At EBAday 2019 in Stockholm, Deutsche Bank’s Koral Araskin highlighted that if instant payments is the new normal, banks will heavily depend on cash buffers to cover all payment flows - even those which come outside of normal working hours. "Is this really meaningfully achievable?" he pondered last year. The events of 2020 and the impact of Covid-19 have truly shown that it must be achievable.
Taking to the virtual stage and building on the success of last year’s congress in Sweden, representatives from Bank of America, JP Morgan, SEB, Volante Technologies and Cash Dynamics discuss corporate liquidity management needs in the age of instant payments, how banks can fulfil them and the implications they have on intraday liquidity.
While the proliferation of real-time payments has influenced liquidity management, it is evident that amid economic downturn, maintaining a safe level of working capital is of paramount importance for banks requiring funds to keep them afloat and continue normal operations.
Gone are the days of processing payments in batches at designated times; today, treasurers must now ensure accuracy when assessing liquidity and manage risk around the clock. Further to this, instead of burdening staff and budgets, they must also leverage new technology and integrate solutions that can monitor transaction data 24/7 - the global coronavirus pandemic has arguably accelerated this shift to digital for some financial institutions.
Panel moderator Joost Bergen, owner at Cash Dynamics, states that while a lot has changed in the corporate treasury management world in the last nine months or so, “liquidity is key for every organisation to operate. Instant payments is here to stay,” but how will real-time payments support treasurers, specifically with their liquidity management? And how will banks manage instant movement of funds?
Krister Billing, business development and market infrastructure manager at SEB, considers the impact of instant payments on liquidity management and states that we are on the verge of a “perfect storm, not only on the bank side, but the infrastructure side and payments side too.”
Billing explores further how there is an appetite for new practices like instant payments, especially as the drive for adoption is consumer and domestically driven. “With near cashless societies, the propensity to use new products is bigger.” However, he adds that the need for instant payments within liquidity management working groups is not that apparent because functionalities and features like Swift gpi already enable banks to make and receive payments at a faster rate.
Henrik Lang, managing director, global head of liquidity, GTS, Bank of America explains that the reason why instant payments are an attractive proposition to corporate treasurers, and there is an increased push to align technology innovation with real-time payments schemes, is due to increased regulator interest.
With real-time payments comes real-time transparency, real-time visibility and real-time reporting. This is the true value-add for banks. Lang posits that treasurers need to “free up as much liquidity as possible, as quickly as possible,” increasing transparency and visibility where they may be rely on end of day reporting to understand their cash positions. As Lang goes on to say, instant payments could resolve issues that persist with cash forecasting, “the holy grail of cash management.”
Lori Schwartz, head of global liquidity product solutions specialists, treasury services, J.P. Morgan brings the conversation together and states that perhaps, this is where artificial intelligence can help. With visibility, control and optimisation, cash flow could be predicted - “where cash buffers are traditionally used, there is opportunity cost and real cost involved,” Schwartz says. She adds that what must also be considered is the “multi-currency aspect of doing the deal today;” all instant payments schemes are different, so knowledge of these are needed in order to embrace the potential that is offered.
Following this thread, Billing agrees with Lang’s earlier point and explains that while there are benefits of building on instant capabilities, providing regulators with timely, correct information and improving visibility of income cash flow, ultimately this supports businesses and in turn, improves customer satisfaction.
Providing a Nordic example, he states that while replacements are being sought out for e-invoicing and direct debit schemes, the “B2B side is more complex,” as for example, cross border payments are “entrenched in complex file formats and standards.”
Domenico Scaffidi, business development director and market infrastructure expert, Volante Technologies, takes this conversation further, mentioning the advantages of Request to Pay and P27 and agreeing that in order to help businesses, all payment information must be received. “If you want to be successful in payments, you need real-time payments,” Scaffidi states.
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