Liquidity management has been undergoing a transformation in recent years. The emergence of new technology, increased data and interconnectivity has made real time and API (application programme interface) solutions increasingly attractive. Banks and fintechs alike are partnering up to develop new tools to meet the needs of their customers, resulting in a changing landscape of liquidity management tools and systems.
Nordea’s Liquidity Management team set out to gain an understanding of how changes in future demand might look and what this would mean for the optimal liquidity management structure in 3 to 5 years. Through a combination of thematic analysis, interviews, market research and a close study of Nordea’s Treasury 2025 report, the team reached a number of conclusions related to future key drivers for liquidity management practices.
Birgitte Hoff, Product Manager, Liquidity Management & Corporate Channels at Nordea, says: “In order to gain an understanding of how things might develop in the future, we needed to assess the triggers that would have a big impact on changes in future demand. These included aspects such as how an improved cash liquidity overview can take a business forward, the state of real-time around the world, the impact of currency volatility on liquidity management and how solutions can drive operational efficiency. Some of our most extensive discussions were around the use of software tools, APIs, cloud services and artificial intelligence. We believe that many of these triggers have a huge impact on a company’s ability to gain a full overview of their available cash and to influence how they control and monitor it.”
As a bank our goal is to stay relevant with the solutions we offer so that we can support companies with their banking needs and thereby allowing them to focus on their core business.
Sirpa Toivio, Product Manager, Liquidity Management & Corporate Channels at Nordea, says: “Our findings showed that all of the possible future developments we uncovered were heading towards enabling efficiency gains. Companies are looking to leverage tools and solutions that support them in becoming more efficient and making sure they have cash available when needed. As a bank our goal is to stay relevant with the solutions we offer so that we can support companies with their banking needs and thereby allowing them to focus on their core business.”
To ensure future readiness, treasury functions should continue the quest to find more efficient ways of working. Corporate treasuries need to choose from the new opportunities offered by Automation and processes, Realtime and Data together with new technologies. These elements provide the important ingredients a treasury department will need in order to be fit for the future.
Nordea’s study shows that automating and simplifying processes will be a key driver for any efficiency gains in liquidity management in the future, saving both time and costs. APIs are expected to play an increasing part in enabling data automation, improving processes and real-time capabilities. The adoption of robotics is also expected to increase, supporting further automisation in liquidity management processes.
Portals with self-service and analytical tools will become increasingly common and be provided either by banks, third parties or by partnerships. The increased availability of analytical tools for liquidity management is also expected to impact the role of treasury employees with an increased emphasis on data analysis and liquidity forecasting. Onboarding to these new tools and services will be improved by self-service, for example with digital sales and agreement journeys, which will allow services to be adopted faster.
Birgitte adds: “With the knowledge that we have now we think APIs will still be the new kid in town even in five years’ time. However, some companies have already proven the benefits of using APIs as the main channels for liquidity management integration, with data flowing between banks and ERP systems. Companies have a good opportunity for overcoming their liquidity pain points by understanding whether an API approach can meet some of their needs.”
Sirpa says: “If today a company is thinking about new connections or new ERP systems, they should definitely look into APIs as they will be a key infrastructure in the future. Bank services in the future will also be complimented by offerings from fintechs. In order to meet all of their efficiency goals, companies should expect to add on to or complement existing services to create a whole package that can combine to provide the optimal liquidity management set up.”
Companies have a good opportunity for overcoming their liquidity pain points by understanding whether an API approach can meet some of their needs.
The research also suggests companies can expect to see more opportunities for improving the visibility of cash in real time. In order to gain a full and up to date overview of their cash positions, liquidity management dashboards that bring simplified ways of providing an overview will be demanded. Some companies will expect dashboards to be provided by banks, others will tailor make their own solutions in-house, whilst some companies see the ERP system as the only interface to conduct their banking.
In the future, it is expected that companies will increase the demand for data in order to make more active and responsive decisions, even automating some of these decisions using rule-based or AI decision making tools. Banks will be able to support this need by providing tailored reporting such as liquidity forecasts. The use of artificial intelligence will enable data to be used and packaged in more comprehensive and specific ways.
