real-time expectations

Cash management

Real-time expectations

July 2019

The future of transaction banking is fusion, collaboration and innovation, says Ideas and Action’s Pia Gonzalez-Nazareno as she shares an industry study on cash management expectations from treasurers and CFOs

The future of transaction banking is fusion, collaboration and innovation, says Ideas and Action’s Pia Gonzalez-Nazareno as she shares an industry study on cash management expectations from treasurers and CFOs

As emerging technologies transform the way financial institutions deliver and scale their services, so too are they shaping expectations of how banks could support and interact with corporate clients in the future.

An industry study involving more than 300 corporate CFOs and treasurers conducted by financial services consultancy firm Ideas and Action has found that 70% of respondents forecast that their expectations of their transaction banks will change in the next five years. Nearly half the respondents (46%) believe that a bank’s ability to innovate will determine whether they will partner with a bank in the future 1.

 

Figure 1: Corporate criteria that will drive selection of transaction banks in the future

The problem is, so many firms talk about innovation that it has become one of the most overused buzzwords of late – not just in financial services, but across all industries. So how can banks demonstrate “true” innovation, rather than just be seen as jumping on the bandwagon?

Stanford Business School professor Stefanos Zenios once said that genuine innovation “happens when needs and new technology come together to create an experience that is better than the previous or current experience.” He further noted that the technology employed “does not even have to be new, just applied for the first time to solving that problem.” 2

Interviewees of the Ideas and Action research shared a similar sentiment, revealing that the actual underlying technology employed is of secondary importance. Rather, corporates place greater value on how bank innovation clearly addresses a business pain point or challenge.

This suggests that for new technology to be seen as innovative, it must deliver demonstrable business benefit – whether it is to create scale and efficiency within existing processes, or to develop new solutions to current and emerging challenges or evolving opportunities.

Pia Gonzalez-Nazareno

Pia Gonzalez-Nazareno

CEO & Managing Partner, Ideas and Action

Ole Matthiessen

Ole Matthiessen

Global Head of Cash Management

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Today’s expectations

The research revealed that corporates’ expectations today are very much related to the ability to scale, automate processes and gain efficiencies. Respondents noted that among the most important capabilities they look for from their banks today are the ability to process transactions in real or near-real time (30.1%), the ease of using online banking systems and platforms (29.5%), and provision of mobile banking (29.1%). Clearly, technology today is seen as a means to faster and more convenient treasury management, freeing up time for treasurers to take a more strategic role in their firms.

Figure 2: Digital capabilities are the most commonly cited minimum requirements today.

Ole Matthiessen, Global Head of Cash Management at Deutsche Bank, explains how the bank approaches innovation on this basis. “Deutsche Bank continues to view innovation with two lenses: those emerging technologies and financial services that have begun to scale, standardise and democratise service provision, and those innovations that combine existing and emerging technology and processes in new combinations creating different outcomes for our client base.”

 

Co-creating the future

In the future, it is these creative solutions that treasury and finance professionals will expect as standard. Driving treasury efficiency will no longer be enough. Corporates will also expect the fusion of banking technologies to catalyse change beyond the treasury function, and enable new strategies and revenue streams. As one respondent noted, “As technology changes the landscape and the needs of our own customers and our business, we will have to work with our banks to find the best solution.”

As corporates themselves seek to understand how changing technology will transform their businesses, they expect their trusted banking partners to provide opportunities to co-create new solutions.

Indeed, the opportunity to collaborate is going to be an important part of the service offering that corporates will seek moving forward. 37.1% of survey respondents noted that “service”, which includes interaction with responsive and accessible industry experts, will be a key requirement in the future. Technology and innovation should not be launched in isolation as clients will want to be kept informed of future product roadmaps, and be involved in the development of new solutions that meet their specific needs.

Some banks are already changing their approach to product innovation in anticipation of these changing needs. Deutsche Bank, for example, has a programme that brings together clients and product developers to better understand clients’ pain points and technology solution requirements.3

Matthiessen notes that already, their clients are seeing benefits from this approach. “The bank’s investment in B2B2C innovation is illustrated by the deployment of a bank/wallet provider agnostic technique of paying and receiving securely at the point of sale [POS} within a client’s ecosystem. This uses a proprietary industry-customised ecommerce gateway coupled with our trusted secure fintech provider, Modo. Addressing our clients’ requests to become increasingly paperless, we are rolling out our upgraded digital service manager solution that enables our clients to digitally manage their interactions with the bank. This makes it possible for them to download e-binders of their bank mandates, effect an online end-to-end initiation and resolution of legal entity or product amendments, and execute documentation and audit confirmations online using e-signatures.”

 

A powerful fusion for true innovation

Transaction banking at its core, is about banks and clients working together, in continued discussion and co-creation. While technology is expected to revolutionise treasury management in the future, the Ideas and Action report found that CFOs and treasurers do not expect technology to replace human judgement, debate and discussion. Technology is seen as a means of creating more effective, informed and efficient decisions within treasury management. The data, insight, and resources generated as a result, is seen as an opportunity to discuss client needs and possible solutions.

A review by Deloitte in early 2019 4 reported that while technology will replace or supplement some functions currently completed by humans, others which are non-process based, context specific rather than standardised and non-routine, will still require human judgement.

Given that these descriptions of functions could be used to describe many of the processes and decisions required in treasury management, the future looks set to be a powerful fusion of people, new and existing processes and technology to drive true innovation.

For more details on the transaction banking selection criteria used by corporates, download the full research report ‘Striking the right note, building resonant propositions for transaction banking’ from www.ideasandaction.com.

Pia Gonzalez-Nazareno is CEO & Managing Partner, Ideas and Action

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Sources:

1 Ideas and Action, Striking the Right Note: Building Resonant Propositions for Transaction Banking, June 2019
2 Financial Times, 27 November 2017, ‘Most innovations are mere novelties’ (
https://www.ft.com/content/a3357dfe-cbb4-11e7-8536-d321d0d897a3), accessed 10 July 2019
3 2019 Banking and Capital Markets Outlook, Deloitte Centre for Financial Services,
www.deloitte.com
4 Deloitte Review, Issue 24, January 2019, What is Work?

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