Accelerating Treasury Digitalisation: When Crisis Meets Opportunity

As the world cautiously emerges from lockdowns to contain the coronavirus pandemic, a return to business-as-usual remains an elusive goal as work arrangements and supply chains have yet to fully recover from the disruption.

Yet, this unprecedented adversity has given corporate treasurers a unique opportunity: to fast-track what would have been an arduous process of digitalising treasury management and embracing real-time payment ecosystems.

Earlier this year, this digitalisation process witnessed unparalleled acceleration as economic activities went almost exclusively online for the first time in history. Virtually overnight, corporate treasurers faced the daunting task of enabling digital demand and payment channels to replace paper-based processes involving banks, vendors, and suppliers.

Banks have also had to step up their game by not only ensuring uninterrupted banking support in the “new normal” of working from home, but also in helping corporates to complete time bound transactions for strategic initiatives. These involve legal documentation and due diligence as well as deploying real-time tools and digital systems for cash forecasting and liquidity management.

An irreversible shift to electronic systems

The pandemic has also transformed the way consumers pay for goods and services. The accelerated shift to e-commerce has created many first-time online customers, while new electronic payment methods are being rolled out across countries and regions. This structural shift will permanently alter the business landscape across all industries, and may outlast other effects of the pandemic.

Besides bringing online access to new payment channels—while maintaining proper risk management and fraud prevention—treasurers have also had to onboard suppliers and vendors to digital payment systems. Vendors who were previously wary of providing bank details have had to quickly switch from paper to electronic payments in a matter of weeks.

This has had an immediate impact on liquidity, as shortened payables cycles need to be managed against longer receivables cycles. Cash forecasting and cash application efforts have had to be enhanced to manage liquidity dynamically and more frequently than before.

At the same time, new payment channels, while facilitating business growth , come with new reporting formats that need to be aggregated and fed into the Treasury Management System (TMS) and Enterprise Resource Planning (ERP) platforms for reconciliation. The growing number of diverse payment channels—coupled with a lack of integration among payment platforms that work across countries, channels (stores and online), and payment systems—is making reconciliation challenging.

Tailored solutions for a ‘new normal’

In such a fast-paced environment, it is vital for banks to work even more closely with corporates in order to support and protect their interests. This means supporting business continuity needs, providing quick solutions to manage e-commerce flows, and helping corporates efficiently manage surplus cash in ways that gives them immediate access to liquidity, while maximising returns on cash kept with banks. Alliances and partnerships with key players in the financial technology (fintech) ecosystem can enable banks to co-create cutting-edge solutions to help businesses seize new opportunities.

Partnering with fintechs allows banks to integrate external technologies within their own data ecosystems to facilitate cash forecasting, optical character recognition capabilities for invoice reconciliation, and e-commerce collections and reporting for reconciliation through collaborations with fintech firms and payment aggregators.

Such a co-creation model provides clients access to the latest technologies and innovations, while significantly reducing their time to market. It also allows corporates to leverage the latest tech solutions safe in the knowledge that a well-established banking institution has conducted thorough due diligence, and is able to provide front office and dedicated customer service support.

BNP Paribas is developing its own digital platform – which provides access to new, real time clearing systems, tax and utility payment tools, and digital cross-border document management - while also partnering with fintech firms to deliver solutions which increase the speed and volume of its clients’ investments in cash management, with the aim of providing the best of both worlds in terms innovation and scale of support.

At the same time, multi-party ecosystems such as Contour, Networked Trade Platform (NTP), and eTradeConnect provide the opportunity to help banks take the lead in shifting the market towards digitalisation.

Agility, flexibility and consistency

As corporates advance in their treasury digitalisation journey, banks will need to deepen their engagements and help treasurers overcome new and existing pain points.

Treasurers will expect even greater agility from banks in responding to their evolving needs, as well as flexibility and consistency in implementing cumbersome processes—such as fulfilling Know Your Customer (KYC) requirements—across all countries and types of transactions. Digitalisation of paper-based processes and reprioritisation will become even more crucial in adapting to the next “new normal”.