FX International Payments
By Mike Faden
Beyond their traditional cash-management role, treasury groups are taking the lead in other areas such as payment services strategy and long-term borrowing and investing, according to the Association for Finance Professionals (AFP) 2017 Strategic Role of Treasury Survey.1 As companies continue to digitize operations, the treasurer's role may expand further, to include helping leverage new technologies that improve supply chain performance and customer relations, the AFP report suggested.2
Technology investments reflect these changes. According to the AFP report, 30 percent of finance professionals listed treasury and payment services technologies among their top focus areas. Treasurers also plan investment in technology to manage cyber threats, which are seen as a major risk, and are eyeing disruptive technologies such as robotic process automation, blockchain and AI, according to a 2017 survey by TD Bank.3
In the AFP survey, 80 percent of senior corporate finance practitioners said treasurers are playing a more strategic role in their organizations than in the previous three years, and the same percentage expect the role to become even more strategic over the next three years.4
A key reason, cited by 73 percent of respondents, is that senior executives have been paying closer attention to cash management in the uncertain and slow-growth business environment since the Great Recession, and there has been a correspondingly greater focus on the company's liquidity and risk exposure. Related, 49 percent said their organizations are more closely monitoring financial metrics. In addition to traditional cash management responsibilities, treasury groups are taking lead roles in other activities including long-term borrowing (79 percent) and investing (61 percent) and executing payment services strategy (60 percent).
As the treasurer's role becomes more complex, treasury-centric technology can help free up time for higher-value work, helping treasurers automate routine processes and comply with evolving regulations, according to the AFP survey. For example, technology can facilitate straight-through processing by supporting functions such as FX trading, automating outgoing B2B payments, and reconciling payment information. In the survey, 30 percent of respondents listed treasury and payment services technologies (30%) among their top focus areas.
However, only just over half of surveyed professionals (53 percent) agreed that treasury currently uses technology effectively to manage risk and increase the contribution to the entire organization. According to the 2018 AFP Risk Survey Report, nearly all finance professionals (97 percent) say spreadsheets are still being used to manage risk — despite the fact that only 28 percent view them as an efficient risk-management tool.5 However, some organizations are now using or evaluating predictive analytics to manage financial risk: two-thirds of the surveyed financial professionals said they believe the technology will increase risk management efficiency.6
In a Deloitte survey, over 50 percent of treasurers said that FX volatility is a challenge, yet most said they are not actively monitoring key risks. This creates a major opportunity for treasurers to invest in more sophisticated real-time analytics, according to the survey.7
Some of the top treasury operational challenges and investment priorities are closely linked to technology, according to a TD Bank survey.8 Survey respondents said their top operational challenges were payments fraud and cyber security threats (30 percent), regulatory requirements and changes (27 percent) and the ability to adapt to faster/electronic payments (23 percent).
Most said they expect innovation in payment services to focus on several of these areas, including faster real-time payments processing (52 percent); higher security and lower fraud risk (18 percent); and consistent payment formats and data, which facilitate straight-through processing (9 percent). And they plan to direct their 2018 payments systems investments accordingly, into areas such as cyber and fraud security (31 percent), faster and integrated accounts receivable or accounts payable capabilities (22 percent), and treasury workstations and integrated applications (21 percent).
Treasury groups are also keeping a close watch on emerging technologies with disruptive potential, although surveys suggested that many of them don't have plans for immediate implementation.9,10 According to the TD Bank survey, the technologies expected to have the biggest impact on treasury functions and payments include process automation (31 percent), an approach that is increasingly being used to automate repetitive tasks and allow professionals to focus on other work. At one major insurer's treasury group, for example, accountants have programmed software robots to run reports and print checks, reducing cost and resulting in faster processes with fewer errors.11 Blockchain technology, which is being widely adopted for payments and other applications, was cited by 23 percent of respondents.
As treasurers assume broader, more strategic corporate roles that include payment services responsibility, they are expanding their use of technology to manage cyber and financial risks, and to improve efficiency by automating B2B payments and other routine tasks.
Mike Faden has covered business and technology issues for more than 30 years as a writer, consultant and analyst for media brands, market-research firms, startups and established corporations. Mike also is a principal at Content Marketing Partners.
1. 2017 AFP Strategic Role of Treasury Survey, Association for Finance Professionals; https://www.mmc.com/content/dam/mmc-web/Global-Risk-Center/Files/2017-afp-strategic-role-of-treasury.pdf
3. TD Bank AFP Treasury Management Survey Report, TD Bank; https://s3.amazonaws.com/td-unc/dev/uploads/TD-Bank-Treasury-Management-Survey-Results.pdf
4. 2017 AFP Strategic Role of Treasury Survey, Association for Finance Professionals; https://www.mmc.com/content/dam/mmc-web/Global-Risk-Center/Files/2017-afp-strategic-role-of-treasury.pdf
5. 2018 AFP Risk Survey Report, Association for Finance Professionals; https://w.afponline.org/publications-data-tools/reports/survey-research-economic-data/Details/risk-2017
7. 2017 Global Corporate Treasury Survey, Deloitte; https://www2.deloitte.com/us/en/pages/risk/articles/global-corporate-treasury-survey-2017.html
8. TD Bank AFP Treasury Management Survey Report, TD Bank; https://s3.amazonaws.com/td-unc/dev/uploads/TD-Bank-Treasury-Management-Survey-Results.pdf
9. TD Bank AFP Treasury Management Survey Report, TD Bank; https://s3.amazonaws.com/td-unc/dev/uploads/TD-Bank-Treasury-Management-Survey-Results.pdf
10. 2018 AFP Risk Survey Report, Association for Finance Professionals; https://w.afponline.org/publications-data-tools/reports/survey-research-economic-data/Details/risk-2017
11. “Robotic Process Automation: How Treasury Benefits,” Association for Finance Professionals blog; https://www.afponline.org/trends-topics/topics/articles/Details/robotic-process-automation-how-treasury-benefits/