Citi Perspectives 2024 E-commerce Edition

Candace Wenzel E-Commerce Global Solution Sales, Citi Treasury and Trade Solutions Meaghan McNally E-Commerce Business Development Sales, Citi Treasury and Trade Solutions | 21 Faster, Smarter, Safer: Why scalable liquidity structures are key to going global Notional Pooling A great complement to target balancing is notional pooling. This is typically used by companies managing a basket of currencies with some level of asymmetry in inflows and outflows across those currencies. Companies can set a notional pool, where (typically) one legal entity takes the responsibility of pooling other entities’ cash across surplus and deficit balances across various currencies to optimize overdraft and FX costs. In addition to providing liquidity centralization benefits, it serves as a cost- efficient alternative to FX swaps. Interest benefit accumulated in notional pools can be redistributed to the participating entities according to companies’ transfer pricing policies. Real-Time Liquidity Many digital native firms are competing for the same pool of gig economy workers, and payment speed can prove a differentiator for companies looking to attract top talent. But real-time, anytime payments require considerations on real-time, 24/7, liquidity management. Real-time sweeps will monitor account balances on a 24/7 basis and pull funds to the account as soon as it drops below a target balance level. This protects companies processing real-time payments from holding substantial buffer in their payouts account, or going into overdraft if an unexpected payment burst happens outside of regular business hours. Equally importantly, it prevents treasury teams fromworking outside normal business hours to support 24/7 payment flows by leveraging controlled, rule-based smart automation. Why the right partner matters Cash is king for fast-growing digital native companies, especially as interest rates have risen. Choosing the right partner is paramount to reducing long-term burdens on the treasury team, optimizing costs, and facilitating scalable operational growth. Citi has decades of experience working with the world’s leading companies to deliver tailor-made liquidity management structures designed to accommodate their ambitions. Citi’s client advisory team, comprised of former corporate practitioners with practical experience of establishing liquidity structures, can serve as an extension of corporate treasury teams as they plan their ideal structures. There is no one-size-fits-all approach for liquidity management. Each company should consider their operations, business model and day-to-day needs to set up the right liquidity structure from day one. Listen to this article