The digital transformation of corporate treasury is not a destination; it’s a journey.
In an interview with Karen Webster, Sairam Rangachari, global head of Digital Channels and Open Banking, Wholesale Payments at J.P. Morgan, said treasurers seeking to gain visibility into cash management can find application programming interfaces (APIs) to be a useful (and even critical) tool.
Age And Complexity
Generally speaking, regardless of vertical, businesses can be viewed as existing along two axes if they were to be plotted on a graph: age and complexity.
It stands to reason that firms that have been around for decades, with far-flung operations and payments done across multiple currencies, have a range of legacy systems in place with less-than-efficient processes entrenched in back-office functions. Rangachari said everyone wants to be in that “upper-right quadrant” of the graph, as bigger, older, global firms tend to have relative stability — but embracing the digital age is trickier in the age of open banking and increased regulations.
“Digitization is not about reaching a destination as you are constantly pushing the envelope,” Rangachari said. “As a treasurer, maybe you would conquer the first few things, which are visibility and reconciliation, and then you would move into other niche areas that you want to automate further to add strategic value to the business.”
Every treasurer wants visibility of data, he noted, as they might bank with multiple partners and may have acquired multiple systems internally as the firms grow.
Throw in today’s world where many people and departments work remotely, and simply having access to quality data when you need it can be a challenge. However, those data attributes are critical when it comes to automatically reconciling incoming and outgoing payments, and for supporting cash flow forecasting.
The volatility of current events, dominated by the coronavirus, underscores the urgency for digitization and real-time data, said Rangachari. Many customers continue to employ some level of manual or brute force to be able to gather and consolidate the data.
That’s all about to change, he said, as companies across all verticals grapple with new ways to be resilient across a newly fashioned global landscape.
“It’s not very uncommon for us to come across clients that have multiple ERP systems, multiple treasury management systems and multiple back-end systems,” Rangachari said — so digitization does have different starting points and milestones for the various customers.
To help speed the transformation, with a nod to a bit of hybrid approach for some firms, Rangachari noted that “we have invested in many tools, including a plug-in for Excel powered by APIs, so that clients can get real-time data into their own Excel environment.”
Different Approaches To APIs
On a grander scale, Rangachari said, there are both tactical and strategic ways to think about APIs.
The tactical way involves exposing J.P. Morgan data and services in an easy-to-use, secure, authenticated, pre-agreed format to the outside world — and, of course, the API connections also link to third parties that may not reside within the banking giant’s “four walls” — but are integrated into J.P. Morgan treasury solutions.
As Rangachari said, “The traditional notion that a customer has to come through my banking portal, or access only the tools that I have built into my own distribution channels — that is being challenged by open banking.”
Against that backdrop, J.P. Morgan is already collaborating with multiple treasury management systems to create a “plug and play” banking experience inside its own offerings, he told Webster.
“And then there are a bunch of ERPs we are working with, where we have started building apps inside of those ERPs with the notion that customers can download and install them instead of having to spend too many tech cycles building their APIs,” Rangachari added.
One example is the J.P. Morgan Treasury Ignition product that plugs into NetSuite.
In exposing companies to APIs and providing corporations with what they need to integrate into their own operations and treasury management systems, there are, of course, points of friction.
As Rangachari noted to Webster, for customers who are just getting started on the digitization journey, frictions revolve around how to get started in the first place, while benchmarking against peers.
Larger, more established firms may have specific pain points to address, such as foreign exchange (FX) mismatches across several accounts. APIs can help them view those mismatches in near-real time, and more quickly take action to address inefficiencies and hedge FX risk.
“By definition, APIs are driving the real-time conversation between the banking system, third parties and the client’s back-end system,” Rangachari said.
The flexibility is critical, as most treasury teams are strapped for resources and are underfunded, he contended. These are teams that have had to grapple with changing business models. Embracing digitization as a “crawl, walk, run” evolution will help these teams to not only be cost efficient but also create agility.
Thus far in 2020, from an API adoption perspective, it’s been anything but business as usual, noted Webster. But even with the pandemic, the trade wars, the stock market fluctuations and a murky economic picture, Rangachari noted that identifiable trends are taking shape for the remainder of the year and beyond.
“One trend has been the validation that investing in the tools to make it faster and cheaper for clients to adopt these treasury management solutions is the right thing,” he told Webster. “If anything, businesses are strapped for cash now, and digitization is becoming a big part of their agenda.”