How Banks Can Accelerate — Or Stifle — Treasury Optimization

Amid an ecosystem of accelerating FinTech innovation and intensifying market volatility, corporate treasurers are taking a hard look at their banking relationships.

Treasury leaders have a long laundry list of requirements from their financial institution (FI) partners, ranging from real-time data visibility to enhanced security to support for back-office modernization.

It’s a massive opportunity for those banks in an increasingly competitive industry. Yet as treasurers turn to their banks for guidance and support, they’re also exploring the value in letting go of some banking relationships altogether — creating a high-stakes ecosystem for those FIs.

ION Treasury Vice President of Financial Services Product Management Jerald Seti and Chief Product Officer Michael Kolman told PYMNTS about how treasurers’ biggest concerns are turning into make-or-break moments for the banks that service them. FIs must position themselves at the forefront of emerging disruptions like open banking and real-time payments in order to address their treasury clients’ most pressing concerns — or risk falling out of the competition, the executives said.

A Help Or A Hindrance

Corporate treasurers have a few key priorities today, and those items at the top of their to-do lists present an opportunity for bank partners to act as a strategic supporter, or an inconvenient hindrance, to treasury goals.

According to Seti, one of the treasurers’ biggest focuses today remains liquidity management, increasingly in real time. Black swan events like the pandemic, the commodities market price crash and other market events have opened treasurers’ eyes to the need to understand current cash positions on demand.

“A large segment [of treasurers] are still working under very manual circumstances, so their ability to see their cash position and understand liquidity often takes them quite a bit of time — days and weeks,” Seti noted. “It’s not really acceptable at this point.”

It’s related to another top priority for modern treasurers, according to Kolman: migrating away from manual and paper-based processes.

In both areas of focus, banking partners play an instrumental role in supporting those initiatives or perhaps derailing them. For instance, as Kolman explained, oftentimes treasurers are not in control of how much they’re dealing with paper.

“One process that’s heavily paper-based is anything related to bank account management,” he said. “Adding and closing bank accounts, changing signers on a group of accounts, all of that requires forms that are provided by the bank that need to be completed and sent back in the form of original copies.”

It’s a similar challenge in the area of liquidity management. FIs have the data that their treasury clients need to understand cash positions. But if the bank cannot provide that information in a seamless, integrated and timely fashion, those treasures find themselves stuck.

Banks’ Data Opportunity

Kolman and Seti pointed to a variety of broader financial services industry trends that are unlocking the opportunity for banks to play a more strategic role with their treasury clients. Initiatives like PSD2 and open banking, SWIFT gpi, and application programming interface (API) integrations have allowed FIs to more efficiently move and share data, providing professionals with real-time visibility into finances or supporting the need to share documentation in a digital fashion.

“There’s really a culmination of many different streams working together to open up new opportunities,” said Kolman. “You have better data flowing into the system because it’s being reported on from the banks and being recorded internally through better systems and business intelligence tools that aggregate data and ultimately give a better, smarter picture.”

But just as banks can act as a help or hinderance to their treasurer customers, data strategies can make or break a bank’s partnership with those clients as well.

Ninety percent of ION Treasury clients see their payment volumes flowing through less than five banks, noted Kolman. As more treasurers reevaluate whether their banking partners are supporting their optimization efforts and are looking to consolidate data for a more streamlined view of finances, the risk for banks to lose treasury clients is on the rise.

“Treasurers are looking at their relationship structure, and ‘pruning the tree,’ if you will,” said Seti. “They’re really saying, ‘Do we need these accounts?’”

One factor behind that evaluation, he said, is that as more corporates embrace data integrations to consolidate their own financial pictures, they’re also increasingly aware of the growing security risk that comes with data sharing. With that in mind, some treasurers will want to pare down their banking relationships to support data consolidation with as few data connections as possible — and therefor as few opportunities of a data compromise situation as possible.

At the same time, financial service providers — banks and FinTechs alike — are finding it valuable to embrace collaboration and to support greater functionality and data connectivity for their joint treasury clients. As initiatives like gpi and API integrations mature, and as security measures are enhanced, the ecosystem will be better suited to address treasurers’ growing demands from banks.

What those FIs will have to consider is how to balance embracing industry collaboration and data sharing capabilities, with the security and consolidation requirements of corporate customers in order to protect and cultivate the bank-treasurer relationship into the future.