Businesses are battling a host of challenges in 2017: namely, the uncertain global economy, volatile financial markets, escalating geopolitical tensions, and the constantly evolving regulatory environment. This is the resounding message I heard from corporate treasury executives across a diverse group of businesses whom I met to discuss the key trends and topics facing their organizations.
Against this backdrop of challenges, many treasury leaders are focusing on three major themes in evaluating their banking relationships. They’re considering the safety and security of their banking operations, they’re monitoring technology innovations that may be relevant to their operations, and they’re improving the efficiency of interactions with their banks.
Safety and Security
The Association for Financial Professionals’ (AFP’s) 2016 “Payments Fraud and Control Survey” found that 64 percent of finance executives—from businesses of all sizes—experienced at least one incident of business email compromise in 2015. Wire transfers were the payment method most likely to be impacted. Many treasurers I spoke with said they knew of businesses that had been attacked in the past 12 months.
The growth in both corporate fraud and the hacking of corporate systems makes clear that treasurers must prepare for a cyber attack. At the same time, the increasing popularity of mobile payments and approvals can make it difficult to balance the competing pressures of security versus convenience. In light of this tradeoff, companies should continuously evaluate the stable of fraud-mitigation tools they’re using. When they consider a new tool, they should do their due diligence to ensure the solution would integrate well with their existing systems and would be versatile enough to offer multiple lines of defense, especially when executing payments.
We have already seen two-factor authentications become the norm. This year, we may see more developments that harness advanced biometric technologies such as iris recognition. These technologies are not entirely new, but they are new to many banking services providers. I expect them to gain some traction, especially since more than half of respondents to the AFP survey expect transactions that do not involve cards to be exposed to greater fraud activity.
However, now that technology is deeply embedded in nearly every part of an organization, cybercrime has become a fundamental business concern that cannot be solved solely by implementing technology. Humans are frequently the weakest link in the battle against fraud. In my meeting with corporate treasurers, many explained that their colleagues in non-treasury divisions such as purchasing often require education on topics like fraud, compliance, and updated payment methods.
Organizations need to establish companywide fraud policies, train personnel thoroughly, and keep open lines of communication on these critical topics. While the battle against fraud will always be a systems arms race, every employee—not just finance staff—has a vital role to play.
In the realm of financial technology, or “fintech,” the proliferation of innovation has been dizzying over the past few years. But it is also encouraging. New products and systems can make work easier, more productive, and safer. Banks continue to partner with fintech companies on advances including faster cross-border payments, corporate cash flow management, and the automation of direct-debit processes.
Specifically, I expect two important financial technology trends to have an increasing impact on corporate treasurers this year: big data and the blockchain. In the world of corporate treasury, big data applications can extend to cash flow forecasting, payments, and liquidity planning, as well as fraud prevention.
Big data has the potential to help treasury teams move beyond the manual aggregation of hundreds of Excel-like templates to view potential cash flows centrally. But we are still in the early stages of harnessing ways to apply these technologies to cash flow forecasting. Some of the solutions associated with big data enable software programs to learn and update continuously and to develop their own logic. Effectively using them requires a treasurer and relevant staff to be nearby, to guide and educate the tools to accurate and meaningful conclusions.
Some of our clients are already realizing the value that big data can bring to the analysis of flows in payment processing and to help with liquidity planning. At one of these early adopters, a leading online fashion platform, a dedicated team of mathematicians and physicists develops data analysis models to help with decision-making and to boost learning on variables such as the impact of weather on sales.
The blockchain is another relatively new technology, and it is receiving a lot of attention in the financial services sector, but its current usage is limited. For corporate treasurers, the blockchain may have attractive financial use cases. For example, it may help with foreign exchange and remittances, real-time payments, documentary trade letters, bond issuance, and share certificates. Other benefits may include 24x7 processing, instead of a several-times-per-day processing cycle, and collateral savings as a result of the shortened settlement cycle.
While these developments and their potential applications hold exciting possibilities for treasurers, there is still a “Wild West” element to the blockchain that gives many pause. The risks and potential security issues raise justifiable concerns. Businesses should work closely with a trusted banking partner to evaluate which solutions could meet their needs most effectively.
Corporate treasurers today, if they work with multiple banking partners, are looking to reduce the silos between those partners, in order to more efficiently capture and share data, and to encourage holistic thinking that will ultimately improve business efficiency. Very large corporates increasingly dictate to their banking partners critical communication methods, formats, and timing to minimize the need for translation or timing differences, and standards such as ISO 20022 are being more readily adopted into new products and markets, making it easier for domestic and international markets to seamlessly communicate.
Many corporations want their banks to simplify administrative tasks, especially those related to compliance procedures, and make the entire user experience faster, simpler, and more convenient. It is frustrating, for example, for corporate treasurers who work with different banks in different region to have to complete multiple and differing KYC and KYA questionnaires and documents.
In addition to improving efficiency in their systems, banks need to work to standardize formats in order to improve the user experience of treasury staff who work with multiple institutions. Currently, standards are often implemented differently among banks. For example, the NACHA format for originating ACH transactions is accepted as an industry standard. Still, when companies originate ACH payments to a specific bank, they must adhere to the NACHA file specifications published by that bank, and these specifications differ among financial institutions. Corporates that deal with multiple banks want to simplify these processes and make them more intuitive.
Treasurers who need to stay on top of these and other trends in bank relationship management can draw from an incredible ecosystem of available resources to tackle the challenges of today’s landscape. Participating in industry conferences and forums and joining in on critical conversations highlighting treasury trends is one key area of involvement for corporate treasurers.
Also, understanding time pressures of their daily job, corporate treasurers may turn to their banking partners to help keep them abreast of new technologies and solutions that could improve their processes. In doing so they can help their businesses improve productivity, drive positive organizational change, and create closer alignment with their banking partners, whose support is crucial in ensuring efficiency and data security.
Eileen Dignen is head of cash management in Bank of the West’s Commercial Banking Group. Dignen is a seasoned executive and senior leader, with a strong background in product management, strategy and development, and sales.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of Bank of the West.