Volatile times make for sleepless nights for corporate executives, particularly those whose job it is to manage the cash positions of their organizations. For corporate treasurers, Manish Kohli, global head of payments and receivables at Citi, told PYMNTS' Karen Webster, three concerns tend to top the list: geopolitical uncertainty, cyber threats and disruption resulting from the emergence of new business models in an interconnected global market.
At the intersection of all these threats is payments, particularly when money is moving cross-border. And there, Kohli said, innovation is helping corporates adapt to and manage these global risks.
Treasurers' Biggest Worries
"We live in times of great uncertainty and great change," said Kohli. "There is clearly a lot that corporate treasurers are worrying about and focusing on."
Corporate cash managers may not be able to control many of those challenges, like ongoing geopolitical instability resulting in trade tensions and financial market volatility, or the rising threat of cyberattacks. What corporates and their finance chiefs can control, however, is how they adapt to these threats.
One of the biggest concerns for treasurers today, Kohli noted, is the rise of new business models resulting from the drive for interconnected supply chains. While this trend has disrupted legacy business models, it has also opened up opportunities for cash managers to embrace new technologies and drive efficiencies through things like smart devices and growing cloud computing power.
"We believe the expectations of treasurers are rapidly changing," said Kohli. "Many of them are in companies looking to adapt and embrace change … Based on our experience with forward-looking treasurers across our global client space, what I see them working on is, how do they make their functions radically more efficient? And that's all about using technology-based services to re-engineer treasury activities."
Cross-Border Payments in the Crosshairs
One of the areas of corporate finance experiencing the biggest exposure to these disruptors is global payments. Kohli pointed to SWIFT's gpi initiative as a significant driver of innovation and progress in the cross-border transaction market, and an example of the impact of payments innovation to not only make global payments more efficient, but to promote the adoption of faster payments functionality.
The rise of third-party payment providers, and the opportunity for traditional institutions to collaborate with them, has also opened doors for cross-border payments innovation. This trend is due, in part, to the fact that cross-border payments are at the center of treasurers' top concerns, whether it be geopolitical uncertainty in the market of a trading partner, or the risk of fraudulent transactions that land money in a market without sufficient enforcement or payment recall capabilities.
"If you look at cross-border payments, at the highest level they are the settlement engine for a rapidly globalizing economy," said Kohli. "Cross-border payments are becoming more important. With that preamble, I think it's right to say cross-border payments have significantly changed over the last few years."
Yet there is progress to be made. "Think globally, act locally" may be a useful strategy to further improving the global payments market: According to Kohli, national markets have the opportunity to adopt faster payments in their domestic payment systems, and national regulators can promote security and efficiency within national infrastructures.
More Progress, New Challenges
As the payments landscape continues on its path of innovation, new challenges continue to emerge. In cross-border payments, the drive for speed and efficiency has also resulted in rising concerns over service providers' ability to more quickly identify and remedy fraudulent transactions.
Regulators have "stepped up to the plate," said Kohli, when it comes to adapting to an evolving global payments ecosystem that struggles with the rising risk of fraud and cyberattacks. Innovators are deploying a range of technologies to combat these threats while simultaneously boosting speed, transparency and efficiency – yet Kohli said not all of these tools will prove successful.
He pointed to Citi's investments in tools like artificial intelligence, biometrics, behavioral analytics and multi-factor authentication as essential strategies to combating fraud. Other technologies, like cryptocurrency, may not prove to be the silver bullet that can mitigate risk and improve payments all at once, however.
"We believe the future of payments will continue to be based on fiat currency models and infrastructure," said Kohli, adding that the global payments landscape is currently comprised of an existing system that is "reliable, secure, interoperable and fully embedded in a diverse and complicated landscape."
The solution to cross-border payment challenges won't be to overhaul this system, he said, but to introduce initiatives like SWIFT gpi or the ISO 20022 messaging standard, which can build upon an existing ecosystem to fuel innovation and progress.
That's not to say experimentation isn't welcome. Indeed, Citi previously developed its own Citicoin prototype, and while the bank chose not to move forward with the project, Kohli said it delivered valuable lessons in the potential of blockchain and the role of fiat currency.
As new challenges emerge, corporate treasurers will have new issues to worry about. But innovators will also add new technologies and solutions into the mix and, combined with the collaborative efforts between banks, FinTechs and regulators, Kohli said further progress will be made.
"The trend is very positive," he said. "I do think that while we have progressed over the last few years, I would expect in the next two to three years the pace of innovation will further improve."