The role of corporate treasury continues to shift, with a significant part of the change being driven by new technology. Let’s take a closer look at the specific technological trends affecting the treasury department.
The open banking revolution is the single biggest trend affecting corporate treasury. While the US and Canada have no specific open banking legislation as yet, banks are already enabling data sharing to third-party applications and services. These third parties can access that data using standards-based APIs (application program interfaces) and put it to use as secure, user-friendly applications.
What this means for corporate treasury in the immediate term is the ability to access multiple accounts on a single platform (without costly SWIFT subscriptions) and to begin to automate their remaining manual processes. It also enables more robust KYC (know your customer) opportunities, saving time with things like identity and income verification.
Open banking protocols will only continue to expand as North America catches up to Europe with open data legislation requiring all banks to enable data sharing. Open banking tops our list of seven because of its current influence in treasury, as well as its role in enabling a number of the other trends on this list.
Treasury management software is a more robust treasury-specific tool than enterprise resource planning (ERP), that offers high-level risk analytics and the ability to ensure compliance with federal finance standards. Treasury can use TMS for real-time cash management, cash flow forecasting, payment reconciliation, debt management, and more.
Like the rest of the functions of enterprise including payroll, human resources, sales, marketing, and others, treasury management is moving to the cloud.
Why is the cloud the go-to option for corporations of all sizes? Because cloud software is more secure. They follow industry safety standards, they have invested heavily in secure infrastructure, and they have extensive back-up and recovery capabilities. Individual companies can no longer achieve the same level of security and redundancy with self-hosting.
The holy grail for the treasury department is end-to-end visibility. As more treasury processes and tools go online, treasurers have access to more data. Seeing, understanding, and splicing that data in a meaningful way would be difficult if not for the data management technologies that have emerged to meet this need.
Treasurers have plenty to gain from achieving a better picture of their financial data, and a growing number of (often siloed) sources of it. Treasurers can access data from:
Using data management systems, treasurers can have more visibility and control over the financial supply chain with a more complete view of their current transactions, exposures, and “right this minute” cash position.
The ability of AI and machine learning to analyze existing data and make predictions is attractive to treasury for all of the obvious reasons. Consolidating and making sense of all of the available data requires a lot of advanced computation. When the machines doing that computation can begin to learn patterns, they can forecast the future. Loads of new fintech tools that make use of AI have sprouted up, as tech companies learn how to harness it to manage risk, prevent fraud, and even begin to anticipate customers’ needs.
AI can, for example, analyze all of a corporation’s existing general ledger data, to make predictions about future cash positions based on accounts receivable (AR). Then as time passes, it can review its own projections against the actual results and correct for any differences in order to make smarter predictions going forward.
Forward-looking treasurers take note: AI might not be a crystal ball just yet, but it may help you peek into the future.
We’re giving automation a place on this list because not all of the automation that is now available to treasurers requires complex machine learning and AI. As we have said previously, the era of manual treasury management is over.
Many of the current workflows that treasury departments undertake still require low-value manual work like data entry and basic reconciliation. With all of the available technology, there’s no excuse for maintaining manual workflows when they can be easily automated.
Blockchain technology has been making headlines for years and will continue to do so. While cryptocurrencies and exchanges get all the hype, it’s the underlying technology of blockchain that is more likely to influence the role of treasury. The security and flexibility of decentralization will surely make their way into more fintech and treasury tools.
While blockchain offers security and decentralization, as of yet it still lacks scalability. It can still only manage eight transactions per second, while VISA can manage thousands. Blockchain technology will have to solve these scalability and speed issues before it becomes an effective option for corporate treasury, hence its place nearer to the bottom of this list. Put this one on your watch list for now.
In the final spot on our list, as an honourable mention, is the increasing demand for technical expertise. It’s not a specific technology trend, but it’s hard to argue that treasury departments have a growing need for talent that has an aptitude for technology.
Companies are benefiting from in-house technical expertise to help administer and extract value from the tools available to them. But technical talent is in demand in all industries. Finding ways to compete to attract and retain that expertise is another growing concern for corporate treasury.
These trends will continue to emerge and affect the role of treasury. The smartest corporate treasurers will know that the items on this list do not represent changes that should be feared — most represent opportunities that should be embraced.
Each of the items above deserves deeper exploration than the broad strokes we offer above. Looking at them on the macro scale, some may seem more daunting than they might in fact be. Sometimes it’s a matter of exploring step-change projects that create quick wins for your organization. Look for opportunities to harness some benefit now, with an eye toward the future.
As treasurers continue to innovate and automate, they become an increasingly strategic component of a company’s outlook and forecasting.