The regulatory and technological stars have aligned for the benefit of all as the move to real-time treasury operations promises to deliver unparalleled efficiencies and insights that banks and treasurers once only dreamt of.       

Author: Gilly Wright

With risk and volatility at the forefront of most treasurers’ minds, real-time treasury offers the promise of improved business intelligence and cash forecasting, increased yield on surplus cash, and the chance to make more efficient use of working capital. But just how much progress has been made toward delivering solutions and services that allow treasuries to function optimally?

A recent Deutsche Bank white paper entitled “The road to real-time treasury” points to a number of developments that suggest real-time treasury is rapidly becoming reality: 45 real-time payment schemes up and running worldwide; open banking simplifying payments processes and enabling treasurers to aggregate banking services onto a single dashboard; intraday sweeping to cash pools; 24/7 conversion of inbound and outbound FX payments and platforms for calculating companies’ net currency exposure; and platforms that can apply tailored hedges within seconds.

“Uncertainty in the market requires real- or near-real-time transparency and visibility into critical data if treasury activity is to be managed effectively,” states Michael Bellacosa, managing director and head of Global Payments at BNY Mellon Treasury Services. “Liquidity, hedging, investment, capital markets—all must be more closely connected to business needs.”

Insisting that real-time treasury will be imperative for a wide variety of organizations in managing their cash and controlling uncertainty, Bellacosa points to the benefits: “In increasingly complex organizations, treasurers need to maximize access to available cash—and ensure that the right funds are in the right place at the right time—if payments are to go out on time and cash is to be applied efficiently. If liquidity is managed more effectively by their clients, banks can gather more investable end-of-day balances.”

Driving Down Cost

Anders la Cour, co-founder and CEO of Banking Circle, a business banking provider, says in all aspects of daily business life, the interactions between businesses and their trading counterparties have moved to real-time. “Treasury operations have no choice but to keep up, moving to a real-time, intraday, on-demand model as opposed to a batch-based end-of-day model,” he says. “The convergence of macroeconomic and technological forces, combined with the availability of the right technologies and services—real-time payments, application programming interfaces (APIs) and ISO 20022 standards—have created opportunities for all parties to move to real-time treasury,” he adds.

The benefit for banks lies in being able to be more responsive and customer-centric in terms of the value-added services they provide to corporate treasurers. “Banks that are able to provide robust API platforms and real-time transaction services will stand to gain more business and set themselves apart from commoditized services provided by their competitors,” la Cour says. “For fintechs, real-time treasury is yet another opportunity to use their agility and technology expertize to leapfrog banks and other fintechs by creating real-time services that address treasury pain points in novel ways. The end result of all this competition and innovation is that more banks and fintechs will be competing for the treasurer’s business, increasing choice and driving down costs.”

While agreeing that real-time treasury and banking will give companies the opportunity to completely transform treasury, Ron Chakravarti, managing director and global head of Treasury Advisory and Market Management at Citi, doesn’t believe we are quite there yet. He insists change will come in phases, not one big bang. Those phases are likely to include: instant payment systems becoming more prevalent in more markets and moving toward 24x7 operation; central banks and commercial banks starting to charge for value on a 24x7 basis; just-in-time production and delivery shifting commercial flows to occur around the clock for business-to-business enterprises, not just business-to-consumer ones; and money and FX markets also starting to operate 24/7. “This will take some time to happen,” says Chakravarti. “There will be many advancements, as well as some dead ends along this path.”

Companies and banks must start preparing now, says Chakravarti, otherwise treasury runs the risk of becoming increasingly less useful for fast-changing businesses and banks will lack solutions relevant to their clients’ changing needs. “Each must have a clear strategy for how they evolve for this change and invest in people, technology and solutions.”

Tech Enablers

How can corporates and banks stay ahead of the pack? Chakravarti believes that deploying new digital collection methods using emerging instant-payment schemes can help meet buyers’ real-time expectations and keep up with the pace and agility that treasury needs to support business growth in new markets. These technologies will also help treasury gain better control and visibility across new revenue streams, acquired businesses and geographies. Emerging technologies such as robotic process automation, big data, artificial intelligence, machine learning (ML) and distributed ledger technology, in aggregate, may deliver full automation of operational treasury and offer intelligent insights, through ML techniques, to enable fully automated liquidity risk management, says Chakravarti.

