In the corporate banking environment, treasury and cash management are closely aligned. Cash management is merged with decision making at the enterprise level in areas such as strategic liquidity positions, mitigation of deficits and risks, deployment of capital. Cash management is on the decline and mainly concerns cash flow management. They work in tandem through a well-timed arrangement to provide real-time information and facilitate decision-making for the CFO suite.
As treasury gains strategic ground with tectonic shifts in banking architecture and the digital embodiment of access and privileges, it becomes imperative for treasury teams to maintain control and ensure 24-hour visibility cash flow, fund requirements, risk scenarios, business disruption. Organizations are becoming increasingly nimble and resilient to contain the impact of external shocks amid a complex web of supply chains and payment systems. Cash management expects a major overhaul in performance in areas such as cash forecasting, foreign exchange payments (FX), liquidity risk management and receivables processing with precision concerns at the helm.
A typical financial network takes after a “spaghetti junction” in the sense that data flows through complex exchanges and is constantly being changed, enhanced and erased in real time. Therefore, forecasting accuracy remains the Achilles heel of treasurers, who have started to rely on automation to gain better information through innovative metrics. While automation is said to have brought a transformative direction to cash flow forecasting, the principles underlying current cash management systems (TMS) need to be reviewed. Building a robust target operating model in treasury must have an overarching policy and ownership framework, mandates for streamlined processes and execution, centralized decision making, and technological innovation. Otherwise, the risks of a non-standardized, non-exclusive model will be far too great for conglomerates to address and could lead to cataclysmic failure.
Some clusters in the corporate banking landscape still lack the digital mnemonics that the retail banking arena has so widely embraced. The digital transformation of treasury has always had a quiet and nuanced evolution, far from the clamor in the world of retail banking. The life of a treasurer began to take the expansive path that spilled over to mobile and app channels once fintech started to take the lead and banks had to ditch inertia in favor of themselves. align.
Covid-19 has placed significant responsibilities on the CFO suite to ensure an uninterrupted and error-free business environment, managed by a rigorous risk management framework.
Reconciliations in cross-border payments
Persistent inefficiencies related to legacy systems, exception handling, multiple interfaces, currency positions, information sharing pose devious challenges for cross-border payments. The solution is to cultivate and apply innovations in payment systems such as instant payments frameworks, to miniaturize existing payment systems and to integrate these methodologies with cross-border channels. The world’s leading banks have implemented instant payment frameworks to help businesses and businesses.
Citi is also deploying its global corporate banking platform as a central engine to reconcile various instant payment networks across entities and geographies. Instant FX and instant payments are paired with cross-border capabilities, while payee tokenization and digital document management add luster to a growing tribe of smart innovations.
The integration of AI and machine learning (ML) frameworks enabled direct reconciliations to ensure that discrepancies in payment information were resolved. Citi used solutions to ensure that heterogeneous data prevalent in payment receipts and invoices is diagnosed and matched appropriately through ML-based pattern detection, which speeds processing. (source: Citi)
Innovations fueling digital integration
Customer satisfaction is constantly marred by an extremely high onboarding period for new corporate bank customers. Major surveys attribute an average of 5-7 days to customer due diligence and KYC timelines which are further extended in the absence of rapid signature verification systems. Additionally, requisitioning the same set of documents over and over by different departments at different points in the customer journey creates glaring inefficiencies and chaos in the customer’s mind, leading to eventual abandonment, in favor of a lesser suitor. complex. This requires a complete overhaul of the integration 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 provide digital data capture, categorization of unstructured elements, extraction of relevant information, derivation of inferences, and going so far. to validate legal agreements and perform KYC / AML checks with complexity, to complete the complete digital integration 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 trading and forex platforms. (source: Standard Chartered)
Streamline forecasting accuracy and liquidity management
Treasurers have long struggled with the accuracy of forecasts. In order to generate actionable information in a timely manner, most of them rely on long and complex modeling, as well as simulation exercises to study historical forecasts so that they can make reliable long-term forecasts.
Banks are increasingly using advanced data and analysis mechanisms to cultivate forecasting accuracy. When forecasting cash positions, treasurers regularly pull information from a collective data pool based on important events and triggers. AI / ML-backed pattern recognition innovations detect anomalies in cash flow as well as seasonal variations, improving accuracy.
Predictive algorithms help focus on delinquencies and aberrations regarding payment behavior and associated customers, paving the way for defaults to be identified. Risk mitigation is boosted through advanced analysis models, as treasurers are better prepared to face adverse market scenarios and fluctuations and to hedge their multi-instrument and multi-regional positions.
To streamline liquidity management operations, Standard Chartered had developed a capacity to concentrate cash through multi-bank direct debit. This had been done using a single electronic banking platform in several banks. Through a star mechanism, the client’s accounts with several banks had been linked to Standard Chartered’s concentration account. Direct debit warrants pulled money from the concentration account by complying with system rules in a faster and more reliable manner, unlike traditional swipe instructions, which work on SWIFT codes. (source: Standard Chartered)
API and Cloud as consumer proposals
Application Program Interfaces (APIs) advance in the treasury environment with important use cases in customer communications as well as in payment batch processing. APIs make the use of legacy SWIFT MT940 communications redundant by providing real-time access to instant payments and debit notifications to cash management systems. APIs also help reconcile payments by generating cash receipts in the system for better tracking and error tracking, which in turn leads to overhauled cash management as well as efficient accounts receivable.
Major banks have also implemented centralization of data in the cloud through cash management systems, FX trading platforms and ERP software. The benefits include less reliance on hardware, elimination of manual errors, and agility, all leading to cost optimization and efficiency.