5 minute read 15 Oct 2019
Boardroom presentation against information wall

Four focus areas for digital transformation in treasury services

By

Matt Cox

EY Americas Corporate, Commercial, and SME (CCSB) Banking Advisory Leader

Large-scale transformation leader and strategist focused on Wholesale Credit and Transaction Banking. Husband. Father of two. Nomadic traveler.

Contributors
5 minute read 15 Oct 2019

A new era of opportunity exists for corporate treasurers to expand their role and banks to transform treasury services to meet client needs.

The digital revolution presents a wealth of opportunities for enterprise treasury functions to become more lean, innovative, and efficient. In fact, a recent survey from JP Morgan Chase found that 88% of corporate treasurers believe their role has grown in strategic importance over the past five years. The higher profile means treasurers are advising chief financial officers more often on critical topics (such as complex investments and country-specific risks) and taking a larger role in combating payments fraud.

As the corporate treasurer role and its underlying expectations change, banks must revisit their own treasury services’ value propositions to ensure they can become fully integrated – and value-adding – extensions of clients’ teams.

The necessary transformations require significant changes to corporate, commercial and small-to-medium-sized enterprise (SME) banks’ current operating models. The banks that are the quickest to identify, assess, and implement the latest technologies into their treasury services offerings, will be the ones best equipped to support client’s corporate treasury teams current and future needs.

It’s clear that many banks recognize the urgency of investing to accelerate their transformations. The EY 2018 Wholesale Banking Survey found that banks are allocating 28% of their technology budgets to technology improvement initiatives.

What the digital revolution means to treasury services

New technologies offer clear benefits to banks and their clients. Just consider the upsides:

  • Advancements in client portals and next-generation document management systems significantly reduce the amount of time needed to onboard new corporate treasury clients. 
  • Stronger data analytics and more effective data management enable banks to provide valuable insights for client decision-making. 
  • Improvements in application programming interface (API) capabilities allow banks to provide an omni-channel experience to their corporate treasury clients and more tightly integrate with their existing enterprise resource planning (ERP) and treasury management (TM) systems. 
  • New product offerings by way of faster payments and virtual accounts help strengthen client relationships and generate new revenue channels.

Below are four focus areas for those banks ready to evolve and transform their treasury services offering:

1) Streamlined onboarding

Developing and maintaining a painless onboarding process must be an imperative for banks. Otherwise, they risk losing clients. In developing tools and processes to improve the client onboarding experience, they must consider the full client life cycle with the aim of reducing complexity and shortening the time required to complete key tasks. Banks should look to develop comprehensive, rather than siloed, onboarding processes supported by next-generation document solutions and enhanced client portals. Digital tools and enablers – including artificial intelligence (AI) and advanced analytics – are critical to streamlining the process.

These processes must span a broader spectrum of products to minimize data and documentation requests and improve overall client experience. Such an overhaul can lead to faster conversion rates, reduced client attrition, fewer abandoned onboardings, and lower costs in dealing with manual onboarding inquiries. It may also free clients to spend less time on administration tasks and fulfilling document requests. No wonder some banks have started marketing a streamlined onboarding process as a differentiator.

2) Improved insights

The ability to provide accurate, up-to-date information to corporate treasury clients has shifted from a “nice-to-have” to a “must-have” capability in recent years. The many areas where treasury functions can leverage improved insights for better strategic decision-making include hedging interest rate risk, foreign exchange risk and better working capital management. Digital tools help equip corporate treasury clients with necessary information on cash positions and risk exposures, as well as supporting analysis to make informed decisions rapidly.

However, banks need a cohesive data management strategy and supporting operating model to provide the information and insights clients expect. Without a sound data management framework, there is a risk that poor data could be used in the analytical models, compromising the results and insights.

Governance strategies are another consideration for banks when providing their corporate treasury clients with improved data. That is especially true when they provide data from other clients. In such cases, banks must consult their internal compliance and risk teams so that the appropriate precautions and controls are in place prior to distributing data.

3) Enhanced client experience

Corporate treasurers increasingly lean on their banking partners for value-adding functionality that enables them to execute the strategic agenda. Typically, that means an omni-channel experience, with multiple avenues to connect and transact. For routine activities, corporate treasurers typically prefer online self-service capabilities and mobile apps. For more tailored and complex activities, corporate treasurers may want access to their relationship manager while on the go.

Banks should look to advanced technology, such as AI and machine learning, to master the channel mix and enhance the client experience. For example, recent advancements have made chatbots a viable option for corporate treasurers to transact with their banking partners.

As corporate, commercial and SME banks continue to invest in improving the quality and number of channel offerings available to their clients, they must consider client tendencies based on size, industry, and maturity.

The banks that can develop and enhance their channel offerings should design these enhancements with the overall goal of establishing a 360-degree view of all of their clients. Advanced APIs will continue to play a big role by enabling banks to communicate with their clients in real time. By integrating with their clients’ ERP and TM systems, they can anticipate short- and medium-term needs and recommend solutions proactively.

4) Product innovation

As demands from senior management and the board continue to grow and evolve, corporate treasurers should strive to provide innovative methods and tactics to support broader strategies and growth agendas. Banks can also improve their offerings to clients in a cost-efficient and scalable manner by partnering with FinTech firms. Virtual account management (VAM) and faster payments are two focus areas for innovation. Emerging tools and technologies free corporate treasurers to focus on the strategic aspects of their work.

The innovation process starts with a comprehensive understanding of the differences in capabilities offered by different technologies and vendors. A deep understanding of the vendor landscape will help banks make informed decisions about the correct way to implement these offerings for their clients.

Digital transformation of this type signals a new era in treasury services. The four focus areas described above, plus the underlying digital technologies, will enable banks to better satisfy the needs of their corporate treasury clients and set up treasurers for success in their new, more strategic roles.

Summary

To drive digital transformation and seize the upside of the digital revolution in treasury services, banks must focus on four key areas – streamlined onboarding, improved insights, enhanced client experiences and continued innovation. Success in these areas will enable banks to help corporate treasurers succeed in their increasingly strategic roles. The evolution starts by identifying, assessing, and implementing new technologies that will best support client needs in the coming years.

About this article

By

Matt Cox

EY Americas Corporate, Commercial, and SME (CCSB) Banking Advisory Leader

Large-scale transformation leader and strategist focused on Wholesale Credit and Transaction Banking. Husband. Father of two. Nomadic traveler.

Contributors