In the recent years, payments as well as the cash management have seen hectic action, and all thanks mainly to the advances within the treasury management capabilities of the corporate world and therefore the move towards real-time supply chain operations amongst several economies.
This is progressing even better currently and because of an era filled with proprietary apps, private APIs and shut networks, banking which is becoming increasingly open with developments like open API, Fintech collaborations, cross-industry partnerships, regulatory changes like PSD2 etc.
These developments impact all pivotal areas of banking, and as well as the corporate banking too must be digitally-enabled and API ready. Multi-bank cash management, which today takes hours or sometimes days to process, is about for a huge transformation with APIs and can transform the way cash management works today.
There is also a regulatory impetus within the sort of Open Banking, which is transforming the way companies, large and small, run their business operations. This is often a chance for banks to earn a profitable fee income on their cash and liquidity management services, provided they create the proper investments on time.
Unlike its retail counterpart, corporate banking has been slow to adopt digital technology across its operations. Corporate banking users are exposed to convenient banking on mobile and other channels as retail banking customers in their personal life, and expect similar experiences from their corporate banks. this is often creating a niche between corporate banks and their clients, who expect a digital, self-service “retail banking-like” experience that permits them to regulate not only banking transactions but also the privileges and limits of various treasury roles.
In addition to investing in digital technologies which will produce such an experience, in an Open Banking world corporate banks would wish the potential to aggregate clients’ financial positions across all their banking relationships in several banks. This capability is (by and large) missing currently.
Most businesses juggle multiple banking relationships and source their cash requirements from quite one bank. Treasury managers lack a consolidated view of their organisations’ cash and liquidity positions across bank accounts, which prevents them from managing their resources efficiently.
However, currently Open Banking has enabled the corporate banks to simply access each other’s data, it’s time to take a position within the latest cash management solutions to supply clients a consolidated view of liquidity, in real-time.
In contrast to SWIFT MT messaging which imposes significant costs and interbank agreements for data sharing, the Open Banking proposition allows – subject to conditions – even small banks and FinTech firms to access a universe of customer and transaction data.
Latest players, like FinTechs and challenger banks, are swifter to capitalise on the chance , leveraging their formidable technological prowess to supply value added services, like income forecasting. Incumbent banks must get within the game directly if they need to retain their market position.
Early movers can seize the advantage by providing services that transcend simple cash management and forecasting, like analyses and proposals on next best actions. for instance, they might build out a model comparing the simplest approaches to sweeping, netting and covering cash positions with traditional methods of covering shortfalls (company loan, overdraft) to enable treasurers to form better informed decisions. By providing this type of advanced functionality, a bank could attract a bigger share of its clients’ cash and liquidity management business, hollowing out the share of the opposite banking relationships.
Corporates also want retail-like real-time payments and faster payment systems. Another area where corporates have invested heavily is reconciliation. Adoption of solutions like virtual accounts can help corporates digitize and manage cash management more efficiently. Now driven by the challenges and opportunities in modern corporate banking combined with regulatory changes, “Virtual Ledgers” are making their way into the company banking space.
Corporate treasures specialise in factors like efficiency, fund optimization, cost reduction, and STP operations. Rationalization of banking relationships may be a key area of focus for businesses and virtual account management solutions allow corporates to try to this effectively.
With virtual accounts and on-behalf-of operations, the advantages are manifold – reduction in cost, risk and administration, easier liquidity management etc. Moreover, on boarding/opening of virtual accounts is far simpler compared to opening new accounts which comes with its set of KYC processes. In Open Banking, real-time environment abounding with digital technologies, the likelihood to innovate such services is virtually endless.