The working lives of corporate treasurers are increasingly being shaped by how they interact with the digital world. As multinational firms take an ever more global perspective, in terms of sales and supply chains, there is a growing need for solutions that facilitate faster movement and settlement of cash as well as more immediate analysis and consolidation of information flows in the corporate treasury.</p> Yet many are frustrated with the level of service they have received from banks with regards to digitalisation and automation of corporate treasury services. “Retail clients do benefit more than corporates from digitalisation of financial services, due to the fact that the provision of services to the retail community in the main does not involve complex cross-border banking services,” says Charles Legrand, founder of CN L & Associates.</p> Raising expectations</strong></p> Mark Buitenhek, global head of transaction services at ING, acknowledges that retail customers have experienced greater service improvements from digitalisation than corporates. “Expectations are shaped by their [clients] interactions with digital service providers such as Google, Facebook, Apple and Amazon. Customers – from large corporates to SMEs to consumers – now expect a similar experience from their bank,” he says. “At the moment, retail customers are benefitting earlier and faster.”</p> At Sibos 2015 in Singapore, corporate panellists voiced concerns over the pace of progress in applying digital technology to corporate banking services. Banks accepted their clients’ frustrations and a number of steps have been taken since to move corporate banking to a more digitised environment.</p> Following an announcement in January, 74 banks have so far announced their participation in a new global payments initiative, in association with SWIFT. The initiative is intended to improve the customer experience of corporate clients by increasing the speed, transparency and predictability of cross-border payments. Of these, 21 banks including Bank of America Merrill Lynch, BNY Mellon, Citi, JPMorgan Chase, Mizuho and Standard Chartered started the pilot in April, which is planned to run through to December. The banks that have signed up to the initiative will work with SWIFT to create a new service level agreement rulebook for cross-border payments to support “smart collaboration” between banks. The first phase of the project will focus on business-to-business payments, helping banks to deliver enhanced payments services to corporate treasuries, including same-day use of funds, greater transparency and predictability of fees, end-to-end tracking of payments, and delivery of richer payment data.</p> “Through the global payments innovation initiative, banks can use existing technology to quickly bring visible improvements to B2B payments for their corporate customers,” said Magnus Carlsson, treasury and payments manager, Association for Financial Professionals (AFP). “From a corporate perspective this kind of development in the payments space is very encouraging as it means no significant changes need to be made to internal systems in order to potentially reap the benefits of the programme.”</p> Regulatory fragmentation</strong></p> Product and service innovation by banks is taking place against a backdrop of regulatory change that can increase the challenges of delivering greater value to corporate clients. As well as constraints on budgets that can make it hard to make the necessary investment in product development, regulatory fragmentation can constrict efforts by banks to implement digitised services consistently.</p> For example, in Europe the European Markets Infrastructure Regulation (EMIR) requires post-trade reporting of over-the-counter (OTC) derivatives transactions by both parties to the transaction, whereas the US Dodd-Frank Act requires only banks to report such trades. As a result, corporates and their bank counterparts have been reporting the same trade to different trade repositories (Europe has registered six such reporting entities), causing significant reconciliation difficulties. The lack of automated solutions for trade reporting has resulted in heightened costs. Moreover, complex rules may be interpreted differently by regulated entities.</p> “The fact that different financial institutions are implementing the same regulation in different ways is also proving difficult for corporate treasurers,” says Peter Matza, engagement director, the Association of Corporate Treasurers (ACT). “For example with know-your-customer (KYC) rules, there are several different platforms financial institutions are offering to corporate clients, but that is not an advantage for corporate treasurers who want one platform for KYC.”</p> At the same time, the limitations on capital and leverage imposed by the Basel III capital adequacy regime are causing a step change in approach of banks to servicing corporate clients. “With the pressure to adhere to the international balance sheet requirements, banks are becoming more selective as to how they employ their services and liquidity – the latter being the ‘oxygen’ for their corporates,” adds Legrand. “Banks need to be aware of their client’s international needs, markets and aspirations. That comes down to relationship management of the client base.”</p> While corporates and banks continue to work together to improve process efficiency in the treasury, the new era of tighter budgets and slimmer balance sheets is inspiring corporate treasurers to take greater responsibility for finding solutions to their strategic and operational challenges. “Corporate treasurers will need to find other solutions to issues such as capital raising, working capital, supply chain finance and pensions,” says the ACT’s Matza.</p> Leveraging technology</strong></p> The desire to harness technology in the treasury is already leading to change. According to a Deutsche Bank-sponsored study published by the Economist Intelligence Unit last year, which surveyed 300 global corporate treasury and finance executives, around half of firms said their corporate treasury department was already using outsourcing technology services in the areas of foreign exchange risk management and cross-border transactions.</p> “Technology can help reduce the burden in treasury, and there are now more opportunities to outsource and more sophisticated options,” said Jonathan Leon, treasurer at The Brink’s Company, a US-based multinational security services firm in the study.</p> While many respondents noted growing use of cloud-based platforms in the treasury, the majority of respondents said they remain risk-averse when it comes to partnering with FinTech companies. Nevertheless, both the ACT’s Matza and ING’s Buitenhek see a key, long-term role for banks in supporting corporate treasury departments.</p> “As the environment in which corporates operate becomes more demanding due to complexity, regulation and volatility, we believe that a deep and insightful relationship with their primary bank is more and more valuable,” says Buitenhek. “As increased digitisation offers greater insight and bespoke solutions based on deep sector and financial knowledge, the bank becomes even more crucial for sound decision-making.”</p> </p>