In addition, he says treasury departments should scale up their preparations to protect against the increasing threat of cyberattack, as machine-to-machine connectivity extends to real-time communication through APIs, and as regulations such as PSD2 expose the banking industry to new service providers and information aggregators.

For BNY Mellon’s Bellacosa, the development of winning solutions will come from a number of sources. “The best way to satisfy business needs is through a diversity of perspectives and technology approaches,” he explains. “There is a tremendous upside to collaboration, and working with a variety of partners has become an important part of how banks do business.”

The financial markets are in the middle of a huge transition as newcomers flood into a market once reserved for banks and banks deal with legacy technology and increased regulatory scrutiny. However, la Cour says banks are doing exactly what they should be doing by observing the market, obtaining knowledge, partnering with newcomers and deciding where to build their own solutions and where to enter partnerships. “Only in this way will banks be able to effectively meet the new, more complex payment requirements and remain competitive within their core domestic markets, long-term,” he says.

Deutsche Bank’s report concludes that most corporate treasury departments will “inevitably, [and] incrementally, be forced to operate in real time.” With so many building blocks already in place, treasurers need to assess what their current systems can support and where they can add some real-time value.


TREASURY & CASH MANAGEMENT AWARDS 2019

GLOBAL WINNERS

Category
Bank
Best Overall Bank for Cash Management Citi
Best Bank for Liquidity Management Standard Chartered
Best Provider of Short-Term Investments/Money Market Funds J.P. Morgan Asset Management
Best Bank for Payments & Collections Citi
Best White Label Systems Provider BNY Mellon
Best Bank for Financial Institutions BNY Mellon

COUNTRY WINNERS

Angola Standard Bank
Argentina Citi
Australia ANZ
Austria UniCredit
Bahamas Scotiabank
Bahrain Arab Bank
Belgium ING
Botswana Standard Bank
Brazil Banco de Brasil
Canada CIBC
Cayman Islands Scotiabank
Chile Santander Chile
China DBS
Colombia BBVA
Cyprus Bank of Cyprus
Denmark Danske Bank
Egypt CIB
El Salvador Banco Cuscatlán
Finland Nordea
France BNP Paribas
Germany Commerzbank
Greece Eurobank
Hong Kong Standard Chartered
Hungary BNP Paribas
India Citi
Indonesia DBS
Ireland Allied Irish Bank
Israel Bank Leumi
Italy UniCredit
Japan Bank of Tokyo Mitsubishi
Jordan Arab Bank
Kenya Standard Chartered
Kuwait National Bank of Kuwait
Lebanon Arab Bank
Malaysia Hong Leong Bank Berhad
Mauritius Barclays Bank Mauritius
Mexico Citibanamex
Morocco Arab Bank
Namibia Rand Merchant Bank
Netherlands ING
New Zealand ANZ
Nigeria Standard Chartered
Norway Nordea
Palestine Bank of Palestine
Peru Citi
Philippines BPI
Poland mBank
Portugal Banco BPI
Puerto Rico Citi
Qatar Arab Bank
Russia Sberbank
Saudi Arabia Samba
Singapore DBS
South Africa Standard Bank
South Korea Shinhan Bank
Spain BBVA
Sweden Nordea
Switzerland UBS
Taiwan CTBC
Turkey Akbank
UAE First Abu Dhabi Bank
United Kingdom Lloyds Commercial Banking
United States BNY Mellon
Venezuela BBVA

US REGIONAL MIDDLE MARKET PROVIDERS

Northeast Citizens Bank
Mid-Atlantic Citizens Bank
Midwest Citizens Bank
West Union Bank
Southwest BBVA
Southeast SunTrust

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, 2018 to December 31, 2018. [Companies with different fiscal year reporting have the option to submit data from the fourth quarter of 2017 through the third quarter of 2018.] 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.

INNERS