Treasury tech: the innovation game

Intensifying regulation post-2008 financial crisis, growing expectations from customers and the accelerating pace of business globally means treasury departments have never been under greater pressure than they are today. Cloud, robotics, automation and blockchain are just some of the technologies that promise to answer the increasingly complex demands. However, that very complexity means that the …

November 16, 2016 | bobsguide

Intensifying regulation post-2008 financial crisis, growing expectations from customers and the accelerating pace of business globally means treasury departments have never been under greater pressure than they are today.

Cloud, robotics, automation and blockchain are just some of the technologies that promise to answer the increasingly complex demands. However, that very complexity means that the evolution of the way money moves through treasury departments is ultimately a gradual, incremental process – not without significant challenges and inherent risks.

Here, we take a look at where treasury fits into the broader sweep of financial services evolution, explore some of the biggest opportunities for tech to transform processes for treasurers and identify the hurdles of innovating in the space.

Innovation games

So how are established players reacting to these changing demands?

Citi director of global commercial cards, Morgan Salmon, told us that banking giants are developing more dynamic solutions to traditional product sets in reaction to new approaches to treasury processes and the emergence of new fintech startups.

For example, a growing focus on bringing payment efficiencies to treasury, plus the increased demand for real-time speed, is creating an opportunity for technology to create better solutions for customers.

He also highlights technology’s ability to create more nuanced segmentation of payees. For example, a large oil company doesn’t need the same level of scrutiny and controls when buying a multi-million-pound new rig as it does when it’s buying stationery.

Most of the systems used historically had just one level of control,” says Salmon. “Now we are starting to see an unpicking of the process in making payments and – in the unpicking – there is an increased need for tech to provide efficiency with the same level of control.”

Coming to work at the bank after the payments startup he was working at was acquired by Citi, he remains plugged into the startup ecosystem, previously mentoring at London fintech accelerator Startupbootcamp Fintech and startup hub Level39. He is also involved in Citi’s innovation labs and D10x programme through which the bank aims to build, fund and eventually implement new products.

Innovation in the time of regulatory change

One highly-touted area we can see innovation in the wider financial tech aimed at making treasury management easier, more efficient and more transparent is around regulation.

New legislation including Basel III and Dodd Frank were brought in to pull the financial services industry into line after the global financial crisis, but this equated to mounting pressure on treasury departments to make sure they are compliant.

Enter a strain of financial tech startups currently picking up a lot of attention: “reg tech”. This refers to technology that is designed to help banks and other financial institutions (FIs) comply with the increasingly complex regulation of their sector and which has been dubbed “the new fintech” by Deloitte, as well as being named by the UK government as a key focus of investment last year.

Like any catchy umbrella term, ‘reg tech’ actually incorporates a myriad of different services. In a report from Deloitte, one of those areas is described as including legislation and regulation gap analysis tools: as in helping FIs to identify the areas of their business that are not compliant.

Related to that are the health check tools: keeping track across the multiple systems inside an FI on a regular basis, while others include regulatory reporting tools, activity monitoring tools and risk data warehouses. As these examples highlight, a lot of the need that reg-tech answers is related to automation and crunching/storing/capturing and processing data that these FIs need to be able to produce.

Many treasury tasks are by their nature complex, but could a combination of machine learning and robotic automation help make some of the more repetitive aspects more efficient?

In a report published at the beginning of the year, Deloitte identified robotics as one of the core tech trends that could impact treasury.

“We have already seen the development of algorithmic trading in other markets and therefore we believe that in the near future the same technology could be used to do dealing on behalf of a company. With the exposures being inputted into the system and the treasury policies being stored in the system, the proposed deals could be automatically sent to the dealing platform for execution.

“Whilst improvements have been made in automating interfaces with banks and market data sources, in the future we would expect to see the straight through processing of exposure capture, confirmations and accounting to name a few.”


Meanwhile, these days no conversation about the future of financial services is complete with blockchain.

Blockchain must be one of the most talked about yet least well-understood concepts to enter finance in recent times.

