Building a Digital Treasury

Adopting new technologies for the treasury and banking industries is rapidly accelerating. Treasurers and other accounting professionals view processes such as gathering currencies, aggregating daily balances, and printing checks to become obsolete.

In much the same way technology is progressing in every other part of our lives, the same is happening within the treasury sector. As a result, many technologies used consistently in other industries are also finding their way into forward-thinking treasury services providers.

What is a digital treasury?

Digital treasury is a method of providing real-time transparency of an organization’s books by providing seamless integration of reporting, compliance, balances, and virtually any need instantly. The benefits of digital treasury are vast, including:

  • Using virtual banking to streamline many administrative processes, such as adding or deleting signers.
  • Gain/loss reconciliation with hedge accounting software to analyze balance sheets without manually combing through data.
  • Reporting and managing foreign currency exposure.
  • Cloud-based regulatory solutions to make sure you are always in compliance.
  • An ability to do more with fewer resources

Avoid these digital treasury pitfalls

Of course, any automation with substantial benefits will have some initial challenges. At the moment, this includes issues that come with a diverse array of solutions. There is currently no all-in-one solution for digital treasury, with each solution working differently.

However, it is still possible to integrate some of the best of several systems. Also, for many organizations, functionality should be a priority. 

When examining trade-offs, it helps to integrate best-of-breed solutions. Therefore, you can get the best of each niche function while maintaining a degree of ease of use.

What some may see as compromise others see as optimizing process compliance and reporting. Suppose one vendor is better at derivative accounting, while another offers expertise in cash management. As a result, consolidation is naturally the best solution if both are crucial for your organization.

Frequently, treasuries offer an excellent connection of solutions when taken process-by-process rather than the all-in-one method. Integrating several technologies depending on exact needs can be a better option for many businesses. 

Just about every industry across the globe is taking advantage of multiple digital improvements to drive growth. Customer expectations and needs will continue to expect digital solutions to solve their questions and issues.

The need for a digital all-in-one solution is more critical now than ever before. Worldwide, treasurers are seeking out better and better solutions to their digital treasury needs. This continued desire to improve is driving Treasury 4.0. Treasury 4.0 seeks to optimize as many vital functions as possible such as standardizing payments, mitigation risk, and visibility to global cash, among other things. 

While there are solutions for pretty much every issue you can come up with, there is a constant struggle to stay ahead of new technologies and needs such as AI and blockchain. Finding superior solutions and separating them from hype and marketing is a daunting task.

The goal of Treasury 4.0 is to provide better support and enable organizations to have an immediate impact on treasury management while also staying on the cutting edge of new developments. While digital treasury solutions are not necessary for business, you can be confident that day where it is no longer optional will come to an end. Soon, only treasuries that embrace Treasury 4.0 can claim industry leadership.

Take note of three major challenges facing treasuries

Bank treasuries often have issues effectively managing their responsibilities due to low digitization. There are three critical issues of note:

  1.   Legacy tools: While treasuries play a critical role in helping banks maintain a stable net interest income. Most current tools lack the necessary analytics and simulation resources to be effective. Inadequate working model tools and an inability to process information without a definite structure from either internal or external sources make it difficult to manage long-term funding.
  2.   Siloed IT Infrastructure: You can waste a lot of time and resources having to move from one system to another. Toggling between multiple systems causes a loss of time and money. The lack of an ability to forecast cash reserves or overall valuation thanks to a lack of integration is an ongoing issue. Data reconciliation errors can cause significant risks.
  3.   Visibility issues: Inaccurate data and holes can cause delays and even flat out wrong numbers without substantial time spent double-checking the data for flaws.

Build a digital treasury

Transitioning to Treasury 4.0 is helping existing treasury operations run better, faster, smarter, and leaner operations. At the same time, Treasury 4.0 leads the groundwork for more significant structural changes in the broader marketplace. Banks interested in upgrading to Treasury 4.0 should focus on these steps:

Perform a digital treasury evaluation

Treasuries need to analyze their current methods, identify their most important issues, and assess their willingness to take a technological leap by considering the following steps:

Secure the necessary budget

Many analysts suggest payback can happen within only a few months of treasury solutions going live. With this in mind, treasury departments can feel confident in requesting funds knowing there will be an almost immediate ROI. You can reinvest these savings into more updates.

Integrate APIs

Historically, treasury operations would perform an end-of-day reconciliation using SWIFT MT940. However, now treasurers can rely on APIs to provide real-time numbers to enable decision-making based on up to the minute data. This data can be used for making decisions regarding liquidity and investments. In addition, APIs can reduce human error and increase efficiency through a complete payment chain. Whatever stage the transaction is in, end-users can engage in trade without contacting the bank.

Automate treasury management

You can take advantage of DPA bots to download files from the bank, create new data files, update master files and even monitor emails. You can download service requests from the helpdesk. You can automate treasury management processes surrounding various treasury instruments, such as CDs, commercial paper, T-bills, State Development loans, bonds, and more. You can generate reports automatically for different territories using different modules. Regardless of what information is needed, you can develop automated processes, whether it’s for FOREX, future cash flow, amortization, derivatives outstanding or investments outstanding or other treasury products and services.

Focus on the most significant challenges

By looking at other banks through interviewing key stakeholders, teams can gauge where the most prominent pain points lie. Through analysis of these challenges, you can more easily pursue progress.

Prioritize opportunities

Initiatives should be evaluated based on profit and loss impact and expected value. The ultimate goal is to prioritize what goals are within the bank’s capabilities. It will lead to the most significant returns and then focus on those opportunities.

Create a digital roadmap

Chart what is necessary to implement the prioritized opportunities and begin implementation. The focus should be on not just IT requirements but team structure and capabilities.

Launch quick performing practices

Fast track initiatives that can enact the most significant balance sheet issues such as forecasting and automation and deliver on those improvements to pave the way for further improvements.

Improve the current operating model

The second goal of bank treasuries in their conversion to Treasury 4.0 is ensuring teams know how to use these new insights most effectively. Along with technological adaptation comes training issues and new processes to ensure success.

Offer your team opportunities for upskilling

Some roles and tasks will become redundant with Treasury 4.0; other skills will become more valuable. Treasurers will need business translators and data scientists, and engineers to communicate and implement digital solutions effectively.

Align with other transition elements

Treasuries will need to determine which functions can be best supported or implemented centrally and efficiently to align with the bank’s overall digital transformation process. Implementing a new operations model is a hefty undertaking. However, we must do these things to stay modern and competitive, with other banks taking advantage to maximize investment, efficiency, and returns.

Final thought

Adopting new technologies for treasuries comes with some severe limitations. Some key issues are the volume of existing solutions and their incompatibility with each other offer significant efficiency issues. There should be extensive testing when transitioning to start.

With this in mind, modernizing is much more than a matter of replacing old with new. Changes need to come one workflow at a time, testing and evaluating each process as they are implemented. While this approach is meticulous, eventually, treasuries can reach an optimal place in integrating several tested platforms.

Assess whether or not implementing each new technology will continue to be a substantial part of treasury operations. Once you have an efficient system in place, you can expect significant gains. ProcessMaker provides an industry-leading iBPMS that organizations can begin using today to stay ahead of Treasury 4.0 and optimize digital treasuries.


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