Liquidity management structures that favour the concentration of cash will become more widespread. Companies will demand liquidity management services that ensure centralisation and the full availability of all cash. The use of cash pooling will continue as well as the creation of in-house banks that reduce the reliance on balance sheets. Zero balancing will stay as a solution in the near future and VAM (Virtual Account Management) is expected to grow as a service in the Nordics.
Birgitte says: “Many large corporates already have really fantastic liquidity management solutions in place today. We see that there are many more mid-sized corporates that will go out and implement simple in-house banks and centralise their liquidity operations as they haven’t fully entered the efficiency journey yet. Standardisation initiatives such as P27 in the Nordics will pave the way for further centralisation of execution processes, both cross border or across the corporate segregation of funds. This is where virtual accounts can be a very useful tool.”
The research also showed that digitalisation will undoubtedly affect the shape of liquidity management in years to come. Faster access to data will support improved operational and strategic decision making.
Industry 4.0 and data interconnectivity offered by the Internet of Things will lead to business model transformation in the way products and services are produced and delivered. In the future, it is expected that almost all processes will be digitised, modernised and in some cases totally transformed, in order to free up more time for value-adding services.
The shift to a fully automated treasury and real-time liquidity and risk management set up will progress differently across industries and companies. The findings suggest the growth of e-commerce will also support the shift towards more automated and efficient processes. Treasuries that embrace the changes being brought about by fast-moving technological developments will both excel and play a more strategic role in their businesses.
In summary, Nordea’s study into the future of liquidity management suggests a number of overall developments to be expected in the next 3 to 5 years. These include the ability of banks to respond to changing demands by offering services that are flexible and fast and easily accessible via simplified onboarding processes. Liquidity management tools and solutions offered by banks will also be complemented by third party offerings. Subsequently, companies will expect that bank services enable fully automated liquidity management processes.
Companies need to explore, be curious and continue to discover the solutions that best fit their needs. Uncovering where the next efficiency gains can be found will support their core business and create even greater value.
In 3 to 5 years, companies will demand an easy overview of their global liquidity situation in real time. More mid-size corporates will have implemented simple in-house banks and centralised their liquidity. Further centralisation of Payments and Collections and the segregation of funds will be implemented. APIs will still be regarded as a relatively new tool but an increasing number of companies will have adopted APIs as their primary channel for enabling liquidity management integration. The collection of high quality data will be automised and offered by banks to companies for a number of specific reporting purposes.
Birgitte concludes: “Our research shows that liquidity management set ups in the next 3 to 5 years should be highly focused on efficiency, cash visibility and making sure there is clear control of cash. Companies need to explore, be curious and continue to discover the solutions that best fit their needs. Uncovering where the next efficiency gains can be found will support their core business and create even greater value. While real-time is already here in some areas of the Treasury, the ongoing developments in this space will ensure that a real time, complete and easy overview of liquidity is something that all businesses will expect to have in five years’ time.”
We can see that efficiency will be the largest driver in the future and controlling cash through liquidity management will continue to be of critical importance as many opportunities arise.
Sirpa concludes: “No two companies are the same so there will be no one size fits all model for liquidity management. Companies will need to select the tools that best match their strategic ambitions. Companies need to ask what is it that they want to be in control of? Then they need to go out and choose. It might be that their bank has partnered with a fintech to provide a solution that is really relevant. As a bank, we need to have services that are flexible because our customers are all unique and the services need to be faster, accessible, and easy to onboard. We can see that efficiency will be the largest driver in the future and controlling cash through liquidity management will continue to be of critical importance as many opportunities arise.”
For more information on Nordea’s view on the future of liquidity management, write to Birgitte at birgitte.hoff [at] nordea.com (birgitte[dot]hoff[at]nordea[dot]com) or Sirpa at sirpa.toivio [at] nordea.com (sirpa[dot]toivio[at]nordea[dot]com).