October 2018

In February 2018, responses to Euromoney from 4,695 financial institutions (FIs) and non-FIs (this group included corporates) from around the world gathered during 2017 indicated that, while most of them managed payments electronically, other cash management services fell some way behind (see Figure 1).

More than 88% of each FI/non-FI category confirmed that they had not used a non-bank financial company such as Alipay or PayPal for a cash management service. The report went on to note, “While the banks worry about the fintechs coming to eat their lunch, the reality is that even the biggest names in fintech payments still have some distance to cover to get anywhere near the dining table.”

Treasurers, notes the Association of Corporate Treasurers (ACT) Business of Treasury 2018 report 2,  “…currently spend most of their time, on a day-to-day basis, on capital and liquidity management (30%), treasury operations and controls (25%), and risk management (19%)”. These functions have been at the top of their agenda since 2013. Increasingly, treasurers are “driving funding strategy and presenting a range of informed alternatives to boards”, with 45% of the 200 interviewed confirming they “considered themselves to be either defining strategy or working with colleagues to define strategy”.

This would not be possible unless a number of manual processes were now automated. There just would not be time. As ACT CEO Caroline Stockmann puts it, “Digital, for us treasurers, is focussed on moving money, storing data and carrying out day-to-day transactions, as well as more complex processes.”

Inquisitive and agile

Graham Taylor, Assistant Treasurer at mobile telecoms operator Vodafone, describes his company’s approach as “highly inquisitive” in terms of overall awareness of technology transformation. Scope ranges from “simple software improvements to the big picture, such as improvements around PSD2”. Specialist financial services organisation Moneycorp provides foreign exchange (FX), payment and treasury services for mid-caps and small and medium-sized enterprises (SMEs) as well as consumer FX services. Nick Haslehurst, Moneycorp’s Chief Financial and Operating Officer, says there is a three-weekly release cycle for new features on Moneycorp’s platform and believes that product offering trends that move from one-off delivery to continuous development are mirrored in treasury management processes.
He sees technology enabling the removal of a layer of the administrative burden that has blighted the treasury function. “Sensible use of digital technology will help treasury get on the front foot, demonstrating the real value of treasury such as better hedging strategies, better payment services, and identifying FX risk more quickly,” he reflects.

Blockchain benefits

technology involving the creation and recording of digital identities) has the potential to monitor and record assets in real time and gain transparency of who owns them, of settlement information and transaction details. This, says an explanatory Deutsche Bank video, ‘Blockchain: Opportunities and challenges’, can deliver huge efficiency gains and allow treasury departments to work in a more streamlined way. “The result is increased visibility, a reduction of manual tasks, fraud avoidance and better risk oversights through the de-risking of certain transaction types.3 ” 

The ACT points out the advantage for clearing instruments such as government bonds and securities in terms of knowing the seller has the asset and the transfer has been made, thus providing heightened security.

Stockmann says that treasurers are more likely to see themselves as customers of blockchain financial systems rather than personally setting up a blockchain system: “Bring us the idea, show us how it works, and we can carry out a risk management and cost/efficiency analysis to see whether we would use it.”

Those ideas are already turning into reality, with Vodafone’s Taylor noting that tangible benefits are emerging from the group’s current proof of concept – a collaboration between treasury and IT services. “We are trying to use it in treasury as a way of managing and centralising our operating companies’ FX.” He explains that the group companies have an internal rate and it removes from the businesses the worry of picking and choosing local rates. They know that group treasury is administering and standing behind the currency.

"Treasury is not isolated from business and technology change. Treasurers can see change coming and will stay up to date and embrace it"

Nick Haslehurst, Chief Financial and Operating Officer, Moneycorp

At Moneycorp, Haslehurst is equally convinced of the merits of blockchain for financial services, viewing it as an opportunity to integrate more effectively up and down the supply chain, with efficiencies for KYC (know your customer) and reconciliations that Moneycorp undertakes daily with banks and clients. “The days of swapping messages with our banks on an individual, transaction by transaction, and reconciling them must be over,” he says. However, adds Haslehurst, progress and adoption rates depend on different applications and approaches in different companies.

Fintech feasibility

While the place of digital technology in the treasury function is unquestioned, there is more ambivalence towards the appropriate role of fintech firms – something the Euromoney survey highlighted.

For Stockmann, fintech firm offerings are not for all corporates. “Fintechs are coming into the market trying to create simpler, easier, more attractive interfaces for less financially sophisticated customers – retail customers and SMEs. Another use is for gathering data – maybe across more than one bank – so a small client can see it all pooled together,” she says.

Big corporates are doing that through their major banking portal with SWIFT messages in the background, notes Stockmann, and they would be understandably cautious of a fintech solution where staff could be wandering the streets with corporate data on their smartphones or making payments that way.

But with proper controls, fintechs can provide valuable agility. “We used a fintech to provide a trade finance/supply chain financing solution, which focussed on the solution, so the user experience was better,” reflects Vodafone’s Taylor.

He says it is a “neat solution” which the company has adopted and rolled out over the past four years: “There were teething problems you may expect from a smaller start-up company but we’re doing really well, and it is rolling out across our footprint.”

On the other hand, Taylor does say that not every fintech possibility is realised. Vodafone treasury explored a reconciliation tool, which failed to make a sufficiently robust business case. He confirmed that to adopt solutions “you [need to] see a real pot of value somewhere”. Most of the time, they don’t, says Taylor, although he makes the point that fintechs can sometimes fill in gaps left by banks in areas that are outside the banking comfort zone.

Living with change

Treasurers, observed the Euromoney survey, may not have sufficient resources to research a new technology and are “looking for trusted providers to lead the way on services they need”. This means that providers should remain proactive about finding better ways of doing things with their clients where cost/benefit and risk/reward make sense. “Treasury is not isolated from business and technology change. Treasurers can see change coming and will stay up to date and embrace it,” concludes Moneycorp’s Haslehurst.

Peter Williams is a financial journalist and the former editor of the ACT publication
The Treasurer



1See https://bit.ly/2KQXasw at euromoney.com
2See https://bit.ly/2H2gPUr at treasurers.org
3See https://bit.ly/2w9QO22 at youtube.com

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