Treasury Technology: There’s an App for That

by Helen Sanders, Editor

Treasury management systems (TMS) have become impressively sophisticated since the early days of telex machines (which I battled with daily) blue screens (which I didn’t understand) and mile-long perforated paper with holes along the edges (despite the secondary advantages for impressive children’s drawings that covered the entire floor). While ‘vintage’ home décor and clothing have become fashionable, few people are keen to see a return to impenetrable reporting, the catastrophic ‘blue screen of death’ as it was affectionately known in our office, or days of training to perform relatively basic activities. Although TMS are now highly functional, flexible and far easier to use than their more troublesome predecessors, innovation in treasury technology is as important today as it was fifteen or twenty years ago. Instead of focusing on core functionality, however, usability, accessibility and interoperability are now amongst the most important priorities.

Adoption models

An important development over the past few years has been the emergence of new adoption models that shift the responsibility for hosting and maintaining the TMS from the user organisation to the vendor or a third party. Originally, this model was described as an ASP or application service provider, which often simply meant that the system was hosted by the vendor, but the technology itself remained unchanged. More recently, managed services have evolved significantly. Software as a service (Saas) is a term commonly used, and essentially means that a user accesses a central application or integrated group of applications, usually via a web-based interface. The vendor manages the system, including upgrades and maintenance, and implementation may also be more straightforward. Saas is one aspect of ‘cloud’ technology, allowing users remote access not only to software applications, but also storage, platforms, security, infrastructure etc. Most TMS vendors are embracing the concept of cloud technology, although this may mean slightly different things in each case. Ben Stollard, Vice President, Northern Europe, Kyriba discusses,

“Use of cloud-based technology in treasury has become far more popular in recent years, pioneered by companies such as Kyriba, which was an early adopter of cloud technology. Initial concerns about security and volume processing were quickly dispelled and we are seeing accelerating adoption amongst our customers as they recognise the benefits of maintaining a single version of the software. These include the enhanced ability to invest in new functionality and the reduction in internal IT resources required to support the system.”

The ability to access a TMS without the need for significant IT resourcing and investment in infrastructure, plus easier implementation and maintenance, enables all companies large enough to have a distinct treasury function to make use of a specialist system. There is therefore no longer justification for treasury departments to use manual processes or spreadsheets for recording and reporting treasury activities. However, as Ben Stollard, Kyriba explains, this message has not yet been disseminated across the full spectrum of corporations,

“In most cases, FTSE100 companies that are now selecting a TMS are replacing existing technology. However, as you move into the FTSE 250 and beyond,  many enterprises are selecting and implementing treasury technology for the first time.”

The increased focus on audit compliance on one hand, and senior management’s interest in achieving visibility and control over liquidity and risk on the other, together create a compelling business proposition for acquiring the use of a TMS.[[[PAGE]]]

Going mobile

Having worked in and around the treasury technology space for 20 years, it is easy to forget that despite the enormous innovation that has taken place over this period, treasurers’ requirements have remained fundamentally similar, albeit that in some cases their remit has expanded. What has changed is treasurers’ expectations about how these requirements will be met. Ben Stollard, Kyriba suggests,

“Although customers’ requirements differ widely according to their industry, business model, treasury strategy and organisation, there are some common trends. For example, the need for timely, accurate cash positioning and forecasting is a key objective for all companies. Without the right processes and technology, treasury departments can spend days putting together cash positions and forecasts, usually using spreadsheets. Data produced in this way is routinely out of date, error-prone and difficult to audit, making it difficult to act quickly.” 

The need for timely, accurate information has been a priority for treasurers for as long as TMS have existed. However, while some years ago this meant that a treasurer would need to ask a specialist user for this information, which was then presented in a defined template, treasurers now expect to receive information on screen (which could be a laptop, mobile phone or tablet) on demand, and in a format that they themselves have defined. They also expect to manipulate data graphically and drill down to multiple levels of detail. No longer is the concept of a ‘specialist user’ acceptable, except for some activities such as user administration, workflow definition or report writing. This creates new and very distinct challenges for TMS providers that are at least as significant as the issues of supporting euro conversion or hedge accounting in the past. Paul Higdon, Chief Technical Officer, IT2 summarises,

“One of the biggest shifts we are seeing across the treasury community is from PC or laptop-based activities to the use of mobile devices such as tablets. Although until quite recently, this was largely restricted to individuals’ personal devices, companies are increasingly making tablets available for business use. This is driving greater demand for treasury transactions, processes and reporting through mobile devices, and new ways of working.”

