The line between financial firms and fintech is increasingly blurred as banks invest in digital, cloud, innovation labs, and mobile technologies.
Banks are starting to look a lot like technology companies, particularly in consumer banking, which has been transformed by a raft of new digital-first or mobile-only providers promising a better user experience, instant payments and real-time account and transaction insights.
It has taken a little longer for some of these trends to filter through to the world of corporate banking, which is still dominated by traditional technology providers like banks, treasury management software and entreprise resource planning (ERP) system providers.
In this year’s Systems and Services Awards, winners like FIS and BELLIN are long-standing software providers to corporate treasurers. FIS works with half of the Fortune 50 companies and its Quantum treasury management solution is one of the oldest on the market. Since it was launched more than 25 years ago, FIS has upgraded the user interface, transformed it into a HTML5-compliant, web-based application and invested in other improvements to make it “cloud native.”
In the software-as-a-service treasury management category, providers like BELLIN leverage cloud-based technologies to keep companies and global treasury operations up to date with real-time information. They’ve also added mobile solutions for treasury management on the go.
Corporate treasurers are still very much wedded to their traditional IT stack and the companies that support that. However, research suggests that their expectations have reached a tipping point, which is forcing traditional providers, specifically banks, to rethink their IT strategies.
In its July 2019 report, Digital Disruption Comes to the Corporate Treasury, financial software provider Finastra’s survey of approximately 380 treasurers found that only 24% exclusively use banks for payments.
“If what’s true for payments is the same for other treasury functions; treasurers are not loyal to their banks—they will source innovation from wherever it can be found,” the report states. “Our research indicates that this could very well be the case, with most respondents happy to look to non bank partners to help them fulfill a wide range [payments, FX, liquidity pools, trade and supply chain] of treasury functions.” Seventy percent of the people Finastra spoke to stated that they believe a shift from bank to non bank services will take place over the next five years–16% indicated the shift had already happened.
It’s not all bad news for banks, however. According to DBS 2019 Digital Treasury Index, which measured the digital readiness and execution plans of companies in Asia-Pacific, finance professionals are looking to their banking partners to help them navigate the confusing fintech landscape. “It is interesting to see CFOs and treasurers deal with some of the new fintech risks emerging as a result of the digital push by business leading to reliance on banks to help mitigate such risks,” states John Laurens, Group Head of Global Transaction Services at DBS. “What’s more, they are demanding new ways to connect to banks, such as through APIs [application programming interfaces] where the connection is both direct and instantaneous.” In corporate banking, DBS is using APIs and QR codes for payments to help streamline and automate certain aspects of the corporate treasury function.
BBVA, which won Best Mobile Cash Management Solution in this year’s awards, has also successfully leveraged digital technologies and collaboration with fintechs to take corporate banking to the next level. BBVA US Net Cash Mobile application features Real-Time Positive Pay, which verifies transactions in real time in order to minimize the risk of fraud.
In the US, Santander’s Cash Nexus solution simplifies subsidiary funding costs and payments by allowing US-headquartered companies doing business globally, or global companies’ US subsidiaries, to initiate payments via a single file from their shared service center, which is processed locally in 15 Santander markets. “Many multinational corporations are establishing shared service centers, or are building out the capabilities of these centers to drive efficiencies and control,” Santander states. “Additionally, they are making significant investments in their ERP systems and treasury workstations and are seeking solutions from their banks and providers to increase the return on these investments.”
In areas such as cross-border notional pooling, Citi, which boasts innovation labs in Dublin and Singapore and a venture arm that invests in innovative startups, is spearheading new initiatives and investments in functionality such as global target balancing, cross-currency and multibank sweeping.
In this year’s awards, the mix of banks to tech companies was almost evenly split, with five banks (Citi, DBS, Santander, BBVA and Bank of America) winning categories, compared to seven tech companies (Bellin, FIS, HighRadius, Serrala, Refinitiv, Adjoint Smart Treasury). Only one of those companies, Adjoint Smart Treasury, is a relative newcomer to treasury. Its private permissioned ledger is designed to give treasurers better visibility and control of their country and currency positions.
Data and analytics remain top priorities for treasurers looking to make better-informed decisions about where to invest their surplus cash and liquidity. Refinitiv’s Eikon platform gives treasurers access to a wide range of up-to-the-minute information pertaining to money market funds and other financial instruments to help them optimize their short-term liqudity. As an open platform, additional information sources can also be easily added using APIs.
One technology that has risen up the corporate agenda is artificial intelligence or AI, which ranks as one of the most important payment innovations for treasurers in Finastra’s Digital Disruption report, specifically in areas such as reconciliation of incoming and outgoing payments, advanced risk and fraud management, and automated exceptions handling.
HighRadius, winner in two categories (Best Cash Forecasting and Best Accounts Receivable Solution), uses “purpose-built AI algorithms” across accounts payable, receivables, payroll, capex and other areas to help treasurers more accurately forecast cash flows. On the accounts payable side, this year’s winner Serrala (formerly Hanse-Orga Group) has gone big on cloud-based payments-as-a-service capabilities to reduce implementation time frames for companies wanting to bring new accounts in different countries on line in a matter of hours, not weeks. The migration to cloud-based services is one of the biggest trends in corporate cash management in recent years, giving companies quicker access to modern technology and the latest functionality via third-party apps.
Banks are also investing in AI. Bank of America’s Intelligent Receivables solution leverages machine learning and optical character recognition (OCR) to help customers more quickly and easily reconcile payments and remittance data. The bank says advanced data capture enabled by machine learning and OCR has allowed for the systematic capture of 78%–98% of client remittance data, limiting the amount of manual information that has to be captured and the number of staff needed to perform these tasks.
Corporate treasurers are more tech savvy than ever before. They now play a more strategic role within their organizations and are increasingly setting the agenda for digitization across the company, which presents a huge challenge to traditional technology providers and banks, who will need to up their game and invest in the latest technologies (blockchain, AI, cloud and APIs) in order to remain relevant to this market segment.
SYSTEM AND SERVICE WINNERS
|Best A/P Solution||Serrala|
|Best A/R Solution||HighRadius|
|Best Treasury Management Software||FIS|
|Best Mobile Cash Management Solution||BBVA|
|Best Use of Artificial Intelligence in Treasury Management||Bank of America|
|Best Application/Use of Digital Technologies in Treasury Management||DBS|
|Best Investment Management Solution||Refinitiv|
|Best Treasury Analytics Provider||SAP|
|Best SaaS Treasury Management Solution||BELLIN|
|Best Virtual Accounts Solution for Corporates||DBS Bank|
|Best Application of Blockchain in Treasury Management||Adjoint Smart Treasury|
|Best Cross-Border Payments Solution for Corporates||FIS|
|Best Cash Forecasting*||HighRadius|
|Best Cash Pooling Solution*||Citi|
|Best Payment Hub Solution*||Santander|
*New categories for 2020.