Long reads

Treasury management trends

Six prominent treasury trends that will help guide strategy and technology adoption for financial institutions in 2021 include:

The only constant will be an increase in the rate of change

As the oil that lubricates the economy, financial institutions will need to react quickly to the impact of the pandemic. Digitalization, cloud and platformification will make a Bank as a Service approach the new normal. My mantra is: “When there is an App, there is a way.” Adopting a platform-based approach will probably be the most important action separating winners and losers.

Increased agility will be needed to manage liquidity and risks

As banks seek to manage the negative impacts of the pandemic, the process of finding a way to manage risk and become profitable will accelerate. The twentieth century ‘finger in the air’ management of banking books is not scalable and not doing anything about it is not going be an option anymore. Digital disruptors are here to stay. The use of artificial intelligence and machine learning, supported by cloud and digitalization, will be key in highlighting trends and potential risk. It will allow banks and treasurers to process data to an extent never possible before – and will become a ‘must have’.

Regulation will continue to drive strategy

The unparalleled credit flexibility offered throughout the COVID-19 crisis will no doubt bring some unexpected consequences. Regulators will need to be quick to act, and compliance will be key. Adhering to existing and emerging regulatory agendas could stretch banking resources thin. Regulation as a service offerings need to step up.

Remote working will accelerate cloud adoption

As remote or hybrid working environments continue into 2021, financial institutions will need to ensure secure and flexible means for connecting employees. Cloud-based services supported by Microsoft Azure, for example, incorporate two-factor authentication, offering greater security for employee collaboration and financial data. Resistance from incumbent on-premise IT departments will be futile.

Platform plays will grow

A look back at 2020 reveals how quickly business environments can change and how easily current standards can become obsolete. The success of working remotely with co-workers, clients and partners has shown us that strong collaboration will continue regardless of where people are operating from.

In 2021, savvy financial institutions will open the way they work to inspire new business models focused on increased agility. Financial institutions are likely to continue the movement away from the standard and limiting businesses models of the twentieth century in the way they deal with people and clients. The process of buying software, implementing and running it will morph into getting the functionality as a service. This will prompt software vendors to offer their code as a cloud-based managed service as a first step, before accelerating to Bank as a Service where the concepts of software, hardware and operations will no longer be relevant. An example of this would be offering Risk as a Service, where there is not even the concept of implementation.

ESG principles will shape investment decisions

One of the strongest effects of the pandemic is the change in focus from growth to well-being. Both active and passive ESG-focused funds reached $71.1 billion during the second quarter of the year with global assets under management hitting $1 trillion for the first time.

ESG investing is likely to remain a hot topic with investors, as up-and-coming generations place a greater emphasis on social activism, and older generations have Covid as a wake-up call. The question that arises in 2021 is whether financial institutions are prepared to meet the demand for sustainable investing. Marketplaces for Sustainable Development Goals (SDGs) will become a reality to enable that demand.

Comments: (0)