Faster Payments

Deep Dive: Real-time Payments’ Impact On Liquidity Management

The proliferation of real-time payments around the globe has had serious implications on liquidity management. Maintaining a safe level of working capital is critical for banks and corporates, which need enough funds to continue normal operations should they be struck by an economic downturn or another unfavorable event. Liquidity is also important for those that may want to take advantage of unexpected opportunities. 

Treasurers are used to legacy systems, and they’re still learning how to operate in an environment where money moves 24/7 year-round. Instant payments are making it increasingly difficult for them to assess their institutions’ liquidity needs. 

This Deep Dive explores real-time payments’ impact on FIs’ and corporates’ liquidity management practices, including the challenges these institutions face and possible solutions. 

NEW CHALLENGES AND SOLUTIONS 

Banks used to process payments in batches at designated times during the five-day workweek. Regularity like this helps treasurers remain accurate when predicting and assessing liquidity. Real-time payments allow transactions to be processed instantly even on weekends and holidays, requiring corporate treasurers to proactively monitor and manage risk. 

Constantly watching every payment can overburden staff and budgets, but new technologies can alleviate these problems. FIs can develop and integrate solutions with their ERP systems that automatically monitor transaction data 24/7. Other products, such as SWIFT’s global payments innovation (gpi) and Dovetail Liquidity Management, can improve payments’ traceability and predictability, helping treasurers get a better handle on liquidity. This data allows them to make more accurate assessments, preventing them from keeping an overly large liquidity buffer and freeing up funds as a result. 

It’s not just legacy systems that need to be updated for the 24/7 world, however. Regulations must be adjusted as well. Businesses face challenges such as inconsistent definitions, management and analysis of real-time liquidity.

The rise of real-time payments systems is not slowing down and treasurers must adjust their strategies accordingly. New regulations and technologies can ease their tasks and help them get back to work.

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 Pay Advances: The Gig Economy’s New Normal, a PYMNTS and Mastercard collaboration, examines pay advances – full or partial payments received before an ad hoc job is completed – including how gig workers currently use them and their potential for future adoption.

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