MATTHEW GIANNOTTI PUTS SOME KEY INNOVATIONS UNDER THE MICROSCOPE AND OUTLINES HOW CORPORATE TREASURERS AND FINANCE TEAMS CAN TAKE ADVANTAGE OF THEM
The coronavirus crisis and related volatility throughout 2020 has raised important questions about how corporate treasurers and finance teams can better use technology to future-proof their businesses and more easily move money through financial systems. Here are five key digital innovation trends empowering corporate finance teams and driving treasury transformation in 2021.
1. CASH IS NO LONGER KING – DIGITAL PAYMENTS ARE HERE TO STAY
The pandemic has fast-tracked the shift away from cash. While stuck at home, consumers turned to online shopping and food-delivery services. In fact, habits have changed at an unprecedented pace during the first lockdown: total online spending in May 2020 hit $82.5bn, up 77% year-over-year – a shift that would normally take between four to six years*. The pace and scale of change has forced businesses to quickly position themselves to accept payments online. Ultimately, digital payments ensure businesses can offer their customers the speed and ease needed in the current environment.
2. PERSONAL EXPERIENCES INFLUENCING CORPORATE EXPECTATIONS
Whether ordering food deliveries or streaming digital content, we have become an on-demand society. Corporate treasurers expect payments to arrive at their destination as soon as they have instructed them, and to know live positions of their bank accounts or financial instruments at the click of a button. The application programming interface (API) revolution we are seeing in banking means that many of these things are a reality today. By easily integrating with cloud-based applications, organisations can explore a range of transformation opportunities. API-driven, nearreal-time payments can deliver efficiencies, cost-savings and improved customer service. This is a fast-moving space – APIs in the global financial services industry are continuously developing in tandem with Open Banking: the use of APIs to create a rich fabric of interconnected apps and services. Corporate treasurers should stay close to these developments and reach out to their bank for insight into them.
3. THE OPEN BANKING REVOLUTION – AN UNDERESTIMATED OPPORTUNITY FOR CORPORATES
Until recently, most of Open Banking’s focus has been on regulation, innovation and competition among banks and fintechs, with most early-use cases centred on personal and small-business customers. But we think Open Banking gives corporates the opportunity to take a big step into the emerging world of digital ecosystems – enabling them to better serve customers, deal with suppliers and work with financial services providers. Corporate treasurers and finance teams will find Open Banking particularly useful for:
• Real-time accounts to support faster payments, reduce costs and improve liquidity. At the heart of Open Banking sit APIs – technology giving customers a real-time connection with their banks, providing an immediate and accurate picture of all their accounts and movements within them.
• Faster, more efficient payment-initiation systems to maintain the pace of trade. Payment applications enabled by Open Banking can help grease the wheels of trade by passing information through systems as quickly and easily as possible.
• Greater cross-bank connectivity and transparency to empower decisionmaking. Open Banking has fundamentally changed the way data can be shared between financial institutions, giving corporate treasurers the ability to see consolidated views of their bank accounts from a range of counterparties in much more cost-efficient ways.
4. REDUCING FRICTION IN PAYMENT JOURNEYS
Regulation is introducing friction into payment journeys. The increased use of one-time passcodes under Payment Services Directive 2 will make online payments more cumbersome and diminish the customer experience. Banks are having to find ways of improving customer journeys to mitigate this. In fact, we have seen customers taking advantage of Open Banking infrastructure for payments by making use of fingerprint sensors and facial-recognition technology on mobile devices, making the process more seamless and userfriendly while maintaining high levels of security. We expect this trend to continue apace.
5. REAL-TIME DATA CAPABILITIES TO MOVE TREASURY REPORTING FROM THE BACKROOM TO THE BOARDROOM, POWERED BY EMERGING TECHNOLOGIES
When businesses harness the technologies that make their finance systems fully responsive, real-time data on cash flows and liquidity positions becomes an incredibly powerful tool. It takes payment processing from the backroom to the boardroom by providing the intelligence that management teams need to quickly make strategic decisions in a rapidly evolving and increasingly competitive business environment. No one knows exactly what will have changed forever and what will return to the way it was before the coronavirus crisis. The good news for businesses that want to implement a fully digital treasury infrastructure, to improve processes and be able to better weather future large-scale disruptions, is that the technology exists. Real-time payments are already a reality for many organisations that are making digital transformations and they are fundamentally changing how those organisations manage themselves.
Source: The Treasurer Magazine