In the corporate banking environment, treasury and cash management are closely aligned. Treasury management is amalgamated with corporate level decision making in areas such as strategic liquidity positions, deficit and risk mitigation, capital deployment. Cash management on the other hand, is down the order and predominantly concerned with managing cashflows. They operate in tandem through a well-synchronized arrangement to provide real time insights and aid decision making for the CFO suite.

As treasury gains strategic mileage with tectonic shifts in banking architecture and digital embodiment of access and privileges, it becomes imperative for the treasury teams to retain control and ensure round the clock visibility across cash flows, fund requirements, risk scenarios, business disruptions. Organizations are becoming increasingly agile and resilient to contain the impact of external shocks amidst a complex intertwining of supply chains and payment systems. Cash management awaits a significant performance overhaul in areas such as cash forecasting, forex (FX) payments, liquidity risk management and receivables processing with accuracy concerns at the helm.

A typical financial network takes after a “spaghetti junction” in the sense that data flows through complex interchanges getting constantly altered, enhanced and obliterated in real time. As a result, accuracy in forecasting remains the achilles heel for treasurers, who have started relying on automation to gain better insights through innovative measures. While automation is deemed to have brought a transformative stance to cashflow forecasts, the underlying tenets of prevailing Treasury Management Systems (TMS) need a makeover. The construct for a robust target operating model in treasury needs to have a global policy and ownership framework, mandates for streamlined processes and execution, centralized decision making and technological innovation. Otherwise, the risks pertaining to a non-standardized and non-exclusive model will be far too significant for conglomerates to address and may result in a cataclysmic failure.

Certain clusters of the corporate banking landscape still lack the digital mnemonics that the retail banking arena has so comprehensively adopted. Digital transformation in treasury always had a muted and nuanced evolution, far removed from the clamour in the retail banking world. The life of a treasurer began taking the expansive route spilling over to mobile and app channels once fintechs started calling the shots and banks had to let go of the inertia to match up.

Covid-19 has thrust upon significant responsibilities on the CFO suite to ensure an undisrupted and error-free business environment addressed through a rigorous risk management framework.

Reconciliations in cross-border payments

Lingering inefficiencies related to legacy systems, exception handling, multiple interfaces, currency positions, information sharing pose sneaky challenges for cross-border payments. The solution lies in cultivating and applying innovations in payments systems such as instant payments frameworks, miniaturizing prevailing payments systems and integrating these methodologies with cross-border channels. Leading banks in the world have set in motion, instant payment frameworks to help businesses and corporations.

Citi for that matter, deploys its global corporate banking platform as the central engine to reconcile various instant payments networks across entities and geographies. Instant FX and instant payments get paired on the back of cross-border capabilities while tokenization of beneficiaries and digital document management add lustre to a growing tribe of smart innovations.

The incorporation of AI and Machine Learning (ML) frameworks have enabled straight-through reconciliations ensuring discrepancies in payments information are resolved. Citi has employed solutions to ensure that heterogeneous data prevailing in payments receipts and invoices are diagnosed and matched appropriately through ML based pattern detection, resulting in accelerated processing. (source: Citi)

Innovations fuelling digital onboarding

Client satisfaction gets constantly marred by excruciatingly high onboarding period for new clients in corporate banking. Leading surveys attribute 5-7 days on an average to customer due-diligence and KYC schedules that get further extended in the absence of prompt signature verification systems. Also, requisition of the same set of documents multiple times by different departments at various points in the client’s journey creates gross inefficiencies and chaos in the mind of the client, leading to a possible abandonment, in favour of a less complex suitor. This calls for a complete overhaul of the onboarding process, resulting in a digitally smarter system equipped with advanced document management capabilities. Many banks have deployed AI technologies such as optical character recognition (OCR) to ensure digital capturing of data, categorization of unstructured elements, extraction of relevant information, derivation of inferences and going as far as validating legal agreements and performing KYC / AML checks with varying complexity, to round off the full digital onboarding process.

Standard Chartered has created an end-to-end workflow solution that uses robotics to validate documents and leaves behind an audit trail for retrospective authentications in its trade and FX platforms. (source: Standard Chartered)

Streamlining precision in forecasts and liquidity management

Treasurers have struggled with accuracy in forecasting for a long time. In order to generate actionable insights in a timely manner, most of them rely on time-consuming and complex modelling as well as simulation exercises to investigate historical forecasts to be able to make reliable long-range predictions.

Banks are increasingly using advanced data and analytics mechanisms to cultivate precision in forecasting. In forecasting cash positions, treasurers routinely derive insights from a collective data pool based on significant events and triggers. Innovations in pattern recognition ably supported by AI / ML detect anomalies in cash flows as well as seasonal variations, which make for enhanced accuracy.

Predictive algorithms help zero in on delinquency and aberrations pertaining to the behaviour of payments and the associated clients, paving way for defaulter identification. Risk mitigation gets a shot in the arm through advanced analytics driven models as treasurers are better prepared to deal with adverse market scenarios and fluctuations as well as hedge their multi-instrument, multi-region positions.

To streamline liquidity management operations, Standard Chartered had developed a multi-bank direct debit cash concentration capability. This had been done by using a single electronic banking platform across multiple banks. Through a hub and spoke mechanism, the client’s accounts with multiple banks had been tied to the concentration account at Standard Chartered. Direct debit mandates pulled cash to the concentration account complying with the scheme rules in a faster and more reliable manner as opposed to traditional sweep instructions, that work on SWIFT codes. (source: Standard Chartered)

APIs and Cloud as mass-market propositions

Application Program Interfaces (APIs) are working their way up in the treasury environment through significant usecases in client communications as well as batch processing of payments. APIs render the use of legacy SWIFT MT940 communications redundant by providing real-time access to instant payments, debit notifications to treasury management systems. APIs also help reconcile payments by generating cash receipts in the system for better monitoring and error-tracking, which in turn lead to revamped liquidity management as well as efficiency in accounts receivables.

Leading banks have also been implementing cloud-based data centralization through treasury management systems, FX trading platforms and ERP software. The benefits include lesser dependence on hardware, elimination of manual errors and agility all leading to cost optimization and efficiency.