Bobsguide conducted a study earlier this year to find out what treasury departments are searching for in their ideal software systems. While the data revealed a reliance on traditional processes such as Excel, it also underlined an eagerness by respondents to adopt new systems in the future.

The survey revealed that change may be in order as around a third (29 percent) of firms have had their current treasury systems for more than ten years, while 16 percent said they had their current system for less than a year. Many treasury departments remain in a position of optimisation, still trying to reach a point where robotics and AI are sensible next steps. Most respondents (75 percent) said they use between one and five systems to carry out their treasury management requirements, highlighting the growing importance of understanding how new solutions can be positioned within existing infrastructure.

“Many companies still need to make material changes to optimise their treasury and financial technology core infrastructure,” says Duncan Cole, EMEA head, at Citi Treasury Advisory Group. “Corporates are searching for ways to effectively integrate their ecosystem and while doing so, automate repetitive tasks. Trusted partners with longstanding relationships are well placed to provide critical support and help corporates navigate the rapidly changing landscape.”

Additionally, a holistic and real-time view of the treasury department was also identified as becoming increasingly important in the adoption of a new TMS.

However, while treasurers acknowledge the profound benefits that technology can bring, budget restrictions remain a key hindrance in the adoption of a new TMS, followed by the time and resource needed to implement a new system.

Application programming interfaces (APIs) have been around for some time but only in the past twelve months have they taken a stronghold as a primary means of integration between a TMS and other third-party systems.

Data from the bobsguide survey suggested the need for quick and affordable implementation of potential new systems, particularly those that can be easily integrated with other systems within the bank or financial institution. A majority of market treasurers say that fast implementation would be the most important benefit offered by a new treasury solution, while many are concerned about integration with other systems when upgrading their system. The target operating model has been identified by many treasurers as particularly influential when upgrading or choosing a treasury system.

“There is an increasing appetite in treasury for integrated decision support tools for next invest, fund or hedge action going beyond what treasury management systems can provide today,” says Cole.

“Recommendation engines based on combining client risk appetite parameters typically defined through policy and algorithmically augmented forecast of liquidity exposure… decision support and decision automation offering opportunity to realise the promise of full automation of operational treasury.”

Further, while firms continue to use multiple systems, selecting and positioning technological solutions to sit within existing infrastructure is becoming a primary concern. Reliance on traditional methods – such as the use of Excel – are fast becoming pain points as holistic real-time overview is required.

Data visualisation
For treasurers, there is more data than ever before, so systems are having to become more powerful. As such, there is more data awareness, and because there is more data awareness at management level, treasurers are looking to use this data in the decision making process.

Although the data reveals the increasingly critical role that treasury departments are playing within banks and corporates, it also reveals a siloed structure. Only 9.3 percent of respondents to the bobsguide survey said their system integrated well with other areas in the organisation.

Similarly, a lack of a holistic view was identified. 21 percent of respondents said their current system does not have the ability to provide a consolidated view across trading, banking, and investment books. 27 percent of respondents believe that their current treasury system does not produce, consume, and store analytics effectively. The need for a holistic real-time view of the balance sheet will be a key driver of change.

Advances in artificial intelligence by many TMS providers has allowed those who use them to better analyse larger chunks of data and react to ever-smaller market movements. A wider and deeper application of APIs has allowed treasurers to become more agile, and the greater ability of firms to integrate treasury systems within the wider business has seen many enjoying reporting efficiency gains.
A real-time treasury view was recognised by respondents to the bobsguide survey as lacking in current systems. Only 11.3 percent of firms said their current system fulfilled their requirement to have a real-time view of their profit & loss, and risk.

Real-time payments
Having a substantial impact on the treasury market is the quickly evolving payments ecosystem. Over the past few years, payments has been braced by technological change and the many regulatory initiatives that have shaped the market. Open banking initiatives, such as Europe’s second payment services directive (PSD2) have changed how firms process payments as well as their invoicing protocols, meaning hedging  and risk strategies are being reappraised. That’s led to substantial change within the treasury department, and how each TMS is used.

PSD2 has had an increasingly significant impact beyond the bloc’s borders as regulators look to adopt similar regulations and initiatives. In Singapore regulators remain quite flexible over adopting Open Banking principles and have encouraged financial institutions (FIs) to make use of APIs to drive interoperability and innovation. In the US, regulators remain in discussions around adopting a PSD2-like regulation, but movements appear to be happening independent of rule makers as large FIs have created app stores that allow third party providers (TTPs) to put forward services using open APIs. In Africa, Open Banking has yet to be implemented but is becoming of increasing interest particularly as the continent has seen an emerging growth of digital-only banks. Those banks still need to have a strong treasury behind the scenes, but this treasury must also be able to react quickly and to have a technical structure that supports the digital model.

A lot of newcomers are pushing the limits of the new banking structure, and treasury departments need to be adaptable, to be able to make the most of this digital transformation.

Capital requirements
Significant banking capital requirements have enhanced the need for a real-time view of a bank’s treasury performance. In 2014, under Basel III, two new important liquidity requirements – NSFR and LCR – were introduced to create a more resilient banking sector. As these requirements combine elements of bank-specific liquidity and market-wide stress, to help calculate liquidity buffers, a modern TMS must support scenario-modelling, stress testing and behavioural assumptions.

While many treasurers calculate both NSFR and LCR in their application lifecycle management system (ALM), a large portion say they calculate their Basel 3 ratio (LCR/NSFR) within their TMS, confirming the important role treasury departments are playing within the day-to-day functions of banks.

Treasury has become a forefront function under the regulation and the new constraints that banks face. Decisions must be made to properly ensure the balance of assets and liabilities, as well as being able to structure all of their loans and different products to end clients.

Respondents to the survey were also asked where they calculate their interest rate risk in the banking book (IRRBB) metrics – the calculation of risk to earnings or capital resulting from movement in interest rates. The majority of respondents (37 percent) said they compute partial modified duration / partial PVO1 in their treasury system, and also net interest income (39 percent).