National Australia Bank Says Real-Time Cash and Working Capital Management Among 2024’s Banking Megatrends

Several megatrends are shaping financial services, Nilesh Dusane, global head of institutional payments at AWS, and Shane Conway, executive general manager of transaction banking, enterprise payments and asset servicing at National Australia Bank, told Karen Webster.

The digitization of banking is creating new customer experiences for consumers but also for small businesses. The form factors being used for payments are shifting from checks, cash and cards to mobile devices.

And increasingly everyone wants a real-time experience — to know in real time whether payments will be successful or not, Conway said. Payments is a scale game, after all, and all players want to reduce the costs tied to moving money or getting it in the coffers.

“What we’re seeing from customers all over the world is that real-time cash and liquidity management are extremely important for businesses large and small,” Dusane said.

There’s growing interest in how artificial intelligence (AI) and machine learning, as part of the banking relationship, can help these corporates optimize their payment operations, he said.

And while the paper check may not go completely the way of the dodo (Conway observed that there are regulations in Australia that demand that some payments be done by checks), the opportunity is there for financial institutions to monetize speed for senders and receivers using real-time rails, Conway and Dusane said. That’s especially true as everyone wants to be paid now, and everyone wants to maximize the time they take until they pay.

Banks seeking to monetize new use cases must shift their business models as they seek to incentivize new payment behaviors and overcome the inertia some banking clients may be displaying.

“We see the most inertia with very large clients, who have deep integrations into legacy payments infrastructure,” Conway said.

The long-term process is one where NAB must migrate those clients onto next-generation payments infrastructure. Although different clients of different sizes may pivot to real-time payments at different paces, Conway noted that all clients show some commonality when it comes to real-time transactions. They want those transactions to be easy.

“It needs to be ‘two clicks and I’m done,’” Conway said.

Those same clients want the transactions to be low cost. In Australia, he said, most consumer transactions are structured so that individuals do not pay fees to send or receive money. And — no surprise — corporates want assurance that their digital transactions are resilient and secure.

Working with cloud providers such as AWS helps cement that resiliency and provides the flexibility to roll out next-generation payment experiences to the mass market without doing it all in-house, Conway said.

“We often talk about data as an asset,” he said, adding that the work required to get data to the right place at the right time is a long-term strategy as the bank upgrades its client-facing portals and integrations and uses advanced technology to boost value-added services “delivered in the moment.”

Taking Stock of the Megatrends

Looking ahead, one key megatrend for 2024 lies in the demand for real-time cash and working capital management, Conway said. Enabling those real-time functions requires more data than most corporate treasurers have traditionally been able to access, and a significant amount of data is still collected through, and analyzed with, spreadsheets. The result is that cash flow forecasting has been limited in scope and effectiveness, perhaps a few weeks at best.

But Conway noted that with the company’s AI-driven liquidity management platform, NAB has been able to extend its corporate clients’ forecasting ability out several months, while automating 80% of the month-end processes tied to treasury and finance functions in seamless end-to-end flow.

“Though these are hot trends within certain corporate sectors, we think these will ultimately be key trends across all segments,” he predicted of the lure of managing working capital in an algorithmic way as enterprise resource planning systems are connected directly to the banks.

“It’ll take some time to get there,” added Conway, who said that banks need to invest in the infrastructure to ensure real-time payments capabilities are better than the legacy payment capabilities that have traditionally been in place.

Upgrading that infrastructure, he continued, will enable payments at the point of sale as firms and individuals pay for goods and services, and as alternatives to card-based payments. That’s not been feasible with mainframe, batched-based processes because money movement has been too slow. But real-time infrastructure is resilient enough to handle high-volume transactions — even micropayments.

Orchestration Delivers Payments Optionality

“What most merchants want is choice and to offer their customers any way to pay,” Conway said.

That choice, he said, can be realized by leveraging partnerships with firms like AWS and the FinTech Banked.

The single point of integration via API and orchestration routes payments most efficiently, with tiered options. A consumer can be offered the options at the point of sale to pay with a check, opt for an ACH transaction with a fee, or incur a small surcharge with a card.

In the background, Dusane said, if a consumer decides to send a payment over a card rail versus an ACH rail or account-to-account payments, the payment processor has to then accordingly route those transactions to the appropriate rail. Banks must be able to take the risk to process that transaction. Robust data on hand about transactions and consumer behavior enables those decisions — and orchestration — to be done in real time.

No matter the initiative, real-time payments use case or the audience, Conway said, in the years ahead, “innovation in payments is all about removing friction at the customer experience layer.”