In this webinar hosted by Strategic Treasurer, industry leaders tackled the up & coming technology in corporate treasury and directly addressed concerns that are surfacing in nearly every treasury team worldwide.
Drivers of New Tech: Big Picture
According to Craig Jeffrey of Strategic Treasurer, there are several forces driving the adoption of new technology in the treasury space, but they all tie back to increasing expectations.
Explosion of data. The sheer amount of data available in the world has dramatically increased in the last ten years. Research firm Statista calculates that the compound annual growth rate of total data volume is 23%.
No tolerance for delays. From Disney’s Lightning Lanes to same-day delivery groceries, tolerance for delays is at an all-time low in the consumer world, and these expectations are spilling over into the corporate world. No longer are executives content to wait for reports, they expect up-to-the-minute information from their treasury department – just as they do with the arrival of their rideshare car, or their lunch order. But it’s not just executives, employees at all levels experience this change in expectations in their real lives, and in turn, begin to expect the same at work.
Brand new tools. Since the invention of the wheel, the cotton gin and the assembly line, the introduction of new technologies has been an absolute certainty of life. The same holds true for tech tools in the treasury space – there will always be new innovations, often developed with the goal of fixing a problem or increasing productivity. New tech tools are also essential for processing and making the most of the explosion of data.
An example of these three change drivers can be observed in the accounting close process. Recently, the acceptable accounting close period was 15 days. Expectations started to shift because new tools and more data became available. As a result, the target close became 10 days, then eight, seven, six and continues to decline – with some forward-thinking companies like Workday proposing a zero day close – meaning the books are closed before the month ends.
Drivers of New Treasury Tech: Solving Specific Pain Points
A recent poll showed 52% of treasury practitioners view the need to solve specific challenges or achieve goals as the reason why they adopt new technology.
The reasons that Bruce Edlund, Assistant Treasurer at Citrix, sought out new technology also support these poll findings. Despite being a large tech company, Citrix was behind the treasury technology curve because they didn’t have any bank connectivity. This lack of connectivity created several problems – from obtaining data in a timely fashion, to increased risk of payment fraud, hassles with bank portals and tokens, among others.
At the same time, the Citrix team was experiencing the benefits of new technology tools in their personal life. “When we go on our personal banking app, we don’t want to look at yesterday’s balance. We can send money to anyone instantly, we can check our balances in real-time. Why shouldn’t it be the same way for our companies?”
Having used legacy treasury technology solutions in other roles, Edlund was convinced that they weren’t the latest and greatest – he was convinced that there were brand new tools that leveraged the latest technological advances, and that would solve their challenges better and faster. He was right. By onboarding a new bank API-ready treasury technology, the Citrix team is now on the road to not just automating manual tasks, but speeding the process up – making their operations faster and better.
New Tech Spotlight: Bank APIs
At the heart of corporate treasury lies financial data, and the most crucial building block of financial data is bank data. In 1994, in the infancy of the digital age, banks began offering online bank portals where companies could download digital bank statements. Nearly twenty years ago, banks developed host-to-host connectivity via file-based transfers which is the most common channel for corporate bank connectivity today.
We’ve discussed how the introduction of new technologies and tools over time is a certainty. Companies that ignore advances in technology do so at their own risk – just ask Nokia, Blockbuster Video or Yahoo. When it comes to bank connectivity, a new technology has emerged: bank APIs. Bank API connectivity is very different from file-based bank connectivity, like host-to-host or SWIFT. Forward-thinking treasury practitioners understand that APIs are a 2-way conversation where the connectivity channel and the data are one in the same.
What challenges do bank APIs solve?
For most treasury professionals, the main driver of new technology adoption is the desire to solve challenges or achieve goals. Other reasons for new technology like a digital transformation initiative or new leadership still exist, but the message is clear: treasury isn’t onboarding new tech just for the sake of it. So what are some of the key challenges that bank APIs solve? The webinar panelists shared a just a few of the many examples:
Increase CFO confidence. Sri Mudigere of Workday commented “[CFOs] are able to get real-time, on-demand treasury reporting with very rich data sets and dashboards that they can play around with…they can dynamically relocate any surplus cash to prepay suppliers or issue bonus payouts, or geographically align where their cash balances should be, based on perhaps their target portfolio decisions that they make. They may even be able to then shift investments into priority projects or accelerate spending on key initiatives that they may not have if they didn’t have that up-to-the minute visibility into their cash positions.” Edlund agrees, commenting that while some companies may not see a direct need for real-time data, “The confidence that we get from bank API connections is really good, and then you have the possibility of speeding things up if you want to.”
Reduce disruption to daily operations. Missing bank statements, chasing down a payment file, the data management required to process countless bank files – all of these and more or a disruption to daily operations and take treasury team members away from their core work. Because bank APIs are not file-based technology, rather a flow of data on-demand, all of the headaches of bank files go away, and those personnel can be redirected to more strategic work.
Improve DSO and free up credit limits. Bank API connectivity allows for instant reconciliation because there’s no delay between when the transaction hits your bank and when that information is piped into a company’s internal systems. With machine learning tools, and the expanded data points that also come with bank APIs, reconciliation can be performed same-day allowing the clearing down of customer invoices in real-time. As those collections are happening, you’re freeing up credit limits, allowing clients to place more orders, and the opportunity to improve your DSO.
Bank APIs also serve as the bridge for adoption other new technologies like instant payment networks, blockchain and others.
New technology is the source of constant change in our personal lives and our professional work. By embracing these tools and the improvements that they bring, companies can harness their power, and can ultimately gain a true competitive advantage while retaining and recruiting the best talent.