Treasury Technology for Financial Services: The Art of the Possible

Corporate treasurers have long had access to systems catering to their needs for cash management, payments and working capital. But treasurers of financial services companies such as banks and investment managers have a distinct set of requirements, many of which are not met by existing treasury technology. From complex payment structures to accounting requirements for private equity firms, how do the needs of financial services treasurers differ from those of corporate treasurers – and how can technology help?

What Do Financial Services Treasurers Want?
Financial services companies include a broad spectrum of organisations, from global banks and FX companies to fund managers and private equity firms – each with their own individual requirements. Corporate and financial services treasurers face many of the same challenges that can be overcome by treasury management technology however, the treasurers of financial services companies also have a number of sector-specific needs:

Cash Positioning and Forecasting
Ensuring that the organisation has enough cash available to meet its obligations – and investing any surplus cash to the greatest advantage – is just as much a priority for financial services firms as it is for retailers. But treasurers of financial services companies are also likely to have additional sector specific needs.

Where banks are concerned, for example, funds typically move through an orchestrated flow of accounts within the bank before reaching an external beneficiary, and may include complex structures such as waterfall payments. Consequently, there is a particular need to be able to move money quickly, intelligently and with minimal effort. Private equity companies, meanwhile, typically require a clear view of cash flows across their portfolio companies, and an understanding of how well individual companies are performing on a monthly or quarterly basis.

Disparate Accounting Processes
Many financial services firms struggle with the use of numerous disparate accounting processes, while accounting systems may lack integration with other platforms. These obstacles can result in inefficiencies and make it difficult to automate accounting processes.

Private equity companies may face additional complexity when their portfolio companies include joint ventures. For example, if a private equity firm owns 50% of a joint venture, a cash balance of £10m on one account might mean accessible cash of only £5m. Private equity companies may therefore require not only visibility into individual accounts, but also the ability to account for their ownership percentage of individual companies.

Manual Payment Processes
Many financial services companies continue to rely on inefficient, manual processes for initiating, processing and authorising payments, with some relying on paper-based workflow processes and even using fax to initiate payments. One fund administrator found that as many as a third of their employees were involved in the payments process – meaning there was a considerable opportunity for centralisation and automation.

Other Challenges
In addition, financial services treasurers may face a number of other challenges, such as:
• High banking costs as a result of multiple banking relationships and services.
• Inefficiencies and a heightened risk of payments fraud resulting from ineffective payment controls.
• Compliance risk arising from the need to screen payments against public and bespoke sanctions lists.
• Reporting requirements which cannot readily be met using spreadsheets.