B2B Payments

J.P. Morgan: Real-Time Treasury A Key Driver Of Corporate’s Loyalty

In the last decade since the global financial crisis, the corporate treasury function has undergone a dramatic transformation. What was once a siloed area of the enterprise that was focused on cash management is today tasked with supporting nearly all strategic priorities, from cybersecurity and anti-money laundering (AML) compliance to supporting organizations’ financial digitization agendas.

 

These expanded responsibilities have emerged on top of treasurers’ traditional cash forecasting and risk mitigation requirements, all while facing the added pressure of doing more with smaller teams and fewer resources.

In the current climate of heightened geopolitical uncertainty, trade disputes, FX volatility and regulatory complexities, corporate treasurers have their work cut out for them.

But, according to JPMorgan’s EMEA Head of Wholesale Payments Shahrokh Moinian, technological innovation is helping to unlock more opportunities for corporate treasurers to step up to this newfound strategic role in the enterprise.

“All of these changes we’re seeing are the result of a few mega-trends,” Moinian told Karen Webster in a recent discussion. “One is regulatory trends, where regulators are looking to increase competition in this field and drive innovation. The other is technological innovation. Overall, these trends mean there are more electronic means of transferring money.”

Driving Real-Time Treasury

Some of the most disruptive regulatory initiatives include PSD2 and open banking, Moinian highlighted, while faster payment initiatives in markets around the world comprise another important piece of connecting corporate treasurers with the transactional data they need to perform strategic processes more quickly and efficiently.

Real-time payment networks – along with API integrations that can automatically capture transactional data from those accelerated payments – are driving a shift toward real-time treasury management, Moinian said. Finance functions like accounts receivable (AR) and accounts payable (AP) are unlocking information that helps treasurers gain a more accurate view of cash positions, along with a more predictable cash flow.

“This real-time trend of the movement of money will ultimately result in real-time treasury,” noted Moinian. “This is not a five-year vision, either – certain companies and industries are already there.”

Speed, however, is only one part of the broader strategic treasury puzzle.

When it comes to payments, today’s treasurers not only need real-time transaction capabilities, but they also need the ability to transact “anywhere, anytime, in any network around the world,” he said, noting that this demand means support for everything from ACH to mobile wallets, in any currency.

Further, corporate treasurers require elevated security and compliance controls within this always-on payments ecosystem, in which the end-user experience is increasingly critical for finance professionals.

“All of this is a very tall order for all banks to satisfy,” said Moinian.

Banks’ Treasurer Loyalty Challenge

With corporate treasurers eager to invest in technology that can support real-time processes, their success hinges on the capabilities of their banks to provide such tools. As a result, treasurers are taking a hard look at their existing financial service provider relationships, and aren’t afraid to switch to a banking competitor that meets their needs.

“There is a review of long-lasting bank relationships to see if those providers are still fit for purpose,” said Moinian. “Banks have to invest heavily in innovation and new platforms, and use technology to the benefit of treasurers. In a number of cases, this results in the changing of primary banks, and in the future, this will probably accelerate as there are more solutions and more requirements for treasurers.”

Financial institutions’ (FIs’) investment strategies in technologies like API integration, open banking, global payments capabilities and real-time payments will be critical in capturing and retaining corporate treasury clients.

Moinian pointed to the investments JPMorgan has made in real-time payments and open banking APIs in an effort to support corporates’ pursuit of real-time treasury. Embracing a range of payment infrastructures – including SWIFT’s gpi, card rails and blockchain – will also support banks’ efforts to meet the evolving demands of treasurers.

Inevitably, not every FI will be able to meet the lofty needs of the modern treasurer. In addition to internal innovation investments, Moinian emphasized the importance of FIs embracing FinTech collaboration as more industry newcomers begin to target the corporate customer. He noted that for JPMorgan, those FinTechs offer “more of a collaborative relationship than a competitive relationship.”

Moving forward, Moinian predicts a market shift in which financial service providers become more specialized to fill treasurers’ particular needs, opening up the door for further collaboration across the market and the emergence of banks taking a “platform-as-a-service” approach to their corporate customers.

Considering how complex treasurers’ operations have become, cooperation and data integration between platforms and service providers will be essential to meeting the always-on, regulatory-compliant, user-friendly transaction experience of a strategic corporate treasury department.

“All of that today is a must-have, whereas previously, it was maybe a ‘nice-to-have,'” said Moinian. “That’s the situation we’re in, and we have to respond to that as an industry.”

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