Is 2015 the year that bitcoin becomes a legitimate currency for treasury to manage? Probably not. However, 2015 is the year where virtual currencies become a larger part of the conversation for more retailers. This likely translates to the growth of online marketplaces and virtual exchanges to facilitate the exchange of bitcoins to traditional currencies. Greater liquidity will be needed for bitcoins and other virtual currencies to be more readily adopted by corporations looking to appeal to what is one of the more interesting trends. Expect bitcoins to be easier to acquire, transact and convert in 2015.
We saw two different catalysts in 2014 that drove treasurers to consider different payment strategies to support global cash deployment. One was SEPA, which standardised the format for credit transfers and direct debit within the EU. The other is what one could call the ‘sharing economy effect’, which is when companies (particularly those who offer online ride-sharing and room-sharing services) who grow significantly strive to find new methods to make cost effective low value, high volume payments. As these brands continue to grow, their margins are impacted by how cost effectively payments can be made to partner drivers. What we expect to see in 2015 is not only more companies reorganising payment resources and infrastructure to make inexpensive locally-based payments, but also organisations evaluating non-bank payment methods as an alternative to traditional bank delivery channels.
The wish of complete electronic bank account management (eBAM) will not be fulfilled in 2015. But we may well get closer, building on small steps that were made in 2014. This past year saw a few select banks implement partial electronic management of bank account changes in their proprietary bank portals. In 2015, we expect rollout of further workflows and – hopefully – strong statements on how banks plan to interact with third-party systems such as treasury management systems (TMS), enterprise resource planning (ERP) and service bureaus. This interactivity is actually the critical point for an eBAM success because what good is electronic bank management if you are stuck logging into each of your dozens of bank portals. Centralised communication is the innovation we all seek, and hopefully we get just a little bit closer in 2015.
Higher Interest Rates
The US economy is, by many measures, recovering well, which means that an increase in interest rates to counteract inflation is almost a certainty in 2015. While a change to fiscal policy will have a multitude of effects, corporate treasurers should expect to incur higher borrowing costs while at the same time seeing the opportunity to earn higher returns on excess cash. What will be most interesting on the investment side is how corporates will deploy cash, given the impending regulatory changes to money market funds and the decreasing attractiveness of earnings credit rates (especially in light of changes banks need to make to prepare for Basel III compliance).
The past year has seen a variety of regulations that have relevant impact to corporates both within Europe and America. The introduction of the European Market Infrastructure Regulation (EMIR) and the supposed deadline for the Single Euro Payments Area (SEPA) occurred in 2014 – yet the deadlines for both were ‘subjective’, suggesting the full impact of both regulations is still to be felt in 2015. In the U.S., the Foreign Account Tax Compliance Act (FATCA) was introduced, which could still significantly shape cash and payment management practices for American companies doing business in emerging markets – and increasing the attractiveness of shifting to the local payment delivery channels previously discussed. We also saw guidance delivered by the US Securities and Exchange Commission (SEC) on money market funds, introducing both floating net asset value (NAV) and the potential application of redemption fees and gates. Although we are already hearing the complaints by corporate cash managers who value liquidity more than increased cash returns, the impact of these changes will become more apparent when interest rates rise.
Unfortunately, it is far too likely that cybercrime and fraud will continue to increase in 2015. Fraudsters will come up with more creative attempts to access sensitive data and exploit exposures in poorly designed workflows. Implementation of strong password controls, including multiple layering of dual-factor authentication and IP filtering or VPN tunnels will move from best practice to standard practice to increase defences. It is quite possible in 2015 that cybercrime is the straw that breaks Excel’s back as a treasury workflow tool, due to spreadsheets’ inherent lack of controls and absence of audit trails.
In 2014 we saw one of the largest treasury advancements for enterprises doing business in China since the easing of renminbi trading restrictions through the late 2000s. The Shanghai Free Trade Zone (FTZ) was technically introduced in September 2013, but the key details were made available this past spring which allowed banks and corporates to begin planning for onshore and offshore RMB pooling. The increase in RMB liquidity will allow corporates to access excess RMB cash reserves, which increases the attractiveness of investing further in China. Although much work remains, 2015 is likely to see an expansion of the Shanghai FTZ as well as increased implementation of cross-border RMB pooling as corporate treasurers get comfortable with the new opportunities to deploy and repatriate cash in China.
While this list may not be exhaustive, I do feel that it aligns well with what keeps treasurers up at night -how to be on the front foot with the CFO, CEO and the board, rather than the back foot – being able to confidently state “we should do this” rather than “we should have done this.”
All the best for the New Year and here’s to hoping that 2015 is the year of the treasurer.
Many banks around the world, large and small, continue to experience major security failures. Biometric systems such as pay-by-selfie, iris scanners and vein pattern authentication can help.
The implementation date of Europe's revised Markets in Financial Instruments Directive, aka MiFID II, is fast approaching. Yet evidence suggests that awareness about the impact of Brexit on MiFID II is, at best, only patchy and there are some alarming misconceptions.
Despite all the automation and improvements that digital banking has the potential to achieve, customers and their needs still form the very core of the banking sector.
Banks might feel justified in victim blaming when fraud occurs, but it does little for customer confidence.