How treasuries can capitalise on the opportunities of digitalisation

The importance of digitalisation

Technologies like machine learning and automation, increased use of APIs and even the Internet of Things are enabling new tools for treasuries in the changing financial landscape. They’re helping treasuries to streamline internal processes, speed up reconciliation, derive greater financial insights, improve cash forecasting and automate back-office work.

As Head of Strategic Partnerships and Open Banking Partners at Nordea, Sofia Ericsson Holm has spoken to many companies that are in the process of digitalisation. “The treasurers I’ve spoken to want better control, improved visibility and greater efficiency,” says Sofia Ericsson Holm. “They want to avoid having to check figures in Excel and remove the need for manual processes. So they’re turning to technology.”

Many treasuries are also interested in the benefits of application programming interfaces (APIs) that enable open banking. Payment Services Directive (PSD2) is a step towards making banking data more accessible in a secure way. But as the scope of open banking expands, new solutions should begin to appear that go far beyond this. These are likely to include new financial tools for treasuries that bring real-time functionality and greatly enhanced cash visibility.

Tips for a successful transition

As with any major transition, the process of digitalisation can bring risks. But treasuries can minimise any potential disruption. This will involve finding new ways of managing and ensuring the quality of data, especially as it increasingly informs strategic decisions. And it may require working with partners, vendors and your bank to deliver the best outcomes. Here are our recommendations for a smooth transition.

Do your homework

New technologies can increase visibility, save time and automate processes, and give your treasury a clearer view of all your organisation’s cashflows. To get the best results, it’s important to consider what your treasury actually needs, rather than going for the biggest or newest solution.

Holm says that treasuries should be vigilant when investing in new finance tools or systems like treasury dashboards. “Always do your homework first. If you’re looking to transition to a new treasury dashboard, make sure you have a clear objective in mind,” she says. “You need to be sure that it has the right system integration and data capabilities to meet your strategic goals.”

It can help to have a strategic discussion with your bank to define your treasury’s pain points — and ask how it can support you. “Many treasuries don’t need a full Treasury Management System (TMS) with all the bells and whistles,” says Holm. “You can get a lot of these solutions from your bank.”

Third-party suppliers may have strong offerings; but again, the planning stage is crucial. You might meet a lot of technology vendors that are offering new and exciting solutions, but that doesn’t necessarily mean they’re right for your business. “It’s not about finding great technology and then deciding how to use that in-house,” adds Holm. “Know exactly what you’re looking for first — always start with the problem, not the solution.”

Build effective technology partnerships

Once you understand the problems you need to solve, be honest with any potential suppliers or partners about your requirements. And do your due diligence about what they can realistically provide. “Ask them for references and case studies of similar work they’ve done,” advises Holm. “Enquire about the onboarding process and how long it takes them to get their clients up and running.”

It’s also a good idea to consider your future needs, and how much agility you need in a partner. “Always look to the future; not just overcoming immediate problems,” says Holm. “If your treasury goes through changes, will the partner’s system be agile, modular and flexible enough to support you? Customisation and necessary adaptations can be surprisingly expensive and time consuming, especially in less modern systems.”

Many treasuries choose to work with partners of varying sizes. And each type of partnership can yield different benefits. “It’s important for large corporates that they have the skills to work with a range of partners, including smaller start-ups and scale-ups,” says Holm. “This can really help you get the most from new technology.”

For example, fintechs are agile and innovative. They don’t have legacy issues, and can offer very effective niche products for specific solutions. But treasuries with more complex challenges may prefer to work with a scale-up of a similar size to their own. “It’s a lot like a hiring process,” explains Holm. “Look for the candidate with the right qualities and solutions, rather than judging them on external appearances.”

Review your own cybersecurity practices

Part of selecting a partner should be an audit of cybersecurity measures. Your cybersecurity might be up to scratch, but what about that of your vendors and the partners you’re working with? Check they’re following the same guidelines as you and make sure your security objectives are aligned.

Of course, you should also look within your own treasury. There are a lot of simple things you can do to improve your cybersecurity and data protection. Implement robust data privacy and segregation policies, especially when using APIs. Make sure all treasury employees understand these policies and the importance of following them — and refresh their knowledge with regular training sessions and workshops. If your business doesn’t have one already, suggest an Information Security Management System (ISMS) to formalise your security rules and processes.

What’s next?

There’s always a certain level of risk in digitalisation, but by planning carefully, understanding your own needs and choosing the right partners, treasuries can smooth the transition. And in the future, it’s possible that new forms of insurance will become available for companies looking to innovate heavily. For example, cyber insurance and M&A insurance weren’t common solutions 15 years ago, but now they’re gaining traction. It’s possible that we’ll see new types of insurance emerging to protect companies on their digital transformation journeys.

“When it comes to digitalisation, you might not be making a conscious decision to stand still. But you still have to live with the consequences of inaction,” says Holm. “It’s important that treasuries and corporates push forward. Seize the opportunities presented by new technologies — because if you don’t, other companies will.”