Close to the first anniversary of the Covid-19 virus spreading around the world, much has changed in the way we operate. For chief financial officers and treasurers, the pandemic has been a wake-up call to relook at their technology capabilities, particularly in the area of real-time information flow, which is crucial in managing financial volatility caused by sudden lockdowns and changes in the economic atmosphere.
The importance of acquiring real-time treasury functionality, where account balances and payments can be monitored 24/7, cannot be overstated. Instant payments, for instance, have grown in usage over the course of the pandemic with treasury management professionals placing emphasis on the technology for B2B (business to business) transactions, hoping that such a scheme could increase transparency on cash flows and reduce the complexities around traditional payment avenues such as cheques, cash and letters of credit.
According to Asset Benchmark Research’s Treasury Survey 2020 of Asia-Pacific-based CFOs and treasurers, a sizable portion (31%) of respondents believed that payment functions within their respective organizations would benefit the most from greater application of technology.
Over the past decade, instant payment schemes have been launched globally, from China’s IBPS (Internet Banking Payment System) in 2010 to the European Union’s 2017 SEPA Instant Credit Transfer, to meet the growing need for fast and secure fund transfers.
Key to supporting the entire ecosystem of instant payments is the growing acceptance from companies to connect with banks and third-party payment providers via APIs (application programming interfaces). Unlike a typical host-to-host (H2H) connection to a bank, which sends batch files to and from an organization in intervals, an API connection provides real-time information between several systems and is relatively easier to deploy.
While increased API connectivity is a critical part of any real-time treasury function, another key merit of adopting such a setup is the ability to obtain accurate information about transaction habits and therefore gain a better understanding of short-term cashflow issues a company may face.
“AI-based API can be used to analyze customers’ behaviour, which can help predict payment delays and optimize cash recovery,” according to a recent whitepaper on “The Future of Payments” by Deutsche Bank Research. “For example, the Google Prediction API provides access to cloud-based machine learning capabilities, including natural language processing, recommendation engine, pattern recognition, and prediction. Developers can use this API to build AI-enabled applications capable of performing sentiment analysis, spam detection, document classification, purchase prediction, and more.”
Leveraging transaction data is not new in the financial services world, having been used by technology companies in the past to determine credit scoring models for loan approvals. For the treasury function of tomorrow to work in the post-Covid world, companies need to understand how to not only collect valuable datasets but to also determine which sets of information are relevant to attaining operational efficiency.
