Today’s Treasury Landscape
Hollywood is littered with movies where an embattled CEO asks a financial guru, “how much cash do we have left before we have to shut down operations” and the guru quickly reels off numbers from a piece of paper. The CEO goes off, inspires a couple of people, and saves the day! In reality, this is hardly the case. The traditional cash forecasting process involves pouring through reams of binders, excel sheets, and online accounts before estimates can be provided… and these activities take days, if not weeks.
Today’s Treasurer is faces a complex and changing environment characterized by market volatility, government regulations, budget restrictions, and the request for transparent financial systems from the public. The effects of the pandemic on financial systems and the disruption it wrought on treasury workforces add to the complexity of manually accessing the data required to manage treasury operations. Other challenges include the lack of a single source-of-truth that provides the real-time insight needed to make data-driven decisions quickly.
To reduce these complexities, most financial services providers have started to invest in digital transformation technologies. According to a survey, approximately 97% of financial service providers have adopted some form of digital transformation tool to ease the complex challenges they face, while less than 21% have a defined digital transformation strategy.
One trend that’s top of mind? A lot of enterprises appear to be adopting digital transformation tech that focuses on data capture and storage tools like cloud storage. But, what’s the point of storing data without investing in some analytical tools that help gain insight from captured data sets? Not to put the horse before the cart, capturing data from every phase of financial services is a good first step to gaining insight into activities. But digital transformation can offer so much more.
What is Digital Transformation?
Digital transformation is the adoption of digital technology to transform business services, operations, and customer experiences to meet changing business and market situations.
For financial services specifically, this definition highlights the importance of digital transformation as a tool for preparing financial service providers and treasuries to meet the changing business environment within the industry. It is a fact that with the right digital transformation solution, diverse strategies can be developed to solve the most complex problems. Here, digital transformation solutions can refer to hardware and software applications used to evaluate and answer industry-specific questions.
Digital transformation technologies or solutions with the capacity to solve complex problems and optimize financial service operations include treasury management systems, simulation modeling software, etc. These applications rely on Artificial Intelligence (AI), machine learning (ML), and open-banking APIs to provide financial institutions with the tools to apply innovative solutions to traditional problems.
For example, a digital transformation technology such as treasury management systems (TMS) relies on automation to capture financial records, which eliminate the need for outdated data recording processes. The TMS platform also provides AI-powered features to analyze data sets from millions of transactions to deliver real-time visibility into ongoing cash transactions a service provider processes.
From Chaos to Data-Driven Insight
The traditional process defined by paper records, excel sheets, and disparate data in informal files has proven to be a recipe for chaos to financial service providers handling millions of transactions. Brick and mortar financial institutions alongside fintech enterprises offering multiple financial services such as digital payments and peer-to-peer lending services produce disparate data sets that must be analyzed in real-time to make accurate decisions. In order to eliminate chaos when seeking insight from these data sets, a scalable platform will integrate automation, AI, and machine learning to manage it in a cohesive and holistic manner.
A turnkey treasury management system is a digital transformation tool that provides a single plane of glass for analyzing and managing the big data sets delivering financial services produce. Deploying a digital transformation solution such as a TMS ensures financial enterprises can:
- Optimize Cash Flow – Fintech organizations partnering with multiple financial institutions can gain insight into liquidity and forecast cash positions across multiple channels used in running transactions. A TMS brings the data from diverse sources into one virtual environment, which provides the visibility needed to develop new operational strategies and support complex decision-making processes.
- Rely on Accurate Cash Forecasting – A TMS provides enterprises in every business sector with the ability to automate the preparation and reconciliation of the enterprise’s daily, weekly, or monthly cash position. The system analyzes financial data against expected recurring expenses to provide an accurate forecast of the enterprise’s cash position. The insight from accurate cash forecasting can then serve as the foundation for developing strategies to minimize its expenses.
- Support Compliance Initiatives – The fintech industry is increasingly being governed by multiple industry regulations that must be adhered to. Digital transformation solutions provide an automated means to keep track of these regulations to ensure every transaction is governed by the specific policy guiding it.
Real World Digital Transformation Use Case
Square, the financial and merchant services provider, is a prime example of the benefits digital transformation provides. The company struggled with managing its complex treasury-related operations across 20 banks, relying on legacy solutions to manage its treasury operations. Square quickly discovered that these outdated solutions hindered its ability to gain the real-time insight it needed for making difficult decisions.
To eliminate these difficulties, Square adopted a cloud-based TMS, which provided a centralized banking data analysis platform to manage its vast cash management network and transactions. Implementing the digital transformation solution enabled Square to gain real-time visibility into the millions of transactions occurring through their multiple bank accounts.
The application of technology in the financial sector has altered the market forever, and embracing digital transformation to improve operational efficiency can no longer be overlooked. Implementing robust digital transformation strategies will help financial service providers anticipate the needs of a changing market to create optimized operational strategies backed by data.
If interested to learn more about Digital Transformation, check out how the industry is managing and investing in changes in the “Building Tomorrow’s Treasury” report.