Globally, treasury operations are moving past digital reticence to bring in process efficiency, effective use of liquidity, and compliance via digitalisation.
Digital innovation is no longer a theoretical case but a practical necessity, with treasury operators realising that it is a matter of how, rather than when. Technology and automation (72 per cent of respondents), along with cyber security (48 per cent), were among the top three areas for planned treasury investments in the year ahead, according to a 2018 survey by the Association of Corporate Treasurers (ACT)1.
The Middle East and Turkey (MENAT) region is making large strides in digital transformation on the back of investment in digital infrastructure, proactive central bank policies, and access to global best practice via financial institutions such as HSBC, which has a global digital investment programme of USD17 billion over two years until 2020.
This accelerating digitalisation extends to corporate treasuries as well. More and more treasury heads will implement new technologies to improve efficiency and reduce costs this year. In a November 2018 survey of finance professionals, technology adoption was cited among the top three in terms of impact on the future of B2B payments2. Almost half (44 per cent) of finance professionals in the survey said they believed B2B payments will be dominated by online payment platforms or e-checks by 2028. About a quarter (26 per cent) said blockchain technology and smart contracts would dominate corporate payments.
Ahead of HSBC’s seminar on ‘Treasury Disruption in 2019’ on January 17, 2019, in Abu Dhabi, Noor Adhami, HSBC’s Regional Head of Global Liquidity and Cash Management, MENAT, said: “The current environment is changing at a very rapid pace. No one can afford not to evolve. For treasuries to be able to be strategic partners for their businesses, they have to embrace digitisation and technology.”
The specific applicability of each of these technologies depends on need. In the region and globally, digital transformation includes technologies ranging from those with long-term impact across functions, such as blockchain, artificial intelligence (AI) and predictive analysis, and those with immediate application, such as digital transaction banking products and cloud-based treasury management systems, an example of which was recently implemented at the Sharjah Finance Department in partnership with HSBC.
Emphasising that HSBC does not advocate implementation of technology for its own sake, Adhami said: “We start the journey with our clients by asking them what they want to achieve and use technology to deliver that, because technology is a great servant but it is the worst master that you could have.”
Digital products that find immediate appeal among corporate treasuries are those that are based on technology mature enough to affect measurable process efficiency. Examples of such technology already in use include Treasury Robotics, where bots are deployed as part of Robotic Process Automation (RPA) for manual and repetitive tasks involving, say, cash management. Modern automated reporting software allows work reports, management reports and compliance reports to be automated. End-to-end accounting is delivered automatically across the whole lifecycle of a transaction.
Already, government and regulatory initiatives in the MENAT region have ensured faster, automated payments and increasing payment flow transparency, which enable corporate treasuries to shorten the working capital cycle and reduce working capital requirements. Free-form text, such as invoice numbers covered by a payment, can be used as valuable data, leading to potentially better reconciliation rates. Driven by MENAT’s high mobile use rate, HSBC’s corporate clients are increasingly using mobile to access their accounts. In the first six months of 2018, over 23,000 payments were authorised via the corporate banking HSBCnet Mobile platform with a value of approximately USD1.6 billion. This is a growth of 24 per cent over the same period in 2017 in MENAT4.
In many cases, banks have been at the forefront of AI usage, and its applications across fraud detection, facial recognition and forecasting. Corporate treasurers in the region have little reason to ignore the advantages of implementing digital innovation at regulatory and policy level, combined with support from the bank's digital integration teams.