How are CFOs and treasurers approaching technology opportunities?
Asset Benchmark Research reveals that much more is needed to help businesses boost efficiency via digital means.
Blockchain, API (application programming interface), big data, these are just a small sample of the new technology being made available to CFOs and treasurers over the last few years as they aim to improve efficiency.
Yet despite the constant push from service providers and technology firms to provide digital solutions, a significant number of CFOs and treasurers are still using manual processes.
That’s according to Asset Benchmark Research’s (ABR) 2019 Treasury Review survey of close to 800 participants, which found that almost a third (32%) of respondents were still primarily relying on Excel spreadsheets as opposed to a formalized treasury management system (TMS) or enterprise resource planning (ERP) system.
Moreover, only 10% of respondents believed that their day-to-day finance processes were more than 90% digitalized. In contrast, most (34%) respondents felt that their day-to-day finance processes were less than 50%, empathizing the fact that physical paper and manual processes are still prevalent in many treasury departments today.
Of the participants that did have an ERP system in place, many (60%) of them mentioned that they had already implemented such a system regionally or globally. Highlighting the divergence of determination when it came to approaching treasury management technology, some firms are keen to try it first-hand while others prefer to take a wait-and-see approach.
That appears to be the case for respondents when it comes to adopting mobile technology for treasury management usage.
More than half (56%) of respondents mentioned that they were not planning to use mobile banking services for corporate treasury with only 9% stating that they would adopt it in the next six months. This apparent lack of interest in mobile treasury management is more evident for larger companies with 61% of respondents from that segment saying they had no plans to use a corporate mobile banking service.
Of the survey participants that did use corporate mobile banking, most of them said account and transaction inquiry was the most common task they used the service for followed by the transfer of funds.
In fact, China-based respondents were more likely to use corporate mobile banking while Indian-based respondents would rather opt for the transfer of funds on a mobile device compared to other markets.
When asked which treasury technology could have the greatest impact on their operations, there were a number of answers ranging from liquidity to trade finance.
However, the improvement of payments was the most common answer. Banks such as Standard Chartered have attempted to address this issue by working with a number of mobile wallet providers such as Momo in Vietnam and GCash in the Philippines to make it easier for businesses to carry out cashless payments and collections.
Cybersecurity and the safeguarding of sensitive information is still top of mind for businesses and is currently the main hindrance when it comes to implementing digital treasury solutions according to ABR. Lack of awareness was also another prevalent obstacle holding back companies from incorporating emerging technology.
“Our business units had to quickly learn what blockchain was. It was very difficult to explain what blockchain is as it is a different way of working and getting money immediately,” says the treasurer of a Thai-based industrials company, which started incorporating blockchain in its supplier finance programme. “We need to spend more time to learn about this technology. We have to try any technology without fear.”
While there is still inaction when it comes to implementing digital treasury solutions, interest in new solutions remains strong. Among the topics CFO and treasurers want to hear about are big data, artificial intelligence and cloud computing, according to ABR.
“At the moment the technology solutions we see are not quite relevant to us. It’s about how we get the house in order before we talk about technology solutions,” explains the Asia head of treasury of a multinational chemical company regarding the prospects of emerging treasury technology.
About Asset Benchmark Research’s annual Treasury Review
Conducted since 2013, Asset Benchmark Research surveys corporates across Asia on an annual basis to understand the challenges faced by corporate treasurers and CFOs and the solutions they consider best suited to navigate financial markets. In 2019, almost 800 corporate finance representatives participated in the survey, led by decision-makers in Greater China, India and Indonesia. Based on annual turnover, 54% of respondents are small and medium-sized enterprises, 27% are mid-caps and 19% large corporations (>US$1bn turnover per annum).
View from Standard Chartered
The corporate treasury function is undergoing a digital and technological transformation, triggered by the emergence of new technologies that are redefining the way treasury functions are being conducted. The emergence of Instant Payments, Process Automation, Open Banking and APIs will propel the treasury function from ‘managing transactions’ to the higher trajectory of ‘managing strategic drivers.’ This transformation will grow the remit of treasury managers to that of a finance technologist and drive working capital optimisation, proactive risk management, automation, and data analytics to support strategic business drivers.
These technologies have become cheaper and more accessible than ever, to rapidly deliver tangible value to treasurers and business heads alike. With several regulatory bodies rolling out initiatives that are geared towards real-time settlements, and banks increasingly using technology as a differentiator, corporate treasury management is ripe for disruption.
Changing tires on a moving truck
Treasurers may face several challenges in embarking on the transformation journey. These challenges range from legacy infrastructure and fragmented ERP / TMS deployment to lack of awareness on how to leveraging technologies. In addition, treasurers are having to deal with the growing cost of compliance, geo-political unrests and fluctuating interest rates. These tactical priorities push transformational initiatives and corporate IT investments down the priority list. As a result, treasurers often refrain from making transformational changes to their systems and business processes. So how shall treasurers strike a balance between transformation and business continuity?
Modernising Treasury – one step at a time
Large scale technology transformation should start small and be driven by a strong business purpose. Fundamental banking activities such as generating end-of-day account statements from banking portals, tracking of intra-day cash positions, reconciliation, initiation of payments, and receiving notifications are great candidates for automation. Banks such as Standard Chartered offer standard API solutions to execute these activities on a real-time and on-demand basis.
APIs also help embed digital corporate banking services within corporate ecosystems in an open, trusted, consistent and scalable way thus allowing corporate treasury managers to access banking services from their internal environment, either to issue instructions or collect information.
At the same time, ERP platforms have transformed to become cloud-native, allowing treasurers to move their IT infrastructure to cost-efficient virtual servers. A cloud-based infrastructure delivers significant reduction in costs by eliminating the need for physical servers, AMC fees and hardware licences; and enhances business continuity and scalability.
The next stage of treasury evolution will involve use of advanced technologies such as machine learning and data analytics. However, the fundamental requirement for this all is to have a centralised data repository (often termed as a ‘data lake’) to store curated and indexed data. Analytics based on large volume of historic and curated data can be invaluable in understanding business patterns, managing currency and counterparty risks and automating investment decisions. Data analytics, coupled with technologies such as robotic process automation could lead to a truly intelligent and efficient treasury function, with focus on ‘managing strategic drivers.’
Addressing the right problems with the right technological tools can deliver up to 50-60% automation. The success will be driven by breaking down large scale transformation into smaller, manageable phases and executing it in an iterative and incremental manner leveraging the digital corporate banking tools offered by banks.
3 Dec 2019