Treasury Leaps Ahead With Tech Tools

Low interest rates, international trade disputes, economic slowdown, geopolitical risks and diverging regulatory require corporate treasurers to provide greater visibility and control of their cash.

For banks to remain the first choice for corporate clients, it’s important they invest in the right technologies to solve customer pain points. “We’ve had a real focus and concentration on better analytics, specifically associated with what our clients are doing with us on a day-to-day basis—to be able to track, monitor and recognize trends, issues and activity,” says Mike Bellacosa, Global Head of Payments and Transaction Services at BNY Mellon.

Greg Kavanaugh, head of Global Product Management, Global Transaction Services, Bank of America, says the potential that digitization offers by way of data is huge. “There are even more-significant benefits than speed and paper reduction. With the right infrastructure in place, digitization has the power to transform a company’s treasury operations. It can give a company the intelligence that will help them optimize their operations. Data points could be fed into artificial intelligence [AI] engines to improve and ‘educate’ the algorithms. These algorithms could then provide dynamic advice and insight, automating processes and letting the company make more-informed business decisions, including anticipating cash flow needs or negotiating better contracts. We’ve yet to see the full value of digitization. That’s a very exciting prospect for every company of any size.”

Standard Chartered’s global head of transaction banking, Lisa Robins, stresses the importance of working with clients to ensure that the physical and financial supply chains are harmonized to deliver a seamless experience. These include a strategic collaboration with SAP Ariba to make the bank’s financial supply chain solutions easily accessible to businesses in the Asia-Pacific region, Swift gpi tracker and investment into the blockchain-based open industry platform, Contour.

Mark Smith, Head of Global Liquidity at Citi, agrees that a partnership journey with clients is crucial to creating  innovative solutions.  “Liquidity management for our clients continues to be a critical function to ensure they have the liquidity at the right time, in the right place, in the right currency, in the right amount, ensuring their working capital use remains as efficient as possible.  The exciting solution set we continue to build at Citi, in partnership with our clients, looks to embrace this fundamental need coupled with the innovative catalyst of data analytics, AI forecasting, digital automation and the transition out of batch—into a true real-time world.” Citi’s new cash concentration tool allows clients to digitally manage their cash pooling structures within minutes, rather than email the bank to make changes, which could take days.

According to Kavanaugh, efficiency is a key requirement for clients: “They want us to make cash management as easy and frictionless as possible and to take costs out of their back office. Our focus is on helping them reduce physical accounts and introducing new technologies to improve reconciliation and convert paper processes into digital solutions.”

He says the explosion of cross-border payments and new payment types also challenges companies with a sometimes confusing array of choices. “We’re taking that burden off our clients. Through strategic advice and smart routing, we can determine the optimal payment channel according to the company’s priorities, such as cost or speed, and the value of the payment.”

Money market funds (MMFs) remain a useful cash management tool for corporate treasurers as they generate incremental returns while seeking to offer capital preservation, alongside liquidity and diversification.

Recent reforms, first in the US in 2014 and then in the EU in 2019,  have brought a level of robustness that encourages investors to use MMFs due to increased clarity and transparency, according to Jim Fuell, Head of Global Liquidity Sales at J.P. Morgan Asset Management.

Away from MMF reforms, Basel III, which looks at the liability side of bank balance sheets, also impacted short-term investors. “Banks have evolved their appetite for liability balances in line with changing regulations,” states Fuell. “Historically, banks simply took deposits and lent money. This has been modified, and they are more indiscriminate as to the nature and types of liquidity they want. Money market funds can offer immediate diversification, with cash allocated across a multitude of counter-parties. Sometimes it’s in the hundreds.”

As we have been in a prolonged low-rate environment for quite some time, Fuell says, strategies that step out from MMFs are a growing area of interest for short-term investors and short- term investment managers. “We offer a suite of short-term fixed-income solutions, each one differentiated by the level of return it might generate.” Incremental returns are often driven by three key levers: reducing the amount of liquidity in an investment; enhancing returns by extending the duration of an investment; or investing more aggressively, taking slightly more incremental credit risk to enhance returns.

Being able to offer bespoke services that are tailored to customers is going to become increasingly important for banks as they seek to stave off competition from non bank providers of treasury solutions. Recent research by Finastra reveals that 70% of corporate treasurers believe that a shift from bank to non bank services will take place within their organization over the next two to five years, so banks need to go above and beyond simply providing standardized application programming interfaces (APIs).

“APIs make it easier to integrate across disparate technology interfaces and enhance the speed at which integration can take place.  A library of APIs for different use cases allows corporate treasurers to pick and choose what they need and accelerates the delivery of new capabilities,” explains Standard Chartered’s Robins.

White-label solutions also enable banks to provide the flexibility that today’s treasurers require.  Serrala’s BCrest Payments, for example, comes with optional adapters for various access gateways, including EBICS, sFTP and Swift; while one half of BNY Mellon’s treasury service business is for financial institutions.

For their part, corporate treasurers will look to whoever can help them leverage technology to assist with their increased workload as they face an onslaught of headwinds.

Methodology

Global Finance editors select the winners for the Best Treasury & Cash Management Awards with input from industry analysts, corporate executives and technology experts. The editors also use entries submitted by financial services providers, as well as independent research, to evaluate a series of objective and subjective factors. It is not necessary to enter in order to win, but experience shows that the additional information supplied in an entry can increase the chances of success. In many cases, entrants are able to present details and insights that may not be readily available to the editors of Global Finance.

This year’s ratings are based on the period from January 1, 2019, to December 31, 2019. [Companies with different fiscal year reporting have the option to submit data from the fourth quarter of 2018 through the third quarter of 2019.] Global Finance uses a proprietary algorithm with criteria—such as knowledge of local conditions and corporate customer needs, quality of product and service offerings, financial strength and safety, market standing, compliance and excellent customer service—weighted for relative importance. The algorithm incorporates various ratings into a single numerical score, with 100 equivalent to perfection. In cases where more than one institution earns the same score, we favor local providers over global institutions, and privately owned banks over government-owned ones.

The winners are those financial services providers that best meet the specialized needs of corporations engaged in global business. These top-notch finance institutions are not always the biggest, but rather the best—those with qualities that companies should look for when choosing a provider.