Corporate treasury is no longer seen as a cost centre. It is expected to play a key role in business policy decisions and new business initiatives. This requires a shift in focus from repetitive BAU activities to, timely and accurate, data driven decision
making for efficient working capital management. Given an option, 70% (as per IDC White Paper- Treasury Ecosystems- 2018) of corporate treasurers today would like treasury management as a service.
The shift, combined with corporates experience as a retail banking consumer, is leading to change in treasurer's banking expectations. The new age treasures expect the same level of convenience and capabilities that retail banking offers.
Real-time payments, paperless transactions, granular insights, digital collaboration, and proactive notifications are on the treasurers wish list in addition to connected ecosystem to achieve centralized, real-time, multi-bank, organization wide visibility
The banks, on the other hand, struggle with legacy – siloed systems, heavy reliance on paper, manual data-entry, multiple hand-offs, outdated communication and collaboration mechanisms, and inefficient processes. Their revenue is under pressure due to continued
low interest environment and declining global GDP. The regulatory and provisioning/capital requirements are stringent. These factors limit the bank’s ability to invest in modernization.
Thus, outdated technology infrastructure and processes continue to be a roadblock for the banks to measure up to the corporate customer needs.
As the new generation of treasurers – digital natives – move up the corporate hierarchy, the gap between treasurer expectations and banking reality would become more pronounced. This breed of treasurers is not averse to tapping into services from multiple
providers, including non-banks, if it simplifies banking and helps them transact at speed and scale.
Aided by supportive regulations like PSD2 (and equivalents around the world) and API driven technology infrastructure like OCEN (Open Credit Enablement Network, India) that simulate innovation, Fintech firms are helping bridge the expectation-reality gap.
New-age business models, barebones physical presence, and technology driven approach to everything helps these digital native firms minimize cost. In turn, they offer inexpensive, customized, and easy to access financial services to their customers.
Having revolutionized the retail banking sector with offerings like P2P Payments, Biometric Payments, P2P Lending, AI Driven Credit Decisions, Data Driven Product Recommendation, Customer Churn Prediction, Risk & Fraud Prediction, Monitoring and Mitigation
and Personal Finance Management, the Fintech now see an opportunity to repeat the feat with Corporate Banking.
The first steps have already been taken.
Today, corporate treasury has option to access state-of-the-art treasury management as a service. Offered by firms like Kyriba and FIS (Integrity), these systems are high on features and convenience. These systems bring together the internal systems like
ERP/Accounting, account statements like MT940/942 and banking APIs to provide a holistic multi-bank, multi-entity view on receivables, payables, limits, payments and much more.
What more, AI platforms like the ones offered by HighRadius forecast cash, automate bank reconciliation, lower DSO, and help corporate treasurers to optimize working capital.
And then we have Taulia that hosts the marketplace for supply chain financing bringing together suppliers, buyers, and financial institutions. It opens door to multiple financing options to the suppliers while banks compete to offer the best fee/interest
Account opening and management is no longer an ardours task. Virtual accounts reduce the need to open and manage multiple physical accounts besides offering a host of other features that help efficient working capital management. Tieto and Cashfac are leaders
in Virtual Account Management space.
While we are at it, Razorpay and Tide offer completely digital current accounts to the SME segment. These accounts come with integrations to applications like QuickBooks and make financial management simpler for SMEs.
Coming to the commercial/MSME lending space, the likes of Tala and OnDeck Capital, with their AI driven alternate credit assessment models and completely digital lending experience are making quick inroads. They are offering short term loans to the underbanked
and addressing the $5.2 Trillion demand that remains unmet every year.
Banks, with their strong relationship, financial heft, and access to customer data were best placed to offer the services that these new-age Fintech firms offer today. Thus, it is a lost revenue opportunity for the banks.
Service delivery portals that bank offer today is no match to the convenience and experience that these Fintech firms offer by embedding banking services into the corporate workflow.
Corporate banking portals like CoCoNet and Bolero’s Galileo are taking customer experience multiple notches higher. The out of the box features are comprehensive, integration formats multiple, and personalization simple and easy. These multi-bank portals
offer flexibility in terms of hosting options and are available on cloud and on premise.
It may not be long before IT firms decide to step in, host the portal on cloud and offer it as a service to Corporates.
These business models have the potential to relegate banks to product processing and take over the service delivery and, as a result, customer relationship. However, it is an opportunity for the banks to focus on product innovation and expand their outreach
through multiple third party channels while sprucing up their own corporate banking portals rapidly.
Banks that rapidly digitalize their back office to serve more customers at a low cost stand to gain a definite advantage over others that take weeks to open accounts. For example - Traydstream offers an interesting value proposition by automating the trade
document checks - one of the cost and time intensive processes in the trade finance workflow. Banks have an opportunity to offer document pre-checks as a service to exporters with near zero staff.
All said and done, the corporate treasurers are set to see smarter banking days ahead..