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New dimensions from real-time corporate treasury

Real-time is coming in many different aspects of our lives. Our expectations in our business and our private lives are changing: we want it now, not in a few hours or days; we expect to know where a package or a payment is at all moments; we expect full information on the good or payment. It is no surprise that the SWIFT global payments initiative is and will be a huge success, but why did it take so long to come about? How could the banks and SWIFT ignore what was happening in the rest of the business and consumer world for so long?

Deutsche Bank’s mission

Deutsche Bank global cash management and transaction banking group are clearly determined to prepare their corporate treasury customers for the move to real-time systems and processes in the many different dimensions of corporate treasury. The recent Deutsche Bank discussion paper “The road to real-time treasury” is a tour-de-force on what is happening and what could happen with contributions from two leading corporate treasurers and several key Deutsche Bank cash management staff. 

Their premise is that, “As instant payments schemes continue to roll out across the world, this not only impacts B2C companies, but also has a knock-on effect on the full value chain of globally connected corporates.” Indeed, Shahrockh Moinian, Head of Cash Products, believes that the move by corporate treasury departments from batch and daily processes to more real-time systems is set to accelerate. 

Key areas and benefits

As expected the paper covers the developments in these areas in the road to real-time corporate treasury and the main benefits:

  • Instant and real-time payments:
  • Open banking and APIs
  • Real-time liquidity
  • Real-time FX management
  • Robotic process automation and artificial intelligence.

Each section is followed by mini-case studies of the impact of moving to real-time processes and systems.

The main benefits and tasks identified included:

  • Instant payments: 
    • the value proposition is becoming more compelling as the value limits on instant payment initiatives increase, and the potential liquidity and risk benefits of real-time payments and collections become clearer 
    • the ability to make payments instantly reduces friction in payment processes by eliminating the concept of cut-off times and the need to build clearing time into payment schedules
    • supplier reach improved: companies can use real-time payments to access a wider supplier base without incurring additional supplier risk through digital ‘cash on delivery’ 
    • customer service: companies can provide a more responsive service to customers – including faster refunds, incentive payments or insurance pay-outs
    • reducing debtors and enhancing working capital
  • Open banking and APIs
    • new ways of initiating payments
    • innovative ways of accessing balance and transaction data through a single channel, and in a single format, which can be integrated more seamlessly with internal systems for cash and liquidity management and account reconciliation.
  • Real-time liquidity
    • intra-day cash pooling is now possible as case study on Deutsche Post shows
    • instant cash concentration through virtual accounts
    • real-time in-house-bank accounting and reporting
  • Real-time FX management
    • the value of real-time payments, collections and liquidity management will be limited unless foreign exchange exposures can also be managed in real time, through real-time currency conversion.
    • to take full advantage of this, Deutsche Bank believe that, treasurers must ensure their internal booking, sales and ERP systems register exposures as quickly as possible (preferably as soon as they are generated) and then feed this information as quickly as possible into their bank’s FX risk management platform.
  • Robotic process automation and Artificial Intelligenc
    • real-time payments and APIs create the “mechanics” behind real-time treasury processes. However, treasury does not add value simply by processing transactions, but rather by using robotic process automation and artificial intelligence to analyse situations and making decisions to optimise liquidity and risk management, and by supporting business strategy. Use cases presented in:
      • receivables management
      • accounts payable
      • cash flow forecasting.

Realising real-time corporate treasury 

Undeniably real-time processes and systems are coming in corporate treasury and that many of the building blocks are already in place and in use. Deutsche Bank believe that most corporate treasury departments will “inevitably, incrementally, be forced to operate in real time.” The report finishes with this diagram Assessing the benefits of a real-time treasury:

Source & copyright: Deutsche Bank

CTMfile take: This is an important paper, worth a download and a detailed read. Then, we are sure that there will be many questions you will want to ask Deutsche Bank.  

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This item appears in the following sections:
Best Practices & Benchmarking
Cash Concentration
Liquidity Risk Management
Buying & Selling FX
FX Settlement
International Payments
Urgent/Instant .Payments

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