay of many corporate treasury departments in Europe and the United States. Indeed, PwC’s most recent Global Treasury Survey found that 80% of respondents in Europe and the US had a fully integrated TMS. Asia Pacific (APAC), however, has tended to lag behind where TMS adoption is concerned: the same study found that less than half of treasury functions in Asia use a TMS.
There are a number of reasons why this is the case, not least of all the way in which the treasury profession has developed in APAC. “In Hong Kong and Singapore, two of the region’s most developed markets, the usage of TMSs is generally on par with Europe and the US,” explains Albert Lo, Partner at PwC. “The main reason being that most companies in these cities have a more developed treasury department that is taking a strategic role in the business.”
Once you move beyond Hong Kong and Singapore, however, TMS usage drops significantly. “In some APAC markets, the role of treasury is still emerging and is embedded into the broader finance function,” adds Lo. “With no standalone treasury function in place, the driver to implement a treasury system is just not there.”
Even when a treasury function exists in companies operating in Asia’s emerging markets, corporate culture can prohibit TMS adoption, comments Tony Marrinan, Head of Financial Sales, APAC at OpenLink. “In the top-tier local corporates, the treasury function is still primarily regarded as a cost centre,” he says. “Typically, their structure is quite decentralised and they do not have overly complex requirements, meaning that senior management believes that the operations can be run on a spreadsheet.”
Historically, many Asian corporates were also priced out of the TMS market. “Until quite recently TMSs were perceived to be expensive,” says Tony Singleton, Managing Director, APAC at Reval. “They were required to be hosted on internal servers and the upkeep of these fell onto the corporate customer. As a result, TMSs have typically been a tool for top-tier corporates with abundant IT resources and sophisticated treasury functions.”
Treasury in the cloud
In more recent years, both the status of treasury in the region and the solutions offered by TMS vendors have changed, seeing TMS adoption gain momentum. “Today treasurers across the region have a much broader remit and are expected to achieve their goals with fewer resources,” says Singleton. In Reval’s most recent global survey, for instance, 72% of financial professionals in the region said they expect the scope of their treasury function to increase, while 73% expect their staff to stay the same or decrease. “This growing maturity, coupled with the proliferation of regional treasury centres (RTCs), highlights the need for treasury teams to have more sophisticated tools than spreadsheets to manage their operations,” adds Singleton.
As the treasury profession has developed, so has the TMS landscape, with vendors offering lower-cost deployment options. The game changer in this respect has been the rise of cloud-based solutions, whereby solutions and data are held off-premises on the TMS providers’ servers and accessed through the internet. According to Reval’s survey, 30% of respondents in the region said they are using cloud-based solutions.
Cloud-based solutions offer numerous benefits for treasurers. For instance, vendors maintain and automatically upgrade their solutions, ensuring that systems are always up-to-date. Cloud solutions can also be accessed easily from anywhere in the world and they can offer better disaster recovery and business continuity.
The main attraction, however, is that the rise of cloud models has cut costs dramatically. PwC, for instance, suggests that a cloud-based TMS implementation can be 30% to 50% cheaper than a traditional server-based implementation. It is no surprise, then, that OpenLink’s Marrinan states that every RFP the company receives specifies cloud deployment.