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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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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