That was illustrated at a Q&A during The Europas startup conference in London earlier this year, where the participants on a panel dedicated to blockchain panel flipped the format and asked the audience to ask questions at the beginning of the session – then tailored their talk to answer the range of understanding. That range was huge – with some attendees asking very niche technical questions while others simply wanted to know ‘what is blockchain?’.

That’s true in the wider global financial industry, which now appears to be separating into two camps: those that are trying to understand what blockchain could mean for their business and those that are not.

More than a third of financial services organisations globally do not know what blockchain is while two thirds of those familiar with the technology believe it’s the biggest technological innovation since the internet for finance, according to research earlier this year by Pegasystems and Cognizant, undertaken by Marketforce.

“For many, the jury is still out on whether or not blockchain will be a force for good or not,” says Pegasystems director and industry principal of financial services Graham Lloyd. However, we do know there’s no longer room to be complacent about such a potentially significant source of disruption.

“Banks and insurers must prepare themselves for the day when they might have to manage blockchain-stored customer data – whether it be their personal information, details of their assets, or even real-time data from virtual currencies.”

He warns that financial institutions need to be prepared to handle blockchain data belonging to their customers in the future or risk getting left behind. That view was iterated at GTNews Treasury Innovation Forum earlier this year.

Blockchain has huge potential in a wide range of industries,” said Dr Catherine Mulligan, associate director at London’s Imperial College Centre for Cryptocurrency Research and Engineering.

We advise companies that they should assess it – without necessarily recommending that they use it.”

Challenges of innovation

So what are the main challenges for startups looking to make inroads into this space? We spoke to head business development at treasury startup Huub Wevers for some insight. He said the firm and others in its space are targeting CFOs and treasurers, but change can be slow.

He says these are very busy people, engaged in a multitude of tasks, many of which are operational, high-frequency and ongoing from day to day. WalletSizing’s product requires the ability and willingness to take one or two steps back from this daily routine in order to initiate a strategic review on existing routines in bank relationships.

“This is potentially disruptive and sometimes seen as a huge project,” says Wevers. “It usually isn’t, but that only becomes apparent once one it’s actually underway. So the challenge is actually mostly to take the first actual step. Once it’s going, the on-going maintenance, reporting, transparency and control achieved ensure significant and sustainable year-on-year benefits.”

Another challenge is simply the high risk of experimentation when it comes to finance. Earlier this year the UK’s Financial Conduct Authority opened its regulatory sandbox to provide a “safe place” for fintech companies to test services and business models before being offered to the consumer without having to worry about regulation.

The thinking behind the sandbox is that fintech startups should have the opportunity to test new ideas, even if what they’re trying to build does not fit within existing rules, which FCA director of strategy and competition Christopher Woolard said earlier this year often pre-date smartphones, let alone emerging technologies like biometric authentication.

The very nature of disruption and innovation means this is likely to be the case with what startups are trying to build and not just in finance. While Airbnb or Uber’s approach of ‘asking forgiveness, not permission’ seems to have worked in the rental and transport spaces, fintech startups typically can’t afford to take such big risks with the law.

The future’s streamlined

Ultimately, the potential for emerging tech and new approaches has the potential to transform treasury processes. The reality is that change is slow.

The disruption of financial services by technology isn’t happening in one sweep, it’s happening through a succession of smaller shifts, moving at different speeds from industry to industry, segment to segment and geography to geography, across the many different areas that ‘financial services’ includes. In treasury there are increasing signs of change, albeit it at a slower pace than more mature verticals.

That said, the scope for new approaches to streamline, plus bring more efficiency, transparency and speed to treasury makes this one of the most exciting sectors to watch in financial technology right now.

By Sarah Gill.



Banks have real opportunity in FX hedging for SMEs

Other | Banking Banks have real opportunity in FX hedging for SMEs

GFT are finalists in two categories for the Cloud Excellence Awards 2022

Other | Banking GFT are finalists in two categories for the Cloud Excellence Awards 2022

LexisNexis® Risk Solutions
How Does NXTsoft OmniConnect Work for Partners?

Video | Banking How Does NXTsoft OmniConnect Work for Partners?

Castlepoint Systems pioneers world-first regulation technology solution

Case Study | Banking Castlepoint Systems pioneers world-first regulation technology solution