Trends Influencing Treasury Management

The increase in supervisors and the cost of non-compliance have made rigorous reporting a significant impact area for treasurers.

FREMONT, CA: Treasury management has undergone significant changes driven by technological advancements, changing business landscapes, and evolving regulatory requirements. New-age treasury functions go beyond traditional liquidity management and have transformed into comprehensive payment, supply chain, liquidity, and forex management functions. Integrating corporate procure-to-pay and order-to-cash cycles with treasury workflows has led to significant efficiencies in transaction banking. Online connectivity between banks and corporate treasuries allows for more agile and effective working capital management and risk assessment. The treasury technology space has witnessed multiple acquisitions, leading to consolidation.

The connectivity involves banks and their communication modes, market data providers, and function-specific applications for trade confirmations and reporting systems. While the integration provides numerous benefits, it necessitates proactive management of cyber risks and financial data exposure. Payment-hub banks offer centralized and standardized payment processes for bulk commercial and treasury payments, local and cross-border transfers, and netting services. The trend has led to the emergence of new players in the payment system supplier landscape. Large corporations are adopting in-house banks to administer intercompany liabilities and reduce the number of bank accounts and external transaction costs.

Smaller banks increasingly turn to cloud-based offerings and Software-as-a-Service (SaaS) models for treasury technology needs. It allows them to access liquidity management, investment management, and capital markets solutions on a pay-as-you-use basis. Small and medium-sized enterprises opt for plug-and-play models that integrate with their ERP applications. Banks prefer stability and specialized providers, while universal banking players gain an advantage with risk, compliance, and governance capabilities. The trend results in a more comprehensive end-to-end offering in the treasury space, and best-of-breed treasury players may face increasing challenges.

Treasury management continues to be primarily driven by front- and middle-office functions due to their central role in treasury management. Back-office functions are outsourced mainly due to the fungibility of these functions. Treasury operations are rapidly digitizing with the advent of Robotic Process Automation (RPA) and cloud technology. MNC corporate treasuries may build internal centers of excellence for consistency across multiple countries and cost-effectiveness. Regulatory standards, compliance norms, and emerging governance principles push banks and corporate treasurers to adopt early compliance based on expectations rather than complete clarity. 

Future treasury management will become more integrated, digitized, and compliance-focused. Banks and corporations must adapt their treasury functions to keep up with these trends to remain competitive and efficient. Adopting technology, cloud-based solutions, and a proactive approach to compliance will be critical in achieving success in treasury management in the coming years.