2017-2018

Whos
running
treasury?
TREASURER VS
THE TREASURY BOT?

TREASURY IS DEAD:
LONG LIVE TREASURY

SWIFT VS RIPPLE:
THE BATTLE

BLOCKCHAIN:
GET TO KNOW THE
PILOT PROJECTS
 From the editor

Editorial director
Leslie Holstrom
Welcome to Treasury Perspectives
editor@eurofinance.com The intelligent treasury edition
Contributors
This years Treasury Perspectives looks at some of the bigger global trends
Mariel Barclay
impacting business from the re-emergence of globalisation to the shift away from
Simon Brady China to lower cost locations in which to do business. We also look at the digital
Mark Parsley challenge for banks and corporates along with the promise of what FinTech, AI
Katrina Rollinson and robotics might offer treasury.
Jonathan Williams
Digitalisation will be the focus both for banks and their corporate customers for some
time to come. The speed of change will be at a pace that most treasurers will find
Art direction + graphic design
uncomfortable. However, it is imperative that you keep informed as new products
Nick Chapman are rolled out and you dont miss the digitalisation boat and what could turn out to
be an interesting and effective suite of solutions. Because increased automation via
Advertising AI, robotics and machine learning will without doubt impact the treasury and the
functions it performs. In some instances, for some companies, automation could
Susan Christopherson
make the treasury role redundant.
susanchristopherson@eurofinance.com
Its a catch 22, isnt it? The corporate drive for efficiency requires automation of
Marketing + circulation repetitive operational tasks. The technology to do that is fast becoming available
for many treasury functions. Add in a bit of AI and machine learning and soon
Jane Pinfield
the technology may make smarter and better-informed judgement calls that were
previously only possible by humans. So, to embrace that type of technology may
Enquiries well mean that treasury automates itself out of existence.
EuroFinance, 20 Cabot Square,
Our journalists this year look at the advances in technology and how those may offer a
London, E14 4QW, UK
new level of efficiency in cross border payments, supply chain, FX and other treasury
T: +44 (0)20 7576 8555 functions. But we also delve into how treasurers can retain control and increase their
remit by repurposing what treasury does and how it operates within the business.
www.treasuryperspectives.com
www.eurofinance.com We believe that the intelligent treasury should function as a strategic consultant to the
business in all things financial. Treasury needs to understand how it can use data to
produce more relevant insights for the business. It should also retain the whole of the
risk portfolio from financial to regulatory, supply chain to cyber, credit to investment
www.eurofinance.com/linkedin
and liquidity because these challenges are ideally suited to the treasurers skillset.
There is much to be done to improve the overall risk management in companies.
Partly because of scattered data, systems and responsibility, and partly because the
www.twitter.com/eurofinance technologies that will allow whole-business risk management are only now becoming
@eurofinance available. This is not only an opportunity for the treasurer but an opportunity for
banks to develop next generation risk management products. Other areas where
treasury can make its mark include working capital and supply chain. The list goes
Treasury Perspectives is published annually
on: M&A, tax, procurement and even the strategic structures throughout the business.
by EuroFinance and is in circulation Those areas can and should be within the treasury remit. If you automate yourself out
worldwide for one year. of job, its best to have a back up plan.

Neither this publication nor any part of it may be

All the best
reproduced or transmitted in any form or by any
means, including photocopying and recording,
or stored in a retrieval system of any nature,
Leslie Holstrom
Editor
without permission.
Treasury Perspectives

Printed by Fox Print Services

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EuroFinance Conferences Ltd
All rights reserved

