Instant Treasury via data standardisation and open banking set to free up liquidity, cut financing costs

Instant treasury is poised not only to improve efficiency and help create a more strategic treasury function, but also provide monetary benefits and cut down financing costs.

“A continuous real-time view [on] our cash position helps us to meet not just [our] daily but also our liquidity management demands,” said Sharon Wang, treasury director at Alibaba during a Sibos 2021 panel on Thursday.

“Credit limits can be freed up more quickly […] enabling more business without adding risk.”

She added that Alibaba earned an extra $29mil in interest income by keeping buffer balances to a minimum.

“By using the cash received within the same day [corporates] can reduce overdrafts or bank loans – in other words, financing costs.”

As part of the digitalisation and automation journey, treasury departments should take a gradual approach to gauge how those initiatives affect the function more holistically.

“I encourage companies when they’re thinking about their treasury processes to make small steps in the right direction, but always consider the entire ecosystem”, said Lori Schwartz, global head of liquidly at JPMorgan.

“It’s one thing to receive the payment transaction information, [but] the next question is: how quickly are you applying that?”

Wang said a combination of robotic process automation, API implementation from Swift gpi and AI chatbots has allowed Alibaba’s 11-people payments team to process 17,000 outgoing payments a day.

“The chat bot will provide real-time information of the underlying payment status from the payment instruction received by bank, to payment process, and to the payments credit into the beneficiary’s account.”

“We are also enriching this function by enabling automated-payments lead generation, upon request.”

Firms will be gauged by their commitment to joint standards and open banking

As an instant treasury function becomes more of a reality, standardisation of data inputs and outputs will be key in enabling real-time visibility for corporates with global footprints.

“Standardisation is important. A body like Swift could really help [in developing] a single way of connecting with all the banks,” said Anita Mehra, corporate vice president of global treasury and financial services at Microsoft.

Banks themselves have acknowledged it’s no longer feasible or desirable to tie corporates to one bank.

“The times of making it difficult to work with other banks – those times are over,” said Christof Hofmann, head of corporate and payments solutions at Deutsche Bank.

“Clearly you must embrace multi banking, you must embrace joint standards and you must convince clients by the solutions you offer and not by how much you try to tie them to you.”

Banks therefore need to transition away from being merely a banking provider to being a banking partner, said Schwartz.

“I can’t help but re-emphasize how important it is to consider the partner you’re working with. Open banking has created a lot of opportunities and a catalyst. But there’s also going to be value-added services. I think banks have a really important role to play within that.”

However, while open banking is providing a greater degree of flexibility to corporates, they do not need to embrace all new offerings. One example is request-to-pay – or request-for-payments in the US. Though growing in B2C and SME payments, corporates have been slower to adopt it.

“Many corporates want to be in charge of their own payment runs. They don’t want payments to be initiated by a third party,” said Hofmann.

Wang agreed, saying the benefits of request-to-pay are somewhat one-sided.

“If you are the beneficiary, you would like to request for this service because you can master your cash flow and reduce customer risk. On the other hand, if you are the payer, you don’t welcome it as it’s not initialed by you, it’s someone else. You may also have some issues in reconciliation.”

For the most part, in jurisdictions where request-to-pay is available, Alibaba has disabled it. Wang added that request-to-pay requires a level of mutual trust between yourself and the client.

“We do not welcome [request-to-pay] unless we have a mutual trust with our clients.”

“It really depends on how you and your customers or your vendors position yourself in the relationship when you’re doing business with each other.”