October 2018

Treasury is ready for a new connected ecosystem, but making it happen needs vision, determination and collaboration from their banking partners, says Michael Spiegel

Understandably, corporate treasurers are not likely to experiment with new technology when it comes to their core business – their cash management and trade finance flows are too precious. But the treasury voices we heard in the Euromoney research and in the preceding article (‘Proceed with caution’) are at one with the latest research we have conducted in partnership with the Economist Intelligence Unit (EIU) for our 2018 report, The Future is Now: How Ready is Treasury? 1

Treasurers are very engaged in the potential of technology to transform their operations and processes. In the EIU research, some 30% of the 300 treasurers globally who responded said they are looking to move in-house systems onto the cloud, for reasons of security, flexibility and collaboration. Around the same number are looking to upgrade treasury management systems (TMS).

Beyond the buzz

While buzzwords such as big data, artificial intelligence (AI) and blockchain are heard all the time, the technology behind them is clearly of interest to this group of corporate respondents. Around 56% of them said that they expected big data to be the most used advancement going forward, and 46% said they would deploy AI for various uses. Only 8% said they were likely to use application programme interfaces (APIs), although this suggests there remains some need for further explanation by banks as to the benefits – in reality, APIs will play a significant role in allowing treasurers to easily access this all-important data. One probable use is in managing supply chains with APIs, improving the treasury function’s access to data through improved communication between systems.

What does all this mean for banks like us? If we want to be more than merely infrastructure providers, we have to work with our competitors and create win-win results for everyone. Our real competitors are the platform providers. While, so far, they have been more focused on the retail side, we may well see more of a platform play in commercial banking and, over time, also in the wholesale banking arena. Therefore, we are teaming up with platform providers and financial technology firms (fintechs) to add more and better value altogether, and thus enhance our existing role at the heart of the new ecosystem.

March of the platforms

Most of the fintechs provide innovative and sound solutions but in narrow fields. Yes, in theory treasurers could replace a transaction bank, but they would need to onboard a multitude of fintechs, or work with a large technology player to cover off the equivalent services. If a provider ended up consolidating all these services onto one platform, it would then resemble and function as a bank, and may get regulated as such.

If a bank did ever get replaced, this would be most likely by a platform and not by individual fintechs. But that is assuming banks don’t evolve at all. At Deutsche Bank, we started a platform approach with our Autobahn app market 10 years ago – and this platform approach will further evolve over time. I don’t think the corporate appetite for replacing banks with fintechs for core treasury solutions is there yet. Another potential factor is the requirement by central banks to have transparency regarding the flow of money for fiscal/monetary policies – which may be more challenging when flows move outside the banking system. Don’t get me wrong, fintechs are important, though banks seem good partners for them to gain the corporates’ trust.

New ecosystem

I am convinced that corporate treasurers will work with a fintech if it is supported by a bank. The EIU research shows that treasurers are prepared to use the technology and services of fintechs in some form with 75% willing to do so if the service came wrapped in a bank recommendation, although, even then, more than half would only do so to a limited extent.

As a bank, we need to on-board the right players, provide connectivity and work with other banks in areas where there is no competitive advantage. This is the ecosystem we need to create. We don’t need to be the first to form the ecosystem – there were plenty of MP3 players before the iPod – but we need to lead from the front and not be relegated to an infrastructure provision function.

In other words, corporates are looking to us, the banks, to design and influence solutions that give them the best experience. And with the help of APIs and the right partners, we can make this happen.

Michael Spiegel is Global Head of Cash Management at Deutsche Bank

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Sources:
1The Future is Now: How Ready is Treasury? at https://bit.ly/2xholJ8 at eiuperspectives.economist.com

Michael Spiegel

Global Head of Cash Management | Deutsche Bank

Michael Spiegel

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