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 Contents
GLOBAL PERSPECTIVES
6 2018: the outlook for treasury
As you read this, already things are
shifting and changing dramatically in the
business and financial environment, and
in particular in technology. Thats the
nature of change these days. So rather
than tell you the interest rate outlook or
the views on dollar/euro, we offer some
key trends that EuroFinance believes will
help to guide a longer term strategy for
businesses and their treasuries.
INTELLIGENT PERSPECTIVES
10 i-Treasurer
AI is not something for the future, it is
something in use in a variety of financial
services and transactions. Its potential to
impact all things financial will continue to
grow, and rapidly. What will that mean for
treasury specifically and how far off are
the ambitious advances?
PAYMENTS PERSPECTIVES
16 More than just ripples
in SWIFTs pond
Cross-border payments have always
drawn a litany of complaints about
mismatches, predictability, tracking
and poor remittance data. Both Ripple,
the blockchain solution and SWIFT, the
incumbent network are working towards
solutions. For treasury it is win-win.
www.eurofinance.com
22 A future proof payment system? SSC PERSPECTIVES
36 Treasury is dead: long live treasury?
If SSCs continue to automate more and
more processes and the Global Business
Services models are gaining in popularity
with large multinationals and global
companies, why doesnt treasury just
succumb to the rule of the shared services
centre? Well, for some treasuries, this is
the current path.
The SWIFT/Ripple battle in the payments
landscape is just one story. If your business
creates a high volume of low value
payments, what about Global ACH 2.0 as
an answer?
CAREER PERSPECTIVES
FINTECH & BANKING PERSPECTIVES
38 Its treasury Jim,
24 Tailored treasury: the promise of but not as we know it
bank and FinTech innovation
If nothing else, treasury has maintained
a consistent mantra for the past 10 years:
automate, do more with less and use
technology to drive efficiency. Will that
path eventually put treasury out of a job?
FinTech companies are targeting unwieldy,
archaic processes and revolutionising how
those work. Meanwhile banks are active in
innovation too, whether partnering with
promising FinTech firms or by changing how
they work. We look at just a few examples CULTURAL PERSPECTIVES
in this massive, fast-changing industry.
41 Managing cross-cultural challenges
BLOCKCHAIN PERSPECTIVES
30 The blockchain in practice
for the treasury
You might have created efficient, state-
of-the-art global treasury solutions,
but that doesnt mean they will be easy
to implement. In a series of interviews,
Is this the year of the blockchain? Pilot leading multinationals reveal how
projects abound. But what products treasury policies are understood and
actually exist and how do they benefit implemented depending on location and
companies today? how to overcome resistance.
TREASURY PERSPECTIVES 2017/2018 // 5
 Global perspectives
2018: THE OUTLOOK FOR TREASURY
What you worry about today, may not be what you should worry about tomorrow and the opportunities
you think are breaking today might also be gone tomorrow. In a world of fast-paced change are there any
key trends of which treasury should be aware and plan longer term? By Katrina Rollinson.
THE WORLD IN 2018
Daniel Franklin has been executive edi-
tor of The Economist since 2006 and editor
since 2003 of its annual publication,
The World in which focuses on the
year ahead. EuroFinance asked him
what we might expect.
EF: What are some of the major issues
companies should be aware of in 2018?
DF: Politically the on-going Trump
drama will impact politics and econom-
ics both domestically and globally. The
US midterms are fairly soon so that will
concentrate the mind on Trumps popu-
larity or lack of.
In Europe you have Brexit and although
the nominal deadline is March 2019, a
deal needs to be done relatively soon so
the clock is ticking louder and louder.
Contingency plans need to be made for
companies and particularly for banks. It
cant be left to the last minute. Also in
Europe, Italian elections are on the
horizon and everyone will be looking to
see how well the Five Star Movement
(Italys populist movement) do. There
will probably be a Greek election too.
Overall, Europe is in a calmer state than
it has been in a long time. Optimism is not
a word you have heard in connection with
Europe for many years. But a combina-
tion of Macron steadying the nerves and
the probable return of Merkel in the Ger-
man election there will be talk after that
what the Franco-German engine can do
if it sputters back into life. Greece is cer-
tainly not out of woods yet but better than
it has done in a long time. Brexit funnily
enough has had the consequence of unit-
ing Europe and reminding people that
Europe matters. The Eurozone economy
is growing at least respectably compared
to recent times.
6 // TREASURY PERSPECTIVES 2017/2018
China will be coming off its party con-
gress which has been a big event looming
for this year. What happens after that?
Will there be a more serious push for
reform once that is out of the way? A
more serious crackdown on shadow
banking and growth of debt in China?
There are big elections also looming in
Latin America for Mexico, Brazil,
Colombia.
National security issues will continue
with North Korea likely to have its
workable nuclear intercontinental mis-
sile ready next year so geopolitical ten-
sions will be sharper.
More regulation is on the horizon and
another issue. A big regulatory dump is
about to happen in Europe with MIFID,
GDPR and PSD2 all extra things you
have to comply with.
The new data rules coming into force
will affect every business.
Then there is the ongoing technologi-
cal development and disruption
impacting industry wide, particularly in
banking. I dont believe the disruption on
the corporate side will happen swiftly.
Customers are very conservative. This
applies even on retail side with the excep-
tion of first time youngsters coming to
market but that is a small segment.
Generically, it is true that every industry
is being disrupted by technology. Theres
a meta trend of massive amounts of data
being generated that are being used by
all industries in a more intelligent way.
Therefore, intelligent data will be a big
theme for almost all businesses. Indus-
tries to watch will be healthcare and bio-
tech from a data utilising perspective.
Another industry to watch will be space,
from a different perspective. With new
discoveries and the ongoing advances to
tourism, it could be a landmark year.
Another question will be over interest
