This posting is in The Asset and provides a perspective regarding the desire for CFO/Treasury to have operations and supporting systems to be functioning in real-time status. The suggested impetus would be the pandemic, which is basically in line with many of the things we have been hearing and writing about given insights from the fourth quarter remote industry events and ongoing direct discussions.
Much of what was being discussed was digitalization, which in turn can be converted into more rapid and insightful data availability. This is particularly applicable in the high volume transaction banking space involving payables and receivables, core to the frequently confronted pain point of opaque financial operations.
‘Close to the first anniversary of the Covid-19 virus spreading around the world, much has changed in the way we operate. For chief financial officers and treasurers, the pandemic has been a wake-up call to relook at their technology capabilities, particularly in the area of real-time information flow, which is crucial in managing financial volatility caused by sudden lockdowns and changes in the economic atmosphere….The importance of acquiring real-time treasury functionality, where account balances and payments can be monitored 24/7, cannot be overstated. Instant payments, for instance, have grown in usage over the course of the pandemic with treasury management professionals placing emphasis on the technology for B2B (business to business) transactions, hoping that such a scheme could increase transparency on cash flows and reduce the complexities around traditional payment avenues such as cheques, cash and letters of credit.’
The move towards digital financial operations is taking several turns, including the increasing use of virtual accounts, something we covered in recent member research. The author also touts the growing ubiquity of APIs to enable more rapid connections between internal and external systems.
This has been brought on by a combination of regulations (PSD2 in Europe and some other similar legislation in various markets) as well as competitive market forces (North America) where the need to manage costs and provide the increasingly demanded user experiences drives technology modernization. Digitalization in key operational components also creates an environment where other latest gen tech can be optimized, which is where the growing use of RPA and AI (machine learning) enters the picture.
‘Key to supporting the entire ecosystem of instant payments is the growing acceptance from companies to connect with banks and third-party payment providers via APIs (application programming interfaces). Unlike a typical host-to-host (H2H) connection to a bank, which sends batch files to and from an organization in intervals, an API connection provides real-time information between several systems and is relatively easier to deploy….While increased API connectivity is a critical part of any real-time treasury function, another key merit of adopting such a setup is the ability to obtain accurate information about transaction habits and therefore gain a better understanding of short-term cash flow issues a company may face….“AI-based API can be used to analyze customers’ behaviour, which can help predict payment delays and optimize cash recovery,” according to a recent whitepaper on “The Future of Payments” by Deutsche Bank Research. “For example, the Google Prediction API provides access to cloud-based machine learning capabilities, including natural language processing, recommendation engine, pattern recognition, and prediction. Developers can use this API to build AI-enabled applications capable of performing sentiment analysis, spam detection, document classification, purchase prediction, and more.” ‘
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group