The Future of Corporate Treasury

7 The Future of Corporate Treasury These new opportunities manifesting through incumbent tech partner upgrades are based on emerging machine learning and blockchain- led solutions. We are starting to already see this come about. SAP, for example, announced at its treasury conference in July 2018 that this year it would introduce a solution to protect customer “master data,” such as settlement instructions and signer authorities from bad actor interference using blockchain technology, and an auto FX ticket determination solution based on digitized treasury policy that is fully integrated with trade execution platforms. This announcement also demonstrates the expected “nesting” of fintech companies within ERP/TMS platforms as a distribution channel for best-of-breed technologies. Fintech consolidation and ERP/TMS vendor acquisition of fintech capabilities are emerging stories that will likely play out in the near term. Deeper linkages between ERP and TMS providers and banks We expect much closer connection too between ERP/TMS providers and banks. This is where basic services such as bank account opening, liquidity concentration, and notional pooling structures, which are provided today as standalone capabilities triggering technical implementations, will be supported in the future by much deeper integration of bank-provided services within TMS and ERP platforms. Those who have not yet invested in ERP and TMS technologies may be less focused on efficiency constructs such as in-house banks, which demand reasonably sophisticated technologies to deploy successfully. Corporates fitting this description may seek a “digital treasury service” model to fast- track to a place where the execution arm of the treasury would, in effect, be provided through a multi-tenant outsourced services provider. This would not be a return to the now largely redundant treasury outsource model of the 1980s and 1990s, which was people-intensive and thus error-prone. Instead, this setup would consist of a digitally outsourced people-light model, where, for example, emerging market and emerging digital native corporates with hyper-growth aspirations could quickly enjoy the established risk management protections of a sophisticated best-in-class, digital treasury operation without tying up capital expenditure that would otherwise be required to establish the same model in house. Varied pace of digital treasury adoption We do not expect the adoption of real-time payments to be embraced uniformly across all industries. Again, here we see a divergence in need depending on how digitally connected to the end consumer the business model is. Putting to one side the increasing list of acquisitions of digital natives by established institutional household names to deliver the omnichannel experience, it is primarily the digital native direct-to-consumer companies that have the insatiable appetite for offering one-click, real-time payment methods to their end consumers. The airline industry would be a good example of an industry that is starting to take notice of, for instance, request-to-pay facilities to offer alternate payment methods not only for a better online experience for their customers but also to drive down transaction costs. What will drive demand for digital treasury for B2B business models? A number of things will need to happen before companies with B2B business models start to show real interest in experimenting with real-time payment schemes. First, the rollout of instant payment schemes across the globe is starting to bring about a 24/7 real-time payment ecosystem. However, limits will need to be raised sufficiently before they come into range for B2B or treasury-initiated flows. Second, currently there is no ability for corporate treasury to mobilize that cash outside of business hours, so for example, weekend inbound flows will be idle until next business day. For now, and until such time that a sufficient number of central banks open up the real-time gross settlement (RTGS) engines, no markets will exist to invest or exchange currency outside of current business days. It will be when and if the RTGS engines are opened up by the central banks that the corporates, where the materiality of flows through their business model are large and less frequent B2B flows, will become interested in real-time payments — initially for working capital reasons and eventually, as new markets open up, for investment and risk management objectives. We expect another consequence when the ability to mobilize cash on a 24/7 basis in new markets become a reality — that is, the utilization of machine learning and robotic process automation techniques to offer an alternative to people-based operational treasury to determine and execute trades after normal business hours and weekends. Gaining insights into the accuracy of historical forecasts by currency is critical to determining whether the future forecasts provided are reliable and actionable.