rates how fast do they go up? We are
quite a way through the maturity of the
cycle. How will that play out for the next
recession whenever that comes. No one is
forecasting the next recession but we are
quite a way through this cycle. There are
a lot of uncertainties around interest
rates and how fast QE gets rolled back.
For a corporate treasury thats the most
important immediate.
Five second summary
None of the political worries
have completely gone away in Europe:
crisis could return, refugees remain an
issue, Brexit is still there and Putin hasnt
gone away on the security horizon, but
the position is somewhat less accute.
Geopolitical tensions will remain
or sharpen globally.
Overall, Europe is
in a calmer state than it
has been in a long time.
Optimism is not a word
you have heard in
connection with Europe
for many years.
www.eurofinance.com
DEGLOBALISATION VERSUS REGLOBALISATION
From the fall of the Berlin Wall until
recession hit in 2008, the name of the
game was globalisation. Countries were
attracted to the idea that democracy
and free markets were the drivers of
economic prosperity; regional integra-
tion like MERCOSUR, NAFTA and
the enlargement of the EU was a facet of
globalisation where political blocks
became important players in economic
growth; supply chains became global
with company production, logistics and
distribution taking place in different
markets and continents. And the US
remained the superpower promoting all
three trends. Company strategies,
accordingly, embraced the notion of
globalised business.
But then Brexit, Trump and the rise
of nationalism have challenged this
orthodoxy. So are we in an era of
deglobalisation? Are the strategies that
multinationals have pursued for the last
decade simply past their sell-by date?
The four marks of globalisation have
changed today completely, explains
Marcos Troyjo, a political economist,
author and director of the BRICLab,
a forum on Brazil, Russia, India
and China at Colombia University.
The idea that free markets and free
trade is more conducive to prosperity is
WHY BANKS ARE FAILING THE DIGITAL CHALLENGE
The next decade will see more disruption
to the banking landscape than we have
seen for a century. The broad drivers of
change are clear: regulation and techno-
logical upheaval. But the true challenge
for banks, and one that they are failing, is
to look beyond these drivers and ask why
banks are finding them so difficult to
deal with.
Most banks and, unsurprisingly their
technology vendors, view the threat as
primarily a technology issue. So, for
example, as far as a senior blockchain spe-
cialist from IBM is concerned: Banks
can optimise their technology but they
cant compete with the new technology.
The consultants, again for obvious rea-
sons, tell the same story, using a different
example. They tend to emphasise the
risk to the big banks from FinTech chal-
lengers. So PwC forecasts a 25% drop in
www.eurofinance.com
challenged not only by BRICS situation
but also by the US with America First.
Then there is the death of Mercosur; the
vote on Brexit and the four-decade old
NAFTA being renegotiated.
The pre-eminence of the global supply
chain too is under threat. Trumps
America first position comes just as
China and other low-cost production
environments lose their low-cost status.
Domestic supply chains may make more
sense, particularly if trade clashes betwen
the US and China result in an increase
in protectionism with China not com-
mitted to free trade in the first place.
But the good news for companies who
modelled their business on a global strat-
egy and now may worry this is redun-
dant, retreat will probably be short-lived.
Trumps America first programme will
harm America. If low cost manufactur-
ing centres are eliminated then Ameri-
can companies will hurt and the
knock-on effect on stock markets in the
US is obvious. If Trumponomics is not
an everlasting, says Troyjo, the US will
return to a foreign policy that is in the
interest of its companies, so trade and
investment deals will come back. He
says that China is driving a resumption
of global policies as it shifts lower value-
revenue over the next three to five years.
The firm also recently polled 1,300
financial industry executives of whom
88% believed that their business was at
risk to FinTech firms active in payments,
FX and personal finance such as loans.
Others focus on the regulatory angle.
Consulting firm Protivitis Jonathan
Wyatt, Digital Lead, says of the banks
struggle: There are pockets of innova-
tion within these banks. Its a constant
battle, helping them with their attitude to
risk the perception they have that regu-
lators wont allow them to do things.
Adapting their mindset is crucial yes
there are risks, but the bigger risk is not
embracing innovation.
Chris Skinner, chairman of the Finan-
cial Services Club, also puts the blame
on regulation but hints at a more pro-
found problem: Banks culturally find it
added activities to other Asian countries,
much like Japan did after its initial,
domestic industrial push, creating a new
group of Asian tigers like Vietnam,
Myanmar and Indonesia. Troyjo also
points to foreign direct investment by
Chinese companies of which the top des-
tination today is the US. This resump-
tion of global growth will also benefit
commodity exporting countries.
Finally he points to the wave of techno-
logical development that is also playing a
role in reglobalisation with Big Data,
blockchain, AI and the so-called Indus-
trie 4.0 knowing no borders but creating
its own global growth.
Five second summary
Dont lose time rethinking; the world
will resume its global growth.
Are the strategies that
multinationals have pursued
for the last decade simply
past their sell-by date?
really hard to change. They want to be
innovative but they are hampered by
risk, because with innovation comes risk.
Its a catch 22 no bank has fully solved.
And Brett King, advisor to the White
House on the Future of Banking, points
to the issue of silos: The big transaction
banks tend to innovate [but only] in
pockets within their business. And he
points out that its not just FinTechs that
threaten the banks. The major threat
comes from the tech giants, he says. He
references how Uber had trouble
recruiting drivers in New York city
because they were unbanked. Before
they could drive with Uber they needed
a debit card. So Uber partnered with a
tech bank and issued their own driver
debit card. Now drivers can get paid
three times a day which was something
no other bank could offer. In solving
this obstacle, Uber became the third
TREASURY PERSPECTIVES 2017/2018 // 7

