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Western EuropeAugust 3 2022

Cash management complexity brings banks and fintechs together

Using technology, banks and fintechs vitally must co-operate to ensure accurate cash-flow forecasts. Heather McKenzie reports.
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Cash management complexity brings banks and fintechs together

In the turmoil that characterises current global energy markets, the ability to forecast cash flows accurately is becoming crucial. Speaking at an Aite-Novarica treasury council roundtable, Ivan de Crescenzo, financial analyst at Italian energy utility Tirreno Power, said the company’s treasury is focused on attaining tools to improve forecasting and give a better outlook on “how the numbers will move”.

“Gas prices are skyrocketing and while we have tools for cash prediction, it is time for us to invest even more in machine learning and other technologies that will give us more sophisticated features,” he said. “The market is so complex now and that is why we must prioritise forecasting.”

Liba Saiovici, global receivables product executive at Bank of America (BofA), said cash-flow forecasting is a priority for many corporates across industry sectors. “Corporate treasuries can be very sophisticated in many ways, but there are still those that are using very basic techniques, such as spreadsheets, to do forecasting,” she said. “With technologies such as machine learning and artificial intelligence, there are now better tools for corporates for cash-flow forecasting.”

Banks and fintechs unite

Much of the discussion during the roundtable was about how banks and fintechs are collaborating to develop cash management and payments solutions. 

“Banks are working more with fintechs to extend reach and enable us to focus on our core services,” said Ms Saiovici. Fintechs provide the “bells and whistles” to bank clients, she added. “Our clients don’t really care how the products are put together, as long as they get functionality without having to interface to many different providers.” 

Mr Crescenzo voiced some concerns about how products were developed, however. “Machine learning will be very useful, but I sometimes fear that fintech companies and banks might produce a black box product. In corporate treasury, we need to know the [algorithms] that are included and how the system works. I feel that this control might slide out of our hands when it comes to machine learning-based forecasting solutions,” he said.

APIs – a powerful tool

The roundtable participants – a mix of corporate treasury and bank representatives – were asked to rank their top three cash management priorities. The foremost priority was shared by real-time payments and liquidity management (45%), with application programming interface (API)-based apps cited by 41% of those present.

Ms Saiovici observed that APIs, which act as bridges between pieces of software, are an “interrelated issue” for cash forecasting, as they are a way for corporate treasurers to gain real-time information on accounts and balances, thus enabling better forecasting. She said: “The objective for treasurers in cash forecasting is to gain better visibility on all of their accounts. APIs, real-time payments and liquidity management are all enablers to improve cash flow forecasting.”

BofA has seen an increasing number of clients using API-based solutions for account visibility and reporting, she added.

APIs, real-time payments and liquidity management are all enablers to improve cash flow forecasting

Liba Saiovici

Rahul Wadhavkar, assistant vice-president and head of product management, North America at technology vendor Infosys, said APIs enable banks to integrate their products quickly with those of fintechs. “If I spoke to a bank 10 years ago, its default position was to develop cash management and payments products itself,” he said. “APIs have led to a shift in this process and banks now go out looking for tech partners to help them solve a particular functionality problem.”

Attila Csutak, vice-president, faster payments at City National Bank in Los Angeles, said real-time payments addressed many of the gaps that corporate treasurers were dealing with in forecasting and liquidity management. “Real-time payments business will gain more interest in the US, as people learn about this payment rail. In turn, that will benefit treasurers by improving cash forecasting and liquidity management on a day-to-day basis,” he said.

Digitise or die

For Mr Crescenzo, an overriding theme in treasury is digitisation. On January 1, 2022, the electronic invoicing laws in Italy were extended to include certain business-to-business cross-border transactions. Under the new rules, Italian entities will have to report details of transactions to the Italian tax authority under the same rules and processes that apply to mandatory e-invoicing between parties both established in Italy.

Digitisation is “increasingly crucial” to meet the requirements of the new regulations. Corporates must receive digital documents from banks, he said, not least because this makes life in the treasury much easier, particularly with regard to reporting. “To be blunt, I would actually ditch a bank if it was unable to digitise documents for the accounts that we have with them,” he said.

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