Five Ways to Transform Treasury by Investing in IT
In the few short years since the Internet emerged, we have already witnessed tremendous change in the way companies conduct transactions, process information and communicate with their bank partners. But what will tomorrow bring? Probably more of the same, as technology and financial services providers develop new tools and systems that will continue to transform the face of treasury, improve controls and operational efficiencies, ensure regulatory compliance and boost bottom lines.
As this occurs, treasury managers should seek to balance the goal of taking full advantage of technology with efforts to ensure a strong return on their company’s investment. This will require keeping a critical eye on both end-user acceptance and budget realities. With this in mind, let’s examine five areas where many treasury departments will be investing IT dollars in the next five years:
New regulations and laws, including the Sarbanes-Oxley Act, The Bank Secrecy Act and the USA Patriot Act, have placed a premium on compliance and risk management. Related service offerings will flourish, offering tools to help you prevent identity theft and fraud, and mitigate your financial and legal risks.
Additionally, Check 21 will affect disbursement strategies, as well as the ability to capture remittance data and integrate with accounts receivable applications. Tools for thriving in an imaging environment will be plentiful.
Look for new technologies related to how data is captured, reported and analyzed, such as information delivery applications for data mining, pricing and payment information analysis supplement MIS reporting applications. It will no longer be enough for corporates to simply capture net payments and post transactions. Instead, truly grasping customer activity and acting on this information will be paramount.
Therefore, look for enhanced customer relationship or knowledge management systems that translate transactional information in a way that identifies usage trends and market penetration, and helps lead to the development of new, value-added services.
In another area, businesses will address time-sensitive transactional processing by delivering information via wireless devices and radio frequency identification technologies (RFID). While the market has been slow to adopt RFID, acceptance may increase if the core functions of traditional card services are incorporated into new product offerings (i.e., detailed purchase information and receipt generation).
As end users become more dependent on receiving real-time information to improve their decision-making, the standardisation of bank-specific proprietary formats will gain momentum. Look for straight-through processing (STP) initiatives to streamline and standardise back-office processes, and reduce redundant systems, risks, manual processing and associated costs per transaction. Simplifying bank formats/systems will drive cost reductions in corporates’ integration of technology, thereby increasing their profit margins.
Another likely area for companies to invest in is payment fraud risk reduction. For example, the use of positive pay reconciliation services allows a bank to identify authorized payments it should accept and unauthorized payments that require clients’ further scrutiny. Cutting-edge banks will transmit these exception reports via voice, wireless or e-mail communication. The advent of payee verification provides an additional layer of protection by automatically identifying checks with altered payee information.
Additionally, “know your customer” anti-money laundering rules require national banks, and federal branches or agencies of foreign banks, to establish and maintain procedures for determining the identity of their customers, as well as their normal and expected transactional behaviours. It will be important to implement technologies that screen transactions to identify high-risk customers, confirm partners’ identities and limit access rights to the company’s coffers.
Also, the use of biometrics will surge, helping to reduce bank fraud and identity theft. Digital representations of an individual’s fingerprint, retina/iris, voice, etc., can authenticate users seeking access to secure information or a physical space, and can replace personal identification numbers (PINs).
Finally, the increased trend toward outsourcing receivables and payables management will grow. In droves, companies will enlist outsourcing to help them align corporate budgetary concerns for increased revenues and cost management with a focus on their core business competencies. What will be different in the years ahead? Look for financial institutions to capture a solid piece of the outsourcing business from technology providers.
Corporations also will enlist outsourcing as a tool to assist in their regulatory and legislative compliance efforts. The right level of internal controls and process documentation can lead to a stronger treasury organisation with a better understanding both of its market position today and where it wants to go tomorrow.
Depending on your business model and strategic IT vision, your technology radar screen may contain applications outside these five areas. For example, in the aftermath of 9/11, disaster recovery technologies have come to the forefront. We will see more enhanced backup tools that promote accessibility without compromising security. This may even be your company’s immediate technology “hot spot.”
Regardless, what should drive your long-term IT strategies are those technologies that can serve as change agents and really transform treasury-providing efficiency gains and reducing operational costs. You probably don’t want to be the first to employ these technologies, but you also don’t want to be left at the starting gate while your competitors race by.