largest acquirer in the US. When you
look also at Alibaba and Amazon that
are emerging as dominant platforms for
commerce, it will put banks at a signifi-
cant disadvantage, says King.
These are all valid points, but the core
truth is more problematic. Banks are
struggling with digital transformation
because they are failing at the basic hur-
dle of change. Banks tech teams are firms would increase over the next three
scattered and staffed largely by long-
term contractors who are hard to man-
age to finite objectives and who have no
real loyalty to the institution. They are
then overlaid by teams from the Big Four
consultants, sometimes hundreds of peo-
ple at a time, some of whom work full-
time for years within an institution.
These consulting teams are, for example,
drafted in to change application develop-
ment culture, but as the existing teams
are essentially the client, the consultants
have no real power to effect change
unless senior management steps in. And
they do not.
Where there are dedicated teams for
digital transformation, inexperienced
executives again lack true accountability
AI: TRICK OR TREAT FOR TREASURY?
Remember the 2015 Sci-Fi movie Ex
Machina? A programmer at an internet
search giant wins a competition to spend
the week with a reclusive CEO and his
AI experiment called Ava. The AI proves
to be more deceptive and intelligent than
her creator imagines. The chilling end
(spoiler alert), where Ava murders the
boss, traps the programmer and escapes
to freedom is a warning on the ethics and
morality of pursuing AI.
Recent statements from Elon Musk, the
Tesla creator and entrepreneur claiming
that AI is the greatest danger to human
kind, do nothing to quell this Holly-
wood-induced fear. Ironically, given
Musks primary business, AI experts
point out that one big issue for any robots
bent on world domination is one that
dogs non-intelligent devices now:
The joke about the film is that 10 min-
utes after it ends, Ava would have run out
of battery which wouldnt have made
such a great ending, says Adam Ruther-
ford a geneticist and consultant on popu-
lar science fictions movies such as Ex
Machina, Life and World War Z.
8 // TREASURY PERSPECTIVES 2017/2018
for delivery either to the business budgets
that fund them or to senior management.
IT development bogs down in meetings
which themselves become forums for
blame apportionment and conflict.
The banks, who admit this in private,
believe that one solution is to joint ven-
ture with the very FinTechs they also see
as a threat. PwCs survey mentioned ear-
lier reported that 82 percent of respond-
ents said partnerships with tech-savvy
clays, Santander, BBVA, Nordea, DBS
to five years. As Gregory Vincent, Head
of FX Payments at INTL FCStone adds,
Banks need to provide innovation, and
therefore are looking at what FinTech
are doing and layer it in or buy it. There
is no point in them building it.
Citi also believes that banks, cant cre-
ate and build everything. Absolutely we
have a number of mechanisms to bring
the outside in, says Morgan McKenney,
head of Citis Asia Innovation Lab. We
are so genuinely interconnected and to
have true innovation you will have to col-
laborate externally.
Given the scale of banks IT spend and
infrastructure, this could be viewed as an
admission of failure. Banks did not miss
We are at least a decade from a power
source that would let them live on.
Well thats good news. But is AI still a
threat to treasurers and their jobs (and
indeed to other managers)? Researchers
like Rutherford, who of course will
remained employed for some time to
develop it, see AI as an opportunity. AI
has been involved in various industries for
years, including finance. Algorithms have
been used to make calculations that are
beyond the complexity of regular humans
as well as to take decisions. What is differ-
ent about now is that we are having more
conversation about it and our access to
machine learning is improving and we
will have better ability to make predic-
tions using complex data sets.
Most banks are invested in, partnering
with or innovating with AI to see how to
improve customer service and solutions.
Banco Bradesco uses a clever bot for cus-
tomer services (trained by the banks
most valued customer service people).
Based on IBMs Watson, the age of the
AI went from five years old to 18 years
overnight, according to IBM. Bank of
the PayPal opportunity because they lack
the ability to innovate. They missed it
because they have not adapted to the
strategic realities of digitalisation and
are still fighting irrelevant, tactical bat-
tles, both internally and externally.
Without a wholesale rethink of IT staff-
ing, reporting lines, incentivisation and
