“I can’t remember a time when I’ve seen treasury functions growing from a staffing perspective,” Rick Burke, head of corporate products at TD Bank, told GTNews in a recent interview.
“But, almost consistently, I have seen more and more being asked of treasurers strategically,” he added. This explains why automation and robotics are reliably listed as top treasury interests and concerns worldwide.
Burke also argued that TD Bank’s treasury clients are less interested in faster payments than they are in real-time payments.
“We are finding faster payments is not the number one issue for commercial entities, not that they are not interested but the commercial space is a lot more buttoned down,” said Burke.
“Treasurers are anxious about where they will get the bandwidth and the investment to make these changes when typically, most finance departments in the commercial space are seen as overhead costs”
“As treasuries need to reconcile payments and keep an auditable set of books in order to pay taxes effectively, there are plenty systems embedded in companies of all sizes that have been around for a long time.
“Treasurers are anxious about where they will get the bandwidth and the investment to make these changes when typically, most finance departments in the commercial space are seen as overhead costs,” explained Burke.
With regards to cross-border payments, the slow down is regulatory rather than technical.
“One of the biggest issues is the regulatory regimes that exist around cross-border payments is the management of issues such as sanctions, terrorist financing and screenings,” argued Burke.
“Governments need to come to together to talk about how to make the cross-border payments process easier from a regulatory perspective. This would, in turn, make financial institutions around the world more ready and open to transact across borders,” he said.
Dreading higher interest rates?
While many of their European counterparts are losing sleep about having trapped cash in a low-interest rate environment, many US treasurers are preparing to experience the most significant rate hike in about 15 years.
Given that interest rates have risen and inflation has not really followed suit, Burke questions whether there is now a market expectation, or potentially a desire, to be a lower interest rate environment.
Despite US interest rates rising from historic lows to what some may view as near-normal levels, the changing workforce demographic makes it more of an issue.
Over 50% of the US workforce is now made up of millennials, meaning many younger treasurers have never operated in a high interest rate environment.
Burke told GTNews: “I don’t think higher or lower interest rates is what matters to treasurers. It is the potential for change.”
Treasurers have policies that support a low interest rate environment and have migrated to working principles of safety and soundness, knowing there isn’t much to be gained by taking financial risks, explains Burke.
“If, in the short term, rates rise to 2.5-3% treasurers will have to do things differently to what they have done for the last ten years,” he added.
While a high interest rate environment allows for treasurers to make higher returns on their investment portfolios, the concurrently may have concerns about what this means for their mortgage and loaning a car.
“There is also a concern that if rates rise it will put the breaks on the high level of leasing and lending that is being seen in the US and UK,” said Burke.
“Will a rise in rates shut that off and lead to a recession? It has been too long to call it a double dip but nobody wants to go back in the other direction,” he added.