FinTechSystemsTreasury – The Web and Beyond

Treasury - The Web and Beyond

It is hard to pin down an exact moment at which the Internet was “born”, but there is no doubt that its growth has been unprecedented by any other technological innovation. The precursor to what we currently know as the Internet, the ARPAnet was developed by the US government in 1969. In 1990, the World Wide Web was established and the Internet became generally available around 1993-1994 as governments lifted restrictions on its use and the first user-friendly graphic user interface was released. According to a 1998 US government report, The Emerging Digital Economy, the Internet was used by three million people in 1994 and by 1998 usage was up to 100 million. As of the end of March 2005, it is estimated that about 888 million people, almost 14 per cent of the world’s population, use the Internet.

For any technology, there are two key phases that are important to understand:

  1. The single point of greatest impact for a technological invention is when it is first introduced.
  2. Following the introduction of a new technology, there is a period of innovation and enhancements that are geared towards improving the user experience.

To put it another way, first revolution, then evolution.

For treasuries today, the revolution has occurred as the Internet has fundamentally changed the way that CFOs and treasurers look at their business. Email eliminated the reliance on fax, phone and mail as the primary means of communication. The Internet has created the opportunity for global liquidity management and oversight; eliminated excuses for not getting information or market intelligence in a timely manner; and demanded that corporate cash and risk managers be plugged into everything that is going on. There is no such thing as a domestic business anymore because all organizations are affected by the global economy.

Since 2001, treasury workstation providers have offered web-enabled solutions for their clients. The benefits of these web solutions are significant: access anywhere and anytime, ability to centralize or decentralize treasury operations as appropriate for the organization, lower initial investment and capital cost by taking advantage of ASP and hosted solutions, reduced reliance on IT groups, and better centralized control and compliance features.

Yet, with all these benefits, web solutions today account for only a small percentage of the overall investment in technology by corporate treasuries. Traditional client-server workstations continue to find homes in large and small organizations. Resistance to adoption can be bundled into three primary categories:

  1. Inherent uncertainty of new technology
  2. Security and control concerns
  3. Global availability of the Internet

The technology industry is littered with many promising technologies that never materialized in practical applications. Information technology groups are risk adverse and cautious of implementing technologies too early in the life cycle because of the risk of investing in the ‘wrong’ technology. In the past 10 years, there has been a maturation of the technology. Robust applications, standards and protocols have emerged, alleviating concerns regarding the Internet’s longevity and creating confidence. With IT’s blessing, treasuries will now be free to seriously consider, select and deploy web solutions.

A key tangent to the technology uncertainty relates to the issue of security and control. In the wake of tightening security, new privacy laws, and control standards brought in under Sarbanes-Oxley, many organizations have been hesitant about using solutions outside their controlled environment and are demanding higher levels of control and security in their business applications. The technology industry has responded to these requirements by developing improvements that provide encryption and two-factor authentication, such as Secured Sockets Layer (SSL). Single passwords controlled by users are no longer sufficient. Two layer authentication requires a positive combination of something a user knows (such as a password or PIN) and something the user has (such as a token, smart card or digital certificate). This duel verification, combined with 128-bit encryption of information prevents unauthorized access and dissemination of personal and company confidential information. In addition, the creation of the SAS-70 certification process, whereby an independent third party reviews and provides an audit of the service provider’s control and security practices, will continue to raise the standards of ASP offerings and mitigate risks for the treasuries that use them.

Perhaps the biggest hurdle, however, is the effect of global imbalance in the availability and use of technology. The paradox is that at the same time the Internet is forcing businesses to take stock of their global operations, there are huge disparities in the technology infrastructure between countries that limit worldwide access. As noted, about 14 per cent of the world’s population uses the Internet. Usage on a per capita basis is highest in North America at 67 per cent, compared with Africa, the lowest at 1.5 per cent. Until this disparity becomes smaller, organizations with multinational operations will be somewhat constrained by what technology they can deploy across the entire organization.

As these immediate concerns are addressed, the technology industry, partnering with treasury professionals will focus on other ways to leverage the Internet. Improvements will not be driven by the technology; rather the technology will be driven by what the customer wants and needs. In the next decade, treasury professionals will make demands in three key areas:

  1. Extensive and flexible reporting, which incorporates more than just traditional treasury information;
  2. Expansion of treasury solutions tailored to PDAs and other wireless devices; and
  3. Increased collaboration and real-time effective communication.

Effective reporting is at the heart of an effective strategic treasury. Reporting in the next generation will no longer mean static, printed reports. Information that is needed quickly and regularly will be one click away through online queries, filters, groupings and hierarchies. There will be standard reports delivered in PDF, which can be emailed for wider distribution or printed for audit purposes. Reporting will also mean integration with Excel and other analytical tools that are cornerstones to treasury’s function.

Web services will provide the ultimate in information sharing on the Internet. Using a standard XML format and structure, web services enable different applications to talk to each other using the Internet as the delivery vehicle. Web services are platform- and application-independent and allow all applications relevant to treasury to seamlessly integrate and flow information on an as-needed basis. The end result is that treasury will have access to a wide array of information within a single connected treasury workbench. Data will be transformed into meaningful treasury intelligence.

With the expansion of information sharing within the treasury workbench, technology will need to evolve to disseminate the information through different devices. In the last five years, there has been enormous growth in the availability, capability and capacity of the wireless communication infrastructure. Through digital and smart phones, and PDAs, people can now connect to the Internet without having to be physically wired. Today’s treasury workstations contain rich functionality that was primarily designed for laptops or PCs and it is not practical for a full treasury application to be run off of a small-screen PDA. In the future, the treasury workbench for the Web will be built with wireless in mind. Certain features, such as the dashboard, will be designed to display and operate on a PDA, and alerts for key triggers on market rates, payment approvals or other news events will be built-in with the expectation of being received and acted upon on a cell phone. The treasury team will not be constrained by wires or specific hardware to effectively manage their daily workflow.

Treasury workflow relies to a great extent on minute-by-minute communication and collaboration. Quick and efficient flow of information is what makes treasury such a strong fit for a Web solution. Treasuries have already seen the benefit of email communication and groupware built into the treasury workbench takes it to the next level. Groupware is software that enables individuals to share information and collaborate online. It exists today primarily in email applications with some additional features in office applications that allow users to track changes in documents. Next generation treasury management solutions will bring transparency and ease of use by designing into the system mechanisms for real-time, online, effective collaboration. Collaboration will be built in as a fundamental component of the workflow.

In the past decade, the Internet revolutionalized the way business is done. In the next decade, the evolution will continue, driven by the need to bring greater value to the treasury professional. Current hurdles to acceptance will be addressed and technology such as web services, wireless and groupware will result in a truly connected treasury that removes silos between functions and information, and launches treasury onto centre stage as a strategic partner to the business. The ultimate treasury workbench will be an integrated information and workflow solution, enabling business professionals to make better decisions faster. It will achieve the effective combination of comprehensive market intelligence coupled with end-to-end workflow support for front, back and middle office delivered through a single integrated portal, and accessed through the most applicable device for the task at hand. The Internet, with its ability to facilitate integration and accelerate information sharing and collaboration is a perfect vehicle for treasury to truly drive hard-dollar business benefits. With the treasury workbench on the Web, the evolution will be complete: Anywhere, Anytime and Anyhow.

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