overall management, banks will con-
tinue to fail at even the most elementary
initiatives. That isnt to say there are no
innovative banks out there. Citi, Bar-
and other global and regional institu-
tions are investing heavily in innovation
labs or equivalents and partnering with
outside firms to create new solutions for
clients. But for many banks, innovation is
simply a step too far.
Five second summary
FinTechs, tech titans like Apple, Paypal,
and Google; and companies that sit on
data like insurance and energy are threats
to the future of traditional banking. But it
is bank managements failure to respond
appropriately to these threats that will
cause them the most trouble.
America Merrill Lynch uses AI for smart
invoicing matching that is up to 50%
more accurate than manual matching.
Banks across the world are trialling or
have processes using AI. In other words,
according to the optimists, AI initially is
being used to automate mundane pro-
cesses, allowing full-time employees to
utilise their talents in more efficient and
creative ways.
Sceptics remain, well, sceptical. They
take the view that companies invest in
these products to save money and their
biggest cost is staff. AI is simply another
form of automation and so while it may
or may not affect overall employment
levels in an economy (and the smart
money right now is that it will not create
the new jobs generated by previous
industrial innovations), it will most cer-
tainly result in the loss of particular job
types and most treasury functions are
automatable. Indeed, treasurers core job
at the moment seems precisely to auto-
mate themselves out of a role.
www.eurofinance.com
FORGET TRADITIONAL ECONOMIC FORECASTING
So much of industry has been disrupted
and continues to be, so why should we
listen to traditional economists and their
often wide-of-the-mark predictions? If
you want to understand more about the
global economy, geopolitical issues, the
rise of technology and tech titans who
may take over key parts of industry, it has
become harder to predict, partly because
of volatility and to a certain extent
because the speed of change has
increased. The financial crisis was
famously not predicted by most econo-
mists; Brexit came as a surprise as did
Trump; and few called the rise of the far
right in politics all over Europe.
So are economists looking in the right
places? Can a more fit for purpose
approach work better? Certainly You-
Tube viewing can predict votes and
spending patterns. Twitter and Facebook
analysis can reveal economic patterns
right down to whether individuals are
reducing spending or buying baby
clothes. Even banks Big Data is a better
real-time predictor of GDP than any
economist with a few data points and an
out of date poll.
To survive, treasury must reinvent itself
as a function that cannot be replicated by
sophisticated algorithms working over
truly integrated, real-time data transfer
and analytics systems. How to start
thinking about that? Well, its an axiom
of AI that computers find the things
humans find hard (Big Data analytics)
easy and the things we find easy (identi-
fying a chair) hard. So maybe treasurers
need to forget about number crunching
and start thinking about becoming
internal change consultants the link
between an increasingly data-heavy but
wisdom-light finance function and the
front line businesses. (For detailed uses of
AI in finance, see page 10.)
Five second summary
AI and automation will be adopted to
cut staffing costs. To avoid redundancy
reinvent yourself as a value-added
human to human interface.
www.eurofinance.com
Economist and entrepreneur Pippa
Malmgren thinks a traditional approach
no longer meets our needs. Malmgren is
the author of the best-selling Signals: How
Everyday Signs Can Help Us Navigate the
Worlds Turbulent Economy. She also served
as an economic advisor to the Bush
administration. She believes we look at
the world through a mathematical lens
but remain blind to the things that are
hard to quantify. We need to embrace
our common sense eye alongside tradi-
tional analytics, and learn to read what
she calls signals.
Keep your data but remember that you
cant put a number on the anger that
gives rise to a populist uprising, even
though the anger is real and changing
the landscape of politics. The top man-
agement of organisations, including the
CEO, think they are navigating the com-
pany but often they are cruising with a
flight plan that is 10 years out of date.
They think China is cheap and therefore
its the future. But today the least expen-
sive market for manufacturing is Mexico,
not China. Mexico is the new China.
To survive, treasury
must reinvent itself
as a function that
cannot be replicated
by sophisticated
algorithms.