5 technology trends that are transforming treasury departments

Treasury departments have faced unprecedented regulatory, economic and political changes in recent years. These disruptive forces, when combined with rising stakeholder expectations, mean there is more pressure than ever before for treasury teams to deliver results.

PRA 110, IFRS 9, MiFID II and the revised Payment Services Directive (PSD2) are just some of the regulatory upheavals that have recently affected professionals. Consequently, treasury functions are increasing in strategic importance, as organisations focus more on transparency and stable financial performance.

Treasury technology trends

Fintechs are revolutionising both B2B and B2C financial interactions, and the resulting innovative technologies create both challenges and opportunities for treasuries.

Our inaugural Treasury Market Report revealed 89% of treasury professionals believed technology advances will lead to greater efficiency within teams. However, 69% were uncertain what impact these investments would have on their job security.

Let’s take a look at some of the key technology trends that are transforming how treasury departments fulfil their obligations.

1. TMS in the cloud

Treasury management systems (TMS) are becoming key to automating the monitoring and handling of core functions relating to cash and liquidity management, assets and liabilities, and FX or interest rate risks.

SaaS, cloud and managed TMS deployments are growing in popularity, allowing treasury departments to centralise their functionality in one off-site location and customise the software to meet their specific requirements.

However, there is still more progress to be made, as many treasury departments still rely on manual processes to perform crucial tasks. A Deloitte survey of corporate treasurers found an average of 20% of treasury functional areas are still managed in spreadsheets, while another study revealed nearly a quarter of organisations use less than 40% of TMS features.

2. Open banking and APIs

Earlier this year, we discussed the opportunities and risks of Open Banking for the wider financial services sector. Treasury departments, particularly smaller corporate treasury teams, could experience significant benefits from Open Banking and APIs through real-time data access.

SWIFT solutions already exist to allow firms access to multiple banking datasets, but these platforms are rarely cost-effective for smaller treasury teams to implement. A single API can instead offer these departments connectivity to various banking portals and a range of accounts simultaneously.

Meanwhile, bank and corporate treasuries are expected to leverage APIs to facilitate real-time payments and reporting processes. The move to Open Banking could therefore dramatically improve cash visibility, customer relationships, credit decisions and KYC vetting procedures.

3. Blockchain

The use of blockchain in treasury departments is more theoretical than practical at this stage. Distributed ledger technology (DLT) currently underpins the world’s biggest cryptocurrencies, including bitcoin, and it enables providers to store information without the need for a central clearing house.

Organisations are experimenting with smart contracts, which can automate transactions between employees, departments and organisations via pre-configured rules. Software such as Adjoint’s Smart Treasury is powered by Blockchain and boasts auto-reconciliation features and various other functions to support treasury professionals.

DLT could have undeniable advantages for treasury departments, but there are a couple of key drawbacks. Firstly, treasurers will be concerned about counterparty risk when making transactions to blockchain vendors. Scalability is also an issue, with bitcoin processing approximately 4.6 transactions per second (TPS), which is dwarfed by Visa’s average of 1,700 TPS. Nevertheless, the technology is showing signs of promise and is one to watch in the coming years.

4. Big data and analytics

The ability to better manage, analyse and process massive datasets can help treasurers improve both their diagnostic and predictive capabilities across a number of key areas, including:

• Liquidity planning;
• Cash forecasts;
• Foreign exchange hedging; and
• Commodity and credit risks.

Despite the opportunities available, Deloitte’s research showed 75% of treasury professionals do not actively monitor ‘at risk’ measures, with real-time analytics capabilities severely lacking in most teams.

However, TMS are already beginning to offer more sophisticated data handling and visualisation features, as well as the inclusion or integration of data warehouses. According to PwC, treasury functions can move beyond ‘why did it happen?’ analytics to ‘what is likely to happen?’ analytics. This shift would enable treasury teams to plan for certain scenarios and better align the department with the wider business.

5. Automation and artificial intelligence (AI) 

Many treasurers are using increasingly specialist software and tools to perform complex tasks such as cash visibility exercises, liquidity planning, regulatory compliance and forecasting. Yet there remains a multitude of laborious manual and semi-manual processes that slow the efficiency of teams, including credit and collections and accounts receivable/payable activities.

The introduction of robotic process automation (RPA) and AI to improve automation has proven a controversial topic in many industries. While time and cost efficiencies are obvious benefits, some people fear the rise of the robots and what that could mean for job security. Freeing up professionals from manual processes should enable them to tackle more analytical and strategic responsibilities. However, companies with large cash-management teams will no doubt reduce headcounts if transaction processes are automated.

Our own research suggested treasury professionals are fairly optimistic about the outcomes of automation and related technological advances. Just 4% believed their jobs were at risk, while 27% felt they would be more secure in their occupation.

Treasury 2020 and beyond

The above technology trends are in various stages of maturity. Some, like cloud-based TMS, are already a reality for many businesses, while others such as blockchain could take years to fully realise their potential.

Innovation is nevertheless gaining momentum in treasury departments and organisations must ensure their teams are prepared for a more technology-focused future. Our market report found sourcing the right technical skills was the biggest recruitment challenge for employers last year, with 32% citing this as their main problem.

Appealing to the specific motivations of particular candidates requires a sophisticated understanding of what drives professionals in an increasingly complex, treasury recruitment landscape. Businesses that get it right can expect the function to go from strength to strength in the coming years, delivering key strategic insights and ensuring financial stability.

If you’d like to discuss your treasury recruitment needs, please contact me on 020 7936 2601 or via email at kq@barclaysimpson.com.

Our 2019 Market Report combines our review of the prevailing conditions in the treasury recruitment market with the results of our latest employer and candidate surveys.

Image credit: Domenico Loia via Unsplash