The Evolving Role of Treasury Technology Providers

As with many other industries, consolidation in the treasury management system (TMS) sector is nothing new. Companies consolidate until a new crop of providers emerge and then the cycle repeats itself. What is different, however, is that the treasurer is now burdened with increased responsibility and is looking to offload anything that is not directly related to running the treasury organisation.

Corporate treasurers are no longer simply focused on basic cash, funding, investing and compliance duties. Today, they must ensure their organisations have access to sufficient cash balances and credit facilities while complying with the rules of all the regulatory jurisdictions in which they do business.  Additionally, they are managing market, liquidity, counterparty and operational risks.

Treasurers are looking for solutions that essentially meet all of their requirements and can accommodate the workflows and business practices on which they operate. They are also asking vendors to be more than just that. Vendors should be able to behave as strategic partners and trusted advisors – experts with years of experience who can take a consultative approach to the relationship, which is increasingly valuable.

While TMSs are offering more than just cash management, and treasurers’ needs have expanded, they are not always taking advantage of all the available functionality. Companies will typically review their current processes and needs and then look at solutions that will fit. It is increasingly important that they consider what they could or should be doing, as opposed to what they think they need to do now.  Treasurers are also keen to benchmark themselves against other companies, to understand how they can incorporate best practices into their own operation. A trusted technology partner can bring with them the collective best practices from hundreds, if not thousands of implementations. This insight is invaluable.

Strategic partners can help treasurers think long-term. A vendor who acts as a partner will help them review their current processes, examine what the end result should be and work with them on how to get there. He or she will also guide them in the training they will need for their users and how much they should budget. A solution is sub-optimal if it is not used to its fullest extent.

Latest Trends and Innovations

In addition to vendors who can act as a strategic partner, treasurers are looking for those who can offer them the latest innovations. The move to the cloud, complying with new market requirements, managed services, and mobile connectivity are all at the forefront of current thinking surrounding the TMS domain.  So while recent consolidation might seem unsettling to treasurers in the market for a new treasury management solution, it is an opportunity for the treasurer to focus on the vendors who will be strategic partners and can both innovate and quickly adapt to challenges that are on the horizon.

The Move to the Cloud:

Some companies have limited IT resources, so treasurers are looking for vendors who can provide them with multiple deployment options for their treasury solutions – hosted on-premise, software-as-a-service (SaaS) and hosted within the vendor’s premise. SaaS and hosting models can help companies reduce their total cost of ownership and also get them up and running faster with less reliance on internal IT resources.

Additionally, what the industry is seeing with technological advancements such as SaaS is the ability to deploy functionally-rich, complex treasury technology at a lower price point. So what once was a significant project that included infrastructure and hardware costs, in addition to the implementation and acquisition cost of the software, has now become easier for companies of all sizes to consume. Rather than just having access to rudimentary treasury tools such as bank aggregation, treasurers now have access to far more in terms of accounting, risk management, dealing, operations, settlement, hedge reporting and compliance, all within a lower price point.

Unfortunately, emerging markets can be held back when it comes to new deployment methodology, if there is lack of availability through the web and no proper infrastructure to reliably connect to a SaaS solution. However, this situation is rapidly changing for some countries within the emerging markets of the Middle East, Africa and Asia Pacific as the technology infrastructure to support SaaS emerges. 

Indeed, a generational skip in some emerging markets is likely, where they may be able to skip straight from spreadsheets to treasury technology in the cloud as opposed to going through the conventional client-installed application that the rest of the world went through. It’s similar to the phone service, where the infrastructure of installing lines actually skipped an entire generation in some parts of the world. Countries in emerging markets had the option of simply not investing in the infrastructure of a wire-based system and instead went straight to mobile. In this way, treasury technology has advanced to the point where it is not necessary to install software. However, the option to install treasury technology on the premise is still there and in fact there is growth in adoptions as companies in emerging markets continue to migrate away from managing their treasury on spreadsheets.

Increasing Appetite for Managed Services:

Until recently, treasurers would buy treasury software, install it in-house, and then take on the responsibility for disaster recovery, managed upgrades, and all of the support work around maintenance of the servers. More frequently companies are pushing to offload that work to the vendor, who sells them the software (not an additional third-party) in order to have that run by someone who understands the software well and can manage all of the architecture in a much more efficient manner. This is a significant innovation that has changed life for many treasurers. By outsourcing the heavy lifting and non-value-add work, treasury departments can operate smarter and more efficiently by focusing their resources on strategic decision-making.  Managed services can include managing a particular function to managing a software upgrade to managing bank communications.

Managing multiple bank connections can be costly and operationally inefficient.  Many treasurers today have already or are looking to streamline their bank connectivity in order to reduce costs, improve efficiencies and free up their budgets and resources to consume more services from their banks. The easiest approach is to have the TMS vendor manage the connectivity, from implementation to ongoing daily management.

Complying with New Market Requirements:

There are always some elements of new regulatory compliance, new functionality, and areas of concern around risk accounting that come to the fore and become extremely important for treasurers. Currently, regulations such as Dodd-Frank and the European Market Infrastructure Regulation (EMIR), along with International Financial Reporting Standards (IFRS) requirements around hedge accounting, require vendors to add new functionality into their TMS to help treasurers comply with these regulations. 

In addition, vendors need to be innovative to upgrade solutions quickly in order to react to those changes in the marketplace. These upgrades can be done more easily and seamlessly in cloud-based TMSs.  Rather than just using the core applications to meet requirements, innovative vendors can be using streamlined, cloud-based technology as their framework in order to build out web-based software and service-type solutions that address particular niches of functionality or requirements of the marketplace.  The market is always changing due to regulatory issues or the economy, so vendors need to be able to quickly adapt their technology and offerings to meet the latest needs of the treasurer.

The Future of Mobile:

Treasury users want to have the ability to use certain elements or components through a mobile device, whether tablet or phone. Functionalities such as wire/payment initiation and approval and reporting of data are important. The likelihood that a treasurer will need a mobile device to enter investment transactions or foreign exchange (FX) transactions while out of the office is relatively unlikely. More often, treasurers find themselves in a situation where they been asked to approve a transaction while they are in all-day meetings or traveling, so pushing that to mobile device technology makes that process much easier. Payment initiation, approvals, dashboard reporting and current investment positions are the main functionalities that treasurers need, so vendors need to make these functions available on mobile devices.

Change is constant – whether it is consolidation, new regulatory requirements or economic changes – so vendors need to be able to quickly adapt their technology and offerings to meet the latest needs of the treasurer. The key for treasurers is evaluating their requirements and goals and selecting a vendor who acts as an advisor and will be with them for the long term. 

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