Ben Stollard, Kyriba agrees,

“The increasing use of smartphones and tablets is changing treasurers’ expectations about the way that their TMS is deployed and how they interact with it. At Kyriba, for example, we have an iPhone and iPad app for accessing our software with a focus on ease of use, intuitive navigation and accessibility of data. As treasury technology extends into new areas such as supply chain finance, working capital optimisation and invoice discounting, remote access to a specific set of capabilities using mobile technology is becoming an essential requirement.”

In general, tablets appear to be the preferred access method for treasury information and activities, as Paul Higdon, IT2 outlines,

“According to a recent user survey conducted by IT2, 79% of users need to access treasury functions from outside of the office, either on a regular or occasional basis. Forty-five per cent already have a tablet, either owned personally or issued by their company, but this is growing rapidly. For example, 66% of treasury professionals would like to be able to access key treasury functions through a tablet (compared with 44% through a smartphone).”

He continues,

“Using a tablet creates very different user expectations. While in the past, users expected that they would need some training in the use of their treasury technology, they expect immediate, intuitive access to functionality through a tablet without training. This applies to users of all types, from the CFO accessing management information to back-office staff checking back-office approvals, leveraging the same platform but for different purposes.”

Consequently, although a TMS may provide comprehensive functionality, providing this in a way that is fully accessible yet secure creates particular challenges, as Paul Higdon, IT2 continues,

“Treasury systems have been developed to provide sophisticated functionality with flexible workflows across a broad range of business activities. This should not mean, however, that the user experience should be compromised. At IT2, we are focused on maintaining the same degree of sophistication and flexibility in the way that each customer defines its use of the system, while maximising user convenience. For example, we have created one-touch access to enable users to access answers to key questions, such as how much cash they have, and where it is, where their assets are held and their counterparty risk, and what their funding position is.”

Embracing mobile technology, particularly through tablets, is a clear priority for banks and vendors alike; for those acquiring or evaluating technology, however, it is easy for one’s judgment to be influenced by impressive user tools, to the detriment of core functionality. If the underlying functionality or data is not there, it doesn’t matter how exciting or dynamic the user interface is, you still won’t have the information you wanted. So while mobile capabilities will become increasingly prominent in users’ list of requirements, these need to supplement, not replace core functionality.

Connecting treasury

Although ease of access and system deployment are important priorities for TMS vendors, there continue to be industry developments that prompt new functional requirements. One such requirement in recent years has been bank connectivity through SWIFT. Automating and securing bank connectivity through integration with banks’ proprietary systems has been a long-held objective, and many companies have achieved this successfully by building interfaces between the TMS and banks’ systems. This starts to become more complicated when a company works with more than one cash management bank, however, each of which has its own systems and formats, adding to the cost and resource requirement considerably.[[[PAGE]]]

Many TMS vendors are now competent and experienced in supporting SWIFT connectivity. In some cases, they may have their own service bureau, or work with third party partners. The problem with this model is that there are multiple partners involved in the exchange of a message between one party and another. If something goes wrong, it may not always be obvious whose responsibility it is to correct it, which poses particular challenges when dealing with time-critical, high value transactions. We are already starting to see the beginnings of a shift in this model. For example, AllianceLite 2, which is managed by SWIFT, is a self-serve, web-based tool for corporates to connect with multiple banks through SWIFT. As Kurt Vandebroek, Senior Vice President, Product Management, SunGard considers,

“It will be interesting to see what impact AllianceLite 2 has on the connectivity space. If this model is successful, we are likely to see considerable competition for service bureaus, resulting in consolidation and evolving business and technology models.”

However, the onus is then on treasury to manage its bank connectivity. A parallel development is that TMS and payment technology vendors take responsibility for the entire cash, treasury or payments management infrastructure, including connectivity,

“In the future, bank connectivity will not be considered as distinct from treasury and payments solutions. Corporate treasurers and finance managers do not want to have multiple technology partners for different aspects of their technology framework, and would prefer a single entity to be accountable for both internal processing and external connectivity. With the growing trend for cloud-based, SaaS and hosted solutions, together with changes to SWIFT’s connectivity model, this can become a reality. At SunGard, we are already reorganising our implementation teams so that treasury or payments technology, hosting and connectivity are all part of a single project framework with a single service.”

