Real-time means better predictability for treasurers.
This year could be a tricky one for treasurers operating in Latin America. Brazil, Cuba and Mexico have all elected new political leaders in the past 12 months. Venezuela is mired in a presidential stalemate and Argentina is preparing for fresh elections.
Steve Donovan, head of Treasury & Trade Solutions for Citi in Latin America, says the entire financial services landscape is evolving at a rapid pace, resulting in new payment systems and emerging technologies, which have the potential to transform treasury operations. “Digital technologies are proving to be the catalyst for new forms of client engagement and business management, as new channels and technologies allow for greater visibility and access to various ecosystems,” he explains. “Speed, agility, accuracy, reliability, security and transparency are at the center of this effort.”
Donovan insists it is important for treasurers to strike the right balance between supporting local business, standardizing processes and adopting global best practices. “Over the years, we have witnessed an increasing and sustained shift toward the standardization and centralization of business processes and common functionalities,” he says. “The most evident indicator of this is the increasing number of Shared Service Centers and Regional Treasury Centers that were established across the region.”
Another key development in Latin America is the race toward instant payments, with instant-payment schemes already live in Argentina, Chile, Costa Rica and Mexico.
Real-time payment schemes are also being developed in Brazil, Colombia, the Dominican Republic, Ecuador, El Salvador, Honduras, Panama, Peru and Uruguay, prompting Donovan to say the region is headed toward a full instant-payment environment in the next 18 to 24 months.
“Governments are driving an instant-payment regulatory agenda across the region, with the purpose of increasing financial inclusion and reducing cost and risk in the financial system by promoting a cashless society,” suggests Donovan. The benefits for the treasury function from the move to real time are very concrete and visible, adds Donovan. “Credit and collection metrics, including days sales outstanding and cash-flow predictability, are enhanced due to instant-payment schemes. Fewer delays in the availability of funds due to cut-off times or check float are also an immediate benefit.”
Additionally, Donovan says treasurers are leveraging instant payments to settle and confirm digital transactions at a much lower cost than what they are used to paying for credit-card collections.
To this end, NovoPayment, a Latin American payment provider, is working with Visa to help local banks and businesses migrate to digital payments and away from cash. With plans to develop business-to-business and business-to-consumer payment Application Programming Interfaces, the initiative aims to bring standardization to the region’s fragmented banking and payments network.
LATIN AMERICA WINNERS
|Best Overall Bank for Cash Management||Citi|
|Best Bank for Liquidity Management||Citi|
|Best Bank for Payments and Collections||Citi|
|Best Provider of Short-Term Investments/Money Market Funds||Citi|