The Inevitable Move Towards Further Digitization: on the Road Again!

People often claim life is changing. But in treasury, we are used to changes and evolution. Today, different reasons, including the pandemic, force all of us to revisit the finance organization as a whole and to move a step further towards digitization. A fantastic opportunity arises for those who will be ready to on-board new technologies and prepared for these changes and… challenges.

“Change is inevitable, growth is optional” (John Maxwell)

For many different reasons, we all know that our treasury management organization will change and need to change in coming months and years. This health crisis was a tell-tale that our treasury world will not be anymore the same. I liked the recent Barclays – TMI treasury survey (“New Europe: is your treasury fit for the challenge?”) as it confirmed this statement. I like to explain what should come in future…

The changes should come from different reasons like regulations, technology, new operating businesses, new ways of working more from home, new generations with different ways of living and new values, as ESG for example, diversity, sustainability… All these good reasons will make our treasury organization much different sooner or later. In the survey, it appears that respondents saw the regulatory changes at 74% as an opportunity to rethink treasury processes. In some cases, it is true and obvious e.g. BEPS on TP with substance, PSD2, ERM Directives, etc.… But open banking, more competitive services and pricing will also be a factor for profound changes (i.e. at 52%) and eventually the need for more robust data security (i.e. GDPR and related reg’s). However, the same respondents consider also that business model changes are also a risk factor, as cyber security, pandemic (guess why), digitization (technology also includes risks) and political risks (growing everywhere).

I want to focus on digitization, which would represent an increasing risk for 66% of respondents. Digitization, for example, can modify the way of paying and welcome new payment methods, more instantaneous. The “real-time” element is becoming predominant these days.

Treasury digitization, risk or opportunity?

Again, the beauty with surveys resides in their ability to confirm trends and perceptions we may have of the market. Here, 95% of respondents have a positive mindset when it comes to digitization (the rest considering it is a risk). I was surprised given the rather conservative approach, in general, of corporate treasurers. It demonstrates that quasi all are convinced they are facing major technological changes. When it comes to technology, FX platforms come on top as technology currently used. I believe they also refer to new platforms, more open and competitive ones, not only to the classic ones. They also mention SWIFT for corporates, which is surprising as there are alternative solutions and as SWIFT becomes more and more expensive to run, especially because of their CSP constraints. Only 15% plan to move to SWIFT in future. But what is more interesting is the third one, i.e. data analytics. It appears as a technology that treasurers already adopted or intend to adopt in the next 12 months. 60% are or will be soon using data analytics. In terms of tools, the questions related to payments and collections, inevitably drove towards answers axed on these two fields, where time is a new issue. The use of robots and RPA’s confirm interest for this technology and opportunity it offers. But RPA’s are not the solution, in my opinion, but a palliative. We all know we have lots of data in several systems that we do not use at all or at least properly. We should. Today with a “treasury-on-demand” approach required by CFO’s, treasurers must develop solutions (and there are some), without spending too much money nor time, to make better use of these data and produce more accurate and useful reports for the C-level and the Audit Committee.

Data analytics will require better skills

The data analytics approach is much more interesting. They consider that they need better skills at 76% and it will necessarily change the recruitments in coming months and will push for education. With solutions like CashStory, with open source solutions and their education program approach, treasurers will need skilled persons or more realistically to train their staff to get this know-how with new languages and coding skills. In the top hurdles, budget is of course the major issue, together with resistance to change within management, treasury headcount and lack of training. The resistance to change within treasury should not be underestimated, I am afraid. Treasurers expect a lot from technology but also from their bankers, e.g. on KYC utility, on greener cash management products, on more pieces of information on new regulations, on co-creation of digital treasury solutions, on cash-flow forecasting with online banking and more cross-border virtual accounts. The list would be long of expectations. However, co-creation is a major expectation for treasurers. By combining fintech’s, banks and treasurers, we have a great cocktail for constructive evolutions. The new normal will be more digital and more creative to revamp processes and on-board new technologies.

What should we do then to be ready?

The major issue is for all of us, whatever the industry, the scarcest resource: human. As it is limited, we need to better select them or to better train them to acquire the ad hoc IT skills for making use of data. An RPA solution is not complex. There are now data mining solutions to shape reports, which are open source in some cases and for which a minimum training could be easily acquired. For young treasurers acquiring these skills, will give them a real “plus” that will differentiate them from peers. Why still using XL when, for example, we have products like Blue Prism, R Studio, Python-based solutions or others for developing what we need? The ones who will acquire these competences and will be able to design their own reporting by making use of available data will gain a competitive advantage and will differentiate from other finance departments. Today, the intelligence is not “artificial” (it is a wrong concept), it is more an “Automated Intelligence” we should be all looking for. The power is not into the financial / treasury data but in the capacity of using them and in extracting key indicators for a proactive and efficient treasury management. If I may give you a piece of advice, I would refer to a famous quote of Seneca: “Life is not waiting for thunderstorms to pass; it is learning how to dance in the rain”. And for properly dancing into the rain, we need to acquire new IT skills. That is a major challenge lots of treasurers have not yet identified.

François Masquelier