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EBAday: Liquidity management is a balancing act that can be improved by instant payments

EBAday: Liquidity management is a balancing act that can be improved by instant payments

The penultimate session of EBAday 2023 covered the myriad of challenges currently being faced in liquidity management. The impact of regional conflicts and subsequent sanctions, as well as supply chain issues, have made the future volatile.

Bonni Brodsky, managing consultant at Lipis Advisors. She was joined on stage by Koral Araskin, head of Liquidity Solutions, Institutional Cash Management, Deutsche Bank; Joshua Cohen, co-head of Liquidity and Corporate Treasury Solutions, iGTB; Peter Dehaan, global head of Business Development for TLM Cash & Liquidity Management, SmartStream; Frank Dux, managing director, CoCoNet; and Martijn Stoker, head of Liquidity and Account Solutions, J.P. Morgan Payments.

Araskin started by offering a positive perspective that despite the problems being faced in liquidity management, there is in increase in the amount of overall investment. He later raised concerns about the role which instant payments will play on liquidity management for treasurers. He argued that in a scenario where payments are all instant, treasurers have less time to play with and this may trigger “buffer costs” which have not been accounted for in instant payments.

Stoker noted three key trends: the first that is in the context of the macroeconomic framework of increasing inflation and rates, what are central banks going to do more for tightening liquidity and what will be the impact on the business environment; the second is around technology and how it is changing the way clients operate. This is impacting how banks operate and changing the expertise they can provide to clients; third is about changing business models impacting the way liquidity management needs to be dealt with. He argued that in the past the model was a business to business model, then a business to consumer model, and now is moving to a consume to consumer model.

Dehaan stated that the future of liquidity management is about accurate real time data. He argued that banks are naturally driven by metrics and ratios, for example budget deposit ratio or liquidity coverage ratio. He argued for better controls of data and having the technology to make data more visible.

Dux brought back the topic of instant payments offering two use cases in the liquidity management context: the first is cash pooling, which he argued offered complete control over pooling and multibank pulling; the second is about timed instant payments, which allows more control over the timing of payments, for example salary payments to go out on a Friday and employees to receive them that day.

Cohen countered Dux’s perspective, arguing that there is the need for real time payments from the liquidity management perspective, but not so much from the corporate side. Later in the panel Cohen discussed AI Cash forecasting. He argued that current models are not able model more than a few days in advance because of insufficient data, but the pattern identification that is offered by AI may be able to advance these predictions, although he emphasised that these AIs are not yet ready.

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