JPMorgan: Treasurers Become ‘Critical Partners’ as Firms Handle More Third-Party Funds

In the digital age, all companies can become platforms.

Priyanka Rath, managing director, head of global liquidity and Account solutions specialists, and Veronique Steiner, head of high growth tech for Europe, Middle East and Africa, both of J.P. Morgan Payments, told Karen Webster that as digital value chains and ecosystems take shape, more firms must become adept at handling third-party money (3PM).

At a high level, 3PM is cash held on behalf of someone else, so it needs to be classified as such and accounted for separately by organizations from the funds that “belong” to them. While online third-party marketplaces and gig economy companies most commonly deal with this kind of cash, we are seeing companies across the board being increasingly faced with the challenge of managing third-party money.

If 3PM management is done well, various ecosystems can take shape: An online music streaming platform can create a commerce “channel” that lets users find artists, order tickets to their next concert, buy a tour T-shirt and even, conceivably, book their ride to the venue … without leaving the ecosystem itself.

“Making the payments invisible gives customers the best possible experience,” Steiner said.

The challenges and opportunities are spotlighted, Rath said, with companies that might want to sell direct to consumer (D2C), and also want to host other merchants on their platforms.

These platform operators must handle money paid by end customers before those funds reach the merchants who sold them the product or service listed on the platform itself.

Steiner noted that the rise of FinTechs and digital wallets has helped change the ways consumers interact and transact with those platforms. Ride-hailing firms and even Big Tech enterprises branching out into financial services, must handle various payment flows that occur between various stakeholders. And no less a behemoth than the auto industry is finding value with embedded payments and commerce, as cars become, essentially, digital wallets on wheels.

No matter the business model, Steiner and Rath said, the ultimate goal is to safeguard those funds on behalf of suppliers or customers while expanding various digital ecosystems and embedding new financial services.

Market-by-Market Considerations

Treasurers are tasked with satisfying the legal and regulatory mandates that govern how that money must be handled, and transactions processed, on a market-by-market, country-by-country basis.

That means juggling everything from deciding which commercial banks to work with (in each market) and knowing what the liabilities are when, for example, a company affiliate may be based in Hong Kong and the merchant is based in Dublin. Along the way, they must also grapple with real-time money movement (and real-time liquidity concerns) and how to optimize balance sheets.

In doing so, Rath said, the very ways and means by which the treasurer and the CFO have had to predict and forecast money movement itself is changing.

“They’re evolving from becoming arms length financial and risk managers to becoming critical partners in enabling their companies’ growth and eCommerce ambitions,” Rath said.

To help craft those ecosystems, Rath said, treasurers should be more involved — earlier — in strategic discussions about growing their businesses’ top and bottom lines and companies. A firm that enters new markets or changes its business model must be aware of the regulatory hurdles of how money can and must be handled.

“The treasurer should be at the forefront of influencing those decisions, even if they do not ‘own’ those decisions,” Rath said.

That means breaking down the silos that exist between treasurers, the CFO and product development teams. There also need to be partnerships with the right banking service providers, Rath said, who added that companies such as J.P. Morgan Payments are making significant investments in technology to enable companies to manage 3PM.

As Rath told Webster, treasurers can help make sure that companies are “innovating and staying ahead of the curve — because the best customer experience ultimately drives transformation and growth across competitive industries.”