Top Treasury Players Break Down The FinTech Disruption

Some of the top names in corporate banking and finance are teaming up to help treasurers make their way into the future.

The shape of treasury management is changing today, thanks to the rise of disruptive technologies, like blockchain, real-time payments and Big Data. To help corporate treasurers navigate the landscape, the banks, SAP and the European Association of Corporate Treasurers (EACT) have published the first of their “Journeys to Treasury” reports, which will be issued yearly.

“Journeys to Treasury is not a traditional report,” explained BNP Paribas Deputy Head of Cash Management Jean-François Denis in a statement, “but more like the minutes of a dialogue between experts from different industries with complementary viewpoints on treasury.”

The scope of the report is vast, and the discussions it includes are complex. PYMNTS breaks down some of the key points that corporate treasurers will need to keep in mind as the FinTech industry impacts their careers.

FinTech Disruption

The next five years of financial services have to be ready for some massive disruption from FinTech players, the report warns. But for corporate treasurers — which are tasked with ensuring the financial success and compliance of their companies — FinTech can pose a threat to their operations.

While treasury management stands to benefit from its interest in FinTech, the report explains that the lack of trust, security issues and lack of regulation surrounding many of these new technologies may mean they will struggle in the corporate treasurer’s world. Not to mention, the report added, many of these innovations first need to gain widespread traction and be able to integrate into existing corporate systems in order to play a successful role within the corporate treasury department.

“We are starting to look at FinTechs, but we believe that the market has still to become more mature before we can seriously consider working directly with them, since we are still concerned about the size and financial stability of most of them,” explained François Masquelier, chairman of the Association of Corporate Treasurers of Luxembourg, in the report. “We are very happy that banks are still interested in investing in FinTechs as they will bring about their financial stability.”

BNP Paribas, PwC, SAP and EACT aren’t completely writing off FinTech innovators, though.

According to the report, these technologies are already offering promising solutions for corporate treasurers, including faster, more affordable cross-border payments, direct debit processing, cash flow management, foreign exchange solutions and SME financing.

Blockchain is just one of these innovations that could disrupt corporate treasury in a massive way. Distributed ledgers have the potential to make real-time payments and document trading more efficient, especially across borders. The report identified smart contracts and multi-bank electronic bank account management as two areas that could see improvement thanks to blockchain technology. But, as with many FinTech developments, blockchain’s immaturity in the areas of security, scalability, integration with legacy systems and its ability to move out of testing and beta phases means blockchain is not quite ready to become a mainstay in the corporate treasury departments.

Big Data may be one of the FinTech developments in this space that has already improved treasury management systems. The report identifies Big Data as a tool that can help treasurers transition from descriptive, to predictive, to prescriptive forecasting, enabling them to become proactive with corporate finances.

That type of proactivity can impact corporate FX hedging, for instance, and enable customer analysis that reaches new heights. When it comes to payments, Big Data may enable financial services providers to offer corporates the payments services at the best possible prices or could deploy machine learning to automate invoice matching, for example.

It’s important to remember, however, that “FinTechs are not the answer to everything,” the report warns. “Before moving into the FinTech space, as a corporate, think which treasury processes could be made more efficient,” the authors wrote.

Real-Time Payments

BNP Paribas’ Cash Management University recently conducted a survey and found that a quarter of corporate treasurers are interested in real-time payment technologies for their institutions.

At present, the top use-case possibilities for real-time payments include a compliment to existing card and cash transactions, immediate payment-on-delivery regardless of the day or time of the transaction and a more affordable substitution to same-day payments.

For corporate treasurers, the emergence of real-time payments goes hand-in-hand with the rise of enterprise mobility, the report said. The demand for 24/7 services, regardless of a treasurer’s location, can help fuel the rise in demand for real-time payments. However, the report admitted that the potential value of real-time payments can be limited as compared to the world of consumers.

Instead, current ACH systems can offer corporates adequate payment speed for their needs. Real-time payments initiatives will need to expand their focus from B2C transactions to include B2B ones, too, the report noted. Developers need to implement standardization across borders, and banks need to support those initiatives, in order for the capability to not only get off the ground on a mass scale but to offer corporate treasurers a benefit.

Today, BNP Paribas, PwC, SAP and EACT said, corporate treasurers are more likely to be interested in automated payments solutions, not real-time payments capabilities.

“For most treasurers, real-time payments are needed mainly when things go wrong,” the report concluded.

Cybersecurity

Among these disruptive technologies, the threat of security lapses looms. Real-time payments mean a much smaller window of opportunity for FinServ players to identify and remedy a fraudulent transaction, for instance.

BNP Paribas, PwC, SAP and EACT have identified several ways corporate treasurers can ensure their corporates are secure as these FinTech innovations trickle into the office.

They include implementing “multiple lines of defense,” including security solutions within ERP systems and treasury management platforms. Identification measures are critical, and biometrics and artificial intelligence can offer a more sophisticated way for treasurers to keep their systems safe.

Fraud, the report noted, will always be a challenge. But the human element is often the weakest link when it comes to cybersecurity, according to the report. Big Data and other technologies can arm banks and other service providers with what they need to keep corporates secure.

Looking Ahead

No one knows for sure exactly how these technologies will shape the corporate treasury department. But BNP Paribas, PwC, SAP and EACT have concluded that, already, these disruptions have changed the corporate treasury game.

Professionals now need “anytime, anywhere treasury.” That means 24/7 services and mobile support. And as FinTech innovations, like blockchain and real-time payments, expand in popularity, treasurers will need knowledge and support to navigate the way these disruptions change their jobs.