Treasury Digitalisation: From Acceleration to Integration

The coronavirus pandemic has redefined what ‘digitalisation’ means to corporate treasurers. Prior to the initial lockdowns earlier this year, digitalisation primarily focused on replacing paper-based processes and transactions, particularly cheques and cash, with electronic transfers. The ensuing ‘new normal’ of working from home and social distancing not only hastened that process, but also upended many business models.

With stringent curbs on the physical movement of people forcing almost all business activity to go online, an accelerated shift to e-commerce required companies to quickly embrace electronic payment channels and reimagine supply chains. Besides ensuring companies’ ability to serve customers and receive payments electronically, corporate treasurers also had to onboard suppliers and vendors to the new digital payment systems. They even worked overtime, often closely with banks, to complete strategic initiatives involving legal documentation and due diligence as well as deploying real-time tools and digital systems for cash forecasting and liquidity management.

Thus far, from a payments perspective, companies have mostly navigated the initial impact of the pandemic with minimal disruptions and are significantly better prepared to cope with the fresh wave of lockdowns unfolding in parts of Europe and the Americas. They must now ensure these new digital tools and technologies are fully integrated into their treasury strategy and proactively manage the many risks of operating in a 24x7 world.

As companies navigate the next leg of their treasury digitalisation journey, it is vital for corporate treasurers to work with trusted banking partners, financial technology (fintech) firms, and payment aggregators to ensure their treasury strategy is fully adapted to the new normal. There are three key areas that corporates must focus on in the immediate future.

Cost of Transition

The accelerated transition to e-commerce comes with new distribution methods and models, and requires adjustments to supply chains. Whether it means setting up new distribution models that are better suited to e-commerce, or selecting new digital tools to manage inventory, track deliveries, or to integrate and reconcile electronic payments with Treasury Management Systems (TMS) and Enterprise Resource Planning (ERP) platforms—these adjustments come with added costs that need to be managed and minimised. Instead of attempting to resolve these challenges in-house, corporates are now more open to turning towards multiple reliable partners such as banks and Fintechs to create and explore new ideas, technologies and solutions to help tackle these issues at a faster pace.

Risk Management

As corporates transition towards new business models, they face new and unforeseen risks brought on by this ‘new normal’. For example, moving to a new more direct sales distribution model to deal with end-user clients directly may open up new risks, such as higher risks for payments and bank fraud, fake goods and services, and hacking.

Cybersecurity and Fraud

The world has witnessed a spate of cyberattacks and fraud cases since the onset of the pandemic.

According to INTERPOL, the rapid deployment of systems enabling employees to work from home has created opportunities for criminals to take “advantage of increased security vulnerabilities to steal data, generate profits, and cause disruption.” Between January and April this year, INTERPOL detected some 907,000 spam messages, 737 incidents related to malware, and 48,000 malicious web links, all related to the pandemic.

With such attacks only likely to increase in the near future, companies need to step up their guard. They also need to work with banking partners to develop systems to validate payments and confirm the identity of payment beneficiaries. For example, authorities in Asian jurisdictions such as Thailand, Malaysia, Singapore, Korea, and Hong Kong have put in place mechanisms for proxy identification and validation prior to making real-time payments through bank transfers. There is an urgent need for such systems to be introduced globally, and corporates as well as banks must join forces and work with national and transnational authorities to ensure their implementation.

Converting ideas into applicable solutions rapidly is key, while also implementing a feedback loop to learn quickly and adapt as the situation changes. Examples of steps to be taken could include:

• Implementing a new supply chain for goods distribution
• Modifying logistics tracking and reducing costs of distribution
• Integrating online purchases to tracking of inventory systems and logistical distribution
• Shifting from item purchase to subscription model
• Securing and strengthening e-commerce infrastructure against fraud and hacking

Role of Banks

Greenwich Associates recently recognised BNP Paribas among five “standout banks for Asia” during the pandemic crisis. It noted that by providing liquidity support and enabling a seamless shift to digital channels while operating from home, banks including BNP Paribas ensured their corporate clients could continue to trade and operate. The importance of such a collaboration between corporates and banks, along with partnerships with fintechs and other digital solutions providers, will only grow as companies integrate newly acquired digital tools into their TMS and ERP platforms.

The bank advises corporate clients on best practices for managing emails, callbacks, and internal approval processes, and also assists with payment surveillance so that suspicious transfers or unusual amounts are flagged for manual review.

Banks can also help corporates hasten the otherwise time-consuming process of finding good end-to-end digital solutions tailored to their specific needs, by identifying the right fintech partners and aggregators to work with. BNP Paribas is also developing its own platform and partners with fintechs to deliver the right solutions to increase the speed and volume of its clients’ investments in cash management, with time to market as a key consideration.