When the financial crisis hit in 2008 and banks began to fail, business leaders looked to their corporate treasury organization to provide an instant picture of their exposure and risk. But that visibility into cash positions was difficult to produce without a complete and overarching view of the financial supply chain. Each banking partner held that information in a different format or tracked it in different ways.
But treasurers don’t simply want better, more consolidated data feeds from their banks; they also want help making sense of it all. According to an SAP/CFO Research survey, corporate treasurers said that they are looking for more consultative services from their banks – a true partner rather than an efficient payment processor.
But banks have the same problem as treasury departments. They can’t see across customers’ financial supply chain, nor can they see adequately across their own customer bases. No bank has been able to afford to scrap their singular connections and build the kind of common infrastructure necessary to gain the appropriate level of insight that would enable them to offer higher-value advisory services.
If a new type of information marketplace were established between all of the banks and all of the corporate treasurers, however, banks could not only receive and send financial related messages and automate key processes on a common platform, they also could take advantage of that platform to build services based upon that underlying network of information. Banks could take a page from consumer technology and introduce more advanced offerings via an app store for corporate treasurers, such as:
- Foreign Exchange Apps
A corporate treasurer may need to understand her global positions across all subsidiaries around the world relative to foreign exchange rules that dictate how big a position the company can have in each country. A bank could use its own intelligence around currency regulations and foreign exchange volatility to help proactively determine what size position the corporate should have within a given subsidiary and walk the client through the cash pooling or movement of foreign exchange cash between different countries required for compliance.
- Reconciliation Apps
Only about half the actual cash that’s received by corporate treasury in a given day is actually applied where it’s supposed to on that day. Banks could provide a reconciliation application to take the tremendous costs out of reconciling cash in with cash out.
- Supply Chain Finance Apps
Once a bank can see a client’s invoices and purchase orders, it can forecast future cash flows and offer credit extensions against them.
- Risk Reporting Apps
Banks could offer real-time volatility risk reporting against the current cash exposure in a country. Aggregating that data over time could be used to offer customers an accurate early-warning system for risk exposure.
- Counter-Party Risk Apps
Banks could build detailed data services on credit or suppliers. Develop dashboards with views of the signals and metrics that matter most.
The time is right. Nearly half of finance executives surveyed that they will definitely (48 percent) or potentially (43 percent) upgrade the technology their companies use to support banking relationships, risk management, and treasury activities. Corporate treasury apps would enable banks to better differentiate themselves by focusing on the real business of corporate banking services. And those services will prove more profitable than the low-margin but steady payment processing business. In fact, there could come a time when banks lead with such services and sell them even to corporate treasurers that don’t – and may never – conduct any transactional banking with them at all.
Would an app store for treasury make sense for your bank?
Leonard Schwartz –Director of Solution Management for SAP Financial Services Network – and Rob Grimes -Solution Manager at SAP Labs