Treasury Digitization - Market Perspectives

3 Treasury Digitization: Market Perspectives Treasury Digitization: Market Perspectives The advent of new digital technologies and the evolution of financial services is prompting corporate treasury to rethink its future. In their drive to establish a digital strategy for treasury, companies need to understand the outlook for treasury digitization in 2020 and beyond; they seek insights into the technologies being pursued and the processes to which these are being applied. To facilitate peer insights and charts included in this report, we surveyed a subset of Citi’s corporate clients globally, through online surveys as well as at various treasury forums throughout 2019. Responses to the survey, which were predominantly from global and regional treasurers, form the basis of this report. The survey reveals that digitization initiatives are being prioritized within cash and liquidity management, presumably due to the potential impact these functions can have on the broader enterprise agenda of growth and cost efficiency. The report outlines key use cases where robotic process automation (RPA) and application programming interfaces (APIs) are being considered or implemented to automate and accelerate processes. We also highlight the processes that treasury believes would benefit from predictive and cognitive technologies to help enhance decision making. While treasury’s openness to the adoption of new technology is encouraging, it faces challenges. In a majority of cases, budget allocations continue to be the key hurdle to technology adoption, as new technologies compete for investment with enhancements to existing technology. As corporates work to improve operational and financial efficiency to support growth, the business case for emerging technologies becomes ever more compelling. The survey and report provide further evidence of the momentum in digitization and are expected to help aid treasury in its quest for support and investment in 2020. Digitization Is Expected to Drive Treasury Change Rapid advances in technology are prompting a transformation in the corporate landscape, with shifts in how companies procure, manufacture, distribute and service their products. Within some industry sectors, the digital mindset is instrumental in driving shifts in customer preferences and buying behavior, leading corporates to pursue diversification or explore new business models. As this disruption and diversification of business models brings about changes to enterprise cash flows and risk profiles, corporate treasury is being impacted in multiple respects. At the same time, financial service systems are changing, with instant payments (also referred to as real-time payments or faster payments) gaining momentum. Several dozen countries are now live or in the process of deploying instant payments infrastructures. These systems generally capture richer remittance data and can offer added functionality such as tokenization. At present, instant payment schemes are more relevant to consumer and commercial or vendor payments, since treasury transaction values are often above instant payments transaction limits. Yet over time, the relevance to treasury may increase as transaction limits are raised. The progressive modernization of national payment systems, coupled with the growing use of financial APIs, signal the early stage of a shift to an “always-on” economy. This is expected to drive the need for a more efficient, smarter and integrated treasury operation in 2020 and beyond. Treasurers will need to develop strategies to optimize the use of liquidity and capital across such economies, even as financial market limitations and regulatory controls continue to impact their ability to invest and fund post market cut-off or cross-border on a real-time basis.