Roger Comins, Senior Product Manager, GTreasury
Enhanced connectivity is an essential part of the ecosystem touching every part of today’s corporate treasury
Nostalgia isn’t what it used to be – and neither is connectivity. Just as nostalgia is marked by a harking back to simpler times, so third party connectivity once had only to satisfy a few basic requirements.
Even the post-war trend towards a more global economy didn’t initially trigger any quantum leap in the sophistication of connectivity. All that changed with the tech revolution; change still ongoing as it has many further stages through which to pass. For treasury departments, good connectivity traditionally focused on assisting batch-based processing to be as efficient as possible. As new payment rails offering real-time capability emerged, this basic function no longer made the grade.
The impact of new technology on the financial services industry has been massive, and corporates need to take advantage. Tools ranging from application programming interfaces (APIs) for building software to SWIFT’s rapidly-growing global payments innovation (gpi) initiative have taken off in recent years. The revolution might have been driven by the new breed of tech disruptors, but most banks quickly realised they needed to join in and take an active role if they were to remain relevant.
On the API front, regulation such as Europe’s revised Payment Services Director (PSD2) and the European Market Infrastructure Regulation (Emir) for open banking also helped to push the envelope. APIs considerably change the way data is exchanged between systems, shifting the paradigm to an on-demand, real-time, approach. This is critical to the progress of faster payment initiatives and real-time reporting needs for corporates.
Another benefit of API connectivity for the corporate world is the potential for self-service “subscription” to banking, back-office, and market data. Reducing (or eliminating) implementation time in establishing connectivity is the goal, but further work remains to be done by both banks and tech providers, and corporations need to be the driving force.
With regards to payment innovation, beneficiaries want full visibility on where their money is at any given time, and they won’t tolerate delays in the speed of payment processing. SWIFT gpi aims to solve this demand for added transparency and expediency by adding standard end-to-end tracking and reporting at each step in the payment settlement lifecycle. An equivalent example for consumers is the tracking systems for packages – who know when a package has arrived and left each processing center.Similarly, the treasury team will have detailed status of payments in transit.
But today’s more complex business environment also means a single type of connectivity on its own is not enough. Interconnectivity counts; it’s at the heart of effective treasury management in offering immediate access to any system via the method and format of your choosing.
Driving the change
Corporate treasury has been instrumental in driving these improved standards and gaining the full benefit of the steadily growing functionality of APIs – particularly the added visibility provided by SWIFT gpi since its launch in early 2017. Treasurers are demanding more of both their banks and their tech vendors while gpi is encouraging the former to raise their game and clear transactions as swiftly as possible.
The drive extends across a whole range of industry sectors, such as insurers who regularly transact large payment volumes and want every efficiency available. That applies to any company providing services, which relies on the TMS. They are pushing particularly for real-time reporting, so they can notify their clients at the earliest opportunity when funds are available. Any delay can cost them and their clients.
Improved connectivity is opening up a host of both new and enhanced capabilities. To offer an example, many corporates – particularly in North America – are reluctant to give up their use of checks. Banks are now opening up check imaging as part of the processing web-services they provide to corporate clients, a capability that never existed outside of the bank portal, unless both parties were storing up data and images, but now is available at the touch of a fingertip.
Connectivity also needs to keep pace with the steadily growing scope of SWIFT gpi. Over the summer SWIFT announced the pilot of an enhanced multi-bank standard to streamline the process for corporate treasurers, enabling them to initiate and track gpi payments to and from multiple banks in a single format and integrate gpi flows in ERP and TMS.
What of emerging technology?
Blockchain, or distributed ledger technology, is a particularly promising development in its ability to provide complete and immediate visibility on transaction processing to every participant in the ecosystem. Blockchain’s potential is still unfolding, but industry leaders and strategists are driving new initiatives that leverage its potential in payment and supply chain networks. 2018 has already seen the world’s blockchain-based bond, and countries such as Australia have plans for a national blockchain network.
Blockchain technology is likely to alter the very foundation of how corporates settle, reconcile, and obtain reporting on transactions within the next five years. There are already early entrants making promising strides with real-time gross settlement, currency exchange and remittance networks, and SWIFT as well has a proof of concept with a closed user-group of banks using Hyperledger technology within its network.
Treasury can achieve maximum cost savings and efficiencies from this ongoing revolution, but doing so means talking to both their banks and their tech vendor. The business world of 2018 will look quaint and archaic in just a few short years from now. Tomorrow’s connectivity challenges will increasingly extend to exchanges between corporates and their banks, but across all functionalities, from cash and liquidity to risk management and accounting – everything a corporate needs to do in making the best strategic decisions.
Roger Comins is a Senior Product Manager at GTreasury with responsibility for defining the product vision, prioritization, and delivery of the Cash Management and Payments solutions. He is a CTP and SWIFT for Corporate Qualified Specialist.