J.P. Morgan’s view: Preparing for the shift to real-time treasury

Real-time treasury remains the ideal end state for many treasurers, and thanks to shifting business models, technological advancement and the evolution of instant payment infrastructure worldwide, the concept of real-time treasury is fast becoming a reality.

Q. How will treasury management evolve in the next 5-7 years?

In the near future, digitisation and automation will continue to simplify and streamline treasury processes, improving liquidity optimisation, risk management and operational efficiencies. Transactions will shift from batch-based to real-time processing, due to the growing popularity of application programming interface (API) and the rise of instant payment systems worldwide. Data solutions driven by machine learning and analytics will also provide treasurers with sophisticated, real-time insights on cash positions and transactions.

With easy access to financial data from multiple banks in real-time, the treasurer will no longer be consumed by manual tasks and freed up to focus on more strategic activities such as providing advice to the business and delivering value-added insights, all of which are becoming more pressing amid a rapidly evolving macro environment.

Q. How should treasury organisations go about preparing for the shift to real-time?

It is important to start the journey to achieving real-time treasury now and for treasurers to gradually build on key capabilities and skillsets in order for operations to become more efficient, effective and responsive to the fast-changing business environment.

There are three key areas – or 3Ds –  that treasurers should focus on to prepare for the shift to real-time:

• Data Visibility: As an essential first step, treasurers need to migrate from batch-based to real-time processing with the ultimate goal of achieving real-time visibility into balances and transaction reporting as well as obtaining data analytics. Solutions such as J.P. Morgan’s treasury services APIs can deliver instant, on-demand access to reporting and payment transaction capabilities whilst DataLab analytics can provide real-time visibility into a client’s transaction flows to drive better cash and liquidity management and support the decision making process.
   
• Data Processing: Ensuring internal processes are automated will help facilitate straight-through processing. Leveraging a single ERP that’s integrated with the firm’s TMS system, combined with the use of robotics and artificial intelligence will help streamline and automate workflows in the areas of payments, collections, reconciliations and reporting. Solutions such as J.P. Morgan’s Virtual Branch can also help treasurers digitise document submissions for processing tax and cross-border payments.

• Data Intelligence: Leveraging automated liquidity and FX solutions that are dynamic and intelligent will allow treasurers to make informed business decisions in real-time. Innovative solutions such as virtual accounts can help rationalise complex account structures whilst also automatically centralising cash across subsidiaries and regions to facilitate effective use of internal liquidity around the clock.

Dynamic investment solutions such as unitised time deposits – which automatically invests daily surplus balances into short-term time deposits for enhanced yields – and automated money market fund sweeps - can help to maximise yields on surplus funds at all times. For treasurers operating across borders and currencies, automated FX solutions such as J.P. Morgan’s ACCESS FX can help streamline the way FX transactions are executed, ensuring conversions are processed automatically and in real time. 

Featuring the 3Ds in the shift to real-time treasury - watch this video for more.

Q. What are the key challenges that treasurers may face as they embark on this journey?

Lack of a clear strategy and vision, limited resources and gaps in digital skillsets are common challenges that treasurers may face as they embark on their digital transformation journey. Additionally, with new technologies flooding the treasury space, treasurers may face challenges to determine where to start or how best to articulate a business case to progress their journey.

While many of the building blocks and technologies to achieving real-time treasury are already available today, treasurers should work closely with their banking partners who would be able to provide guidance and insights on putting these solutions together to deliver greater strategic value to their business.

Another key challenge is the access to quality data as legacy practices that involved manual entry, insufficient database maintenance and fragmented systems may result in inconsistent data. To improve data quality, it makes sense to use a single ERP and TMS system throughout the organisation.

While the use of technology brings many advantages it can also lead to increased fraud and cyber risks. Fraud analytics and machine learning can be implemented to identify potential attacks and monitor domain threats.

Q. How tech savvy does a treasurer and their team need to be?

As digital transformation gains momentum, treasurers should focus on upskilling themselves and their teams by deepening existing skills and developing new ones focused on embracing change and technological innovation, in order to be able to operate more effectively in this increasingly digital and automated world as highlighted in the diagram below.

Being data savvy will be a key attribute as technologies such as machine learning gain traction within the treasury space. While machines can process huge amounts of data very quickly, valuable results can only be derived if the right queries are asked. Ultimately, treasurers need the knowledge and skills to understand, analyse large volumes of data and ask the right questions to make sense of the information and translate them into actionable plans.