Progress towards eBAM

The increasing use of SWIFT is fuelling new opportunities for treasurers, and indeed, the ability to access a growing range of services through a single multi-bank platform is one of the value propositions of SWIFT. One such opportunity that has been discussed for some time, but is only now reaching fruition is eBAM (electronic bank account management). We have discussed eBAM at length in TMI before (see Treasurer’s Voice, April 2012, edition 204) but essentially, this refers to the electronic exchange of messages between a corporate and its banking partners for opening and closing accounts, and maintaining signatories. The term eBAM is also now being used to refer to the internal management of bank account information, which is perhaps more accurately termed BAM. Kurt Vandebroek, SunGard explains,

“A comprehensive eBAM tool provides the following capabilities:

i) repository for bank account information and documentation

ii) workflow manager to enforce compliance rules and segregation of duties

iii) reporting to meet both internal and regulatory requirements

iv) electronic message exchange capabilities through SWIFT (or a proprietary channel as preferred)

We built our eBAM portal (which is integrated with our TMS and payment systems or can be used with third party systems) to provide all of the above functionality, but we found that there was less demand amongst our corporate clients for exchanging electronic messages with their banks. There were two primary reasons for this. Firstly, many companies had not yet optimised their internal bank account management processes, which is an essential prerequisite before automating the exchange of bank account management messages. Secondly, many of the banks were not yet ready to support eBAM. Consequently, we have focused initially on supporting clients in their bank account management processes, and then automating the exchange of messages, an approach that is proving highly successful.”

Paul Higdon, IT2 also confirms,

“eBAM is becoming a growing priority amongst our customers. Initially, many companies approach eBAM as an operational initiative that reduces the burden of bank account administration, centralising and optimising this function. There are also strategic advantages in maximising cash visibility and monitoring counterparty risk.”

Nancy Colwell of USI Insurance Services gives an excellent account of the company’s approach to bank account management in this edition of TMI; it first included BAM and the project is now being extended to cover the electronic exchange of messages. As Kurt Vandebroek, SunGard notes, which is consistent with USI’s experience,

“Now that a growing number of customers have implemented ‘BAM’ (bank account management) there is increasing pressure on the banks to support eBAM.”

However, while eBAM has global relevance, Kurt Vandebroek, SunGard describes how the same tool has different applications in some regions than others,

“In Asia, the demand for BAM solutions is particularly strong, including in situations where digital signatures (and therefore eBAM) are not supported. In these cases, fast growing companies that are expanding their geographic footprint either through M&A or organic growth need to manage new bank accounts efficiently. Demand is also coming from the banks in Asia. As documentation for bank account opening, closing and changes to signatories is often extensive, banks are keen to streamline the process as far as possible, so they are actively working with vendors such as SunGard to enable document templates to be populated automatically etc.” [[[PAGE]]]

Although the TMS industry continues to evolve substantially, and a number of vendors have achieved a high level of sophistication across a wide reach of functionality, treasury management technology has not become generic, and it is by no means a commoditised business. During discussions with a number of vendors, not only those represented in this article, it is clear that although they are working to address common challenges and demands, their approach to doing so is quite different. Furthermore, there is a wide divergence in vendors’ priorities. Mobile technology and graphical manipulation has fantastic potential, and can be enormously impressive, but the underlying functionality and technology that underpins them needs to remain the priority. For example, in the October edition of TMI (edition 209) the Treasurer’s Voice article was on the topic of SEPA, in which we featured commentary from SunGard, for whom SEPA migration is a major priority. Another vendor, with a comparable target client base and treasury functionality said that SEPA was ‘not relevant’ to them. I am hoping that my question was merely misunderstood.

What this illustrates, is that companies of all sizes, at whatever stage they are in their treasury journey, and however easy it may appear to adopt a new system, still need to be rigorous in their TMS selection, and avoid being star-struck by impressive mobile gadgets when identifying their functional and technical priorities. New ways of accessing data have transformational potential, but to be presented with the right data and capabilities, these have to be available in the system in the first place. At the same time, the treasury technology space has become quite an exciting place.