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Foreign Exchange

Technology in Treasury Management: Technology review

The internet now seems to be driving the future of cash and treasury management systems and services, with cloud computing and downloadable apps the possible end game. By Jack and Wolfi Large.

The pressures on corporate treasury departments for complete visibility of their operations, accountability, and risk and fraud control continue, as do the efforts of the banks and other third-party cash and treasury management systems and service suppliers to develop the solutions required. Connectivity

Improving connectivity has been one of the main priorities for both banks and corporate treasury departments in 2010. The banks have been installing multi-channel solutions, such as the Total Channel Solution from Tieto, as shown in Figure 1, which offers consistency of service regardless of the contact channel: mobile phone, iPad, PC or paper.

Figure 1 - Total Multi-Channel Solution

Source: Tieto


Corporate treasurers’ preference for bank-agnostic communication systems and services continues, with a 25% increase in companies connected to SWIFT in 2010; by January 2011, there were 726 registered companies on the SWIFT network, slightly more than half connected via a service bureau. The majority of SWIFT corporate users, 71%, are in Europe with 19% in the Americas and 10% in Asia Pacific. The volumes of messages are growing fast, with an increase of more than 50% in basic FIN messages and more than 150% in FileAct messages in 2010. And SWIFT connectivity is no longer the preserve of the large global MNCs, mid-sized companies (those with annual turnover of less than €1 billion), are increasing in number and already represent 40%. But SWIFT is not alone in improving connectivity between companies and banks. All the corporate treasury management systems suppliers have improved their connectivity services and several new ERP-to-bank integration services have been launched. Sierra Atlantic’s BankON service, as shown in Figure 2, enables the fast and easy integration of banks with corporate clients’ ERP systems. Citi’s CFX ERP Integrator extracts payment details from their clients’ ERP databases.

Figure 2 - ERP-to-bank integration

Source: Sierra Atlantic, Inc.


But SWIFT connectivity can be unnecessarily expensive and restrictive. Fiona Hamilton, VP EMEA operations at Volanté Technologies, believes that for many companies a multi-pronged approach can be more effective. SWIFT is an obvious choice for payment instructions requiring indemnification guarantees, but cash management reporting, client reporting and general corporate notifications do not require this level of security. Global networks such British Telecommunications MSM, with 99%-plus reliability of connection, costs per message often many times cheaper, depending on volumes, and setup costs for connectivity to the network considerably cheaper too, can offer an advantageous alternative. And SWIFT often cannot provide connectivity to all companies party to a supply chain. Hamilton concludes, "Corporates should implement a 360-degree approach to information exchange facilitating choice in security, least-cost routing, end-point reach and quality of service. SWIFT is certainly part of the solution but corporates should leverage the competition that is out there." Automation of bank relationship management

The implementation of the new electronic Bank Account Management (eBAM) standards is proceeding slowly. The vision, to replace paper-based bank account management processes with electronic straight-through processing systems, is clear but not easy to deliver. The problem is that, although the format of the eBAM messages for the exchange of bank documents can quite easily be agreed, it is proving far more difficult for banks to standardize their documentation. Only a few banks have as yet tested eBAM with live pilots. At the moment eBAM is only really happening within bank groups, where some of the larger banks have managed to standardize their automated account opening and account management world-wide. General, more widespread, take-up of the eBAM standards is likely to take many years yet.

By comparison, the TWIST global Bank Services Billing (BSB) standard is a real success. There are already 18 banks committed to use the BSB standard for billing and statements and several have already implemented it. A new XML 20022 version is being developed and there are plans to extend the BSB standard to enable the electronic invoicing of all bank services. There is also a plan to bring together the BSB and eBAM standards to provide a comprehensive set of bank-to-customer administration standards which, if adopted, will make the evaluation of bank charges considerably easier for corporate clients.

Corporate treasury management systems suppliers are already beginning to develop fully integrated solutions for bank relationship management using these new standards. The solutions, as shown in Figure 3, combine bank fee analysis (TWIST BSB), statement aggregation and bank account management (eBAM).

Figure 3 - Integrating bank relationship management

Source: SunGard


Business networking There are some 600 million members on the Facebook network, more than 90 million members on the LinkedIn network and countless others on smaller networking sites, all adding up to a phenomenal amount of interest in this area of web-based technology. Although networking has always played an important part in cash and treasury management conferences and other events where companies, bankers and suppliers meet and socialize, web-based business networks will make interaction between cash and treasury management professionals so much easier. The internet is ubiquitous, available 24/7 and free. Business networks are not only beginning to transform the way cash and treasury products and standards are developed and supported, they are also offering treasury professionals a new opportunity for sharing their expertise and experiences.

Deutsche Bank’s Drive DB provides an interactive, secure online environment for collaborative product development. The bank’s corporate users and product developers share ideas for developing new bank products and services via the web-site and take votes on which they consider the best. Drive DB was launched in October 2010, pre-populated with eight ideas from Deutsche Bank’s product developers. The site has proved very popular and has over 1,000 users who have come up with an additional 19 product ideas on payment systems, notifications, single-click investigations and accounting, as well as other aspects of transaction banking proposed by employees of Deutsche Bank’s client companies across a wide range of job functionality and commercial activity. Deutsche Bank has found the interaction invaluable in improving an understanding of and relationships with its corporate customers.

The problem with many banking and payment standards is that, once developed, they sit on the shelf in need of active promotion to encourage use. SWIFT has set up the MyStandards web-site network to record the bilateral agreements made between standard users and to share market practices. It also offers a space for users to share experiences on implementing standards. Adam Moulson, head of standards implementation, believes, "MyStandards will speed up the implementation and adoption of new standards world-wide."

Opportunities for sharing experiences are also being built into other new services. The Thomson Reuters Eikon market financial information service offers a space to share expertise with close friends and colleagues and the LinkedIn network has an increasing number of specialist groups on liquidity management, payment factories, working capital management and many other cash and treasury management topics.

Treasury automation

Both the balance and nature of the processes required in finance and cash and treasury management are changing. A large part of treasury administration is basic, repetitive, can be standardized and is therefore easy to outsource to third parties. Many companies have already outsourced basic financial functions - for example, accounts payables - to specialist outsourcing providers, such as Hewlett Packard and IBM via the internet. And classic cash and treasury management systems with their one-time system licence fees plus annual maintenance charges are being replaced by web-based software-as-a-service (SaaS) solutions with monthly fees. Already most sales of new cash and treasury management systems are on a SaaS basis. Although there remain some corporate treasurers who prefer the one-time system licence, SaaS and web-based services are beginning to dominate. Eventually corporate treasurers will simply need to decide the best combination of the ever-increasing range of internet-based services to create a solution to fit their particular needs.

As the role of the corporate treasurer expands, so do the requirements for cash and treasury management systems and services. Enterprise-wide cash management systems and services, incorporating not only the traditional FX and other instruments but also elements relating to the physical production of goods and services, such as energy costs and commodity forecasts, are now becoming essential. The cash and treasury management system is fast becoming the working capital engine of the corporate treasury department and core to the company‘s success.

JACCOO LLC, which launched its new SaaS service in 2010, describes it as a new and innovative way of banking, offering diverse and extensive functionality to carry out optimal cash and treasury management. It is essentially a working capital management platform, including accounts receivable, accounts payable, in-house banking, SWIFT messages, treasury operations, multi-bank integration, cash and risk management and a cash flow monitoring dashboard, as shown in Figure 4.

Figure 4 - JACCOO, the working capital engine

Source: JACCOO LLC


The JACCOO service acts as the company’s ‘in-house bank’, carrying out the execution of all transactions and the issuance of reports for the company, and also performing end-of-day reconciliation of cash flows to give full visibility of the company’s cash. JACCOO uses a completely different business model from the usual cash and treasury management systems and SaaS services. New users simply send in an application and register, then carry out the step-by-step implementation of their chosen functionalities themselves with support from JACCOO staff. There are no set-up charges, simply per-transaction fees.

The corporate treasury management systems business has continued to consolidate. In the past year Wall Street Systems agreed to acquire Treasura from Thomson Reuters. Treasura is a SaaS corporate treasury management system aimed at mid-sized treasury departments. Wall Street Systems already owns City Financials, also targeted at mid-tier corporate clients, and might well decide to merge the two.

Reval has also been acquiring corporate treasury management systems companies. In 2009 it acquired the US-based FXpress system and over the past year has been incorporating FXpress functionality into its flagship product Reval. In January 2011 it acquired ecofinance, the leading general treasury management system provider in Central Europe. Concerning this latest acquisition, Jiro Okochi, Reval CEO, says,"We will take our time to evaluate and integrate the best functionality to deliver the single, full solution that the industry wants." Reval clearly seems intent on evolving from a provider of financial risk management solutions to a provider of general cash and treasury management system solutions. Ken Lillie of Lillie Associates believes this is an important development and explains, "This will add another option for corporate TMS buyers in a rapidly shrinking supplier pool. It will be good if they can offer a fully integrated complete solution to challenge the majors."

Cloud computing with downloadable apps

Cloud computing is location-independent computing using shared servers to provide resources, software, and data to computers and other devices on demand. Downloading ‘apps’ to mobile phones and tablets is now commonplace and Apple recently launched an app service for its desktop and laptop computers. Cloud computing with downloadable apps could well be the future of cash and treasury systems, with corporate treasury departments connected to all their different software suppliers, banks, SWIFT et al and simply downloading specific apps and data as required. This is a long way in the future, perhaps, but possible, as shown in Figure 5.

Figure 5 - Cloud computing in cash and treasury management

Source: J&W Associates


The first examples of downloadable apps for cash and treasury management are already appearing in closed systems with registered users. In recent months Deutsche Bank has begun rolling out a new model of its Autobahn electronic banking distribution services via a new app-based approach. More than 100 services are being redesigned as apps, which users will be able to access and launch individually. Dan Marovitz, head of product development for Global Transaction Banking at Deutsche Bank, believes, "The ‘App Market’ we are building on Autobahn is game-changing. It is a huge leap in making our services more accessible and will revolutionize the way we do business."

The internet now seems to be driving the future of cash and treasury management systems and services with cloud computing and downloadable Apps the possible end game. Many of the banks are reviewing the possibility of implementing an app-based approach to the provision of their electronic banking services. Several corporate treasury management systems suppliers are also building their own versions of app markets. Location-independent cloud computing using shared servers offering cash and treasury management apps in an open environment may, like all miracles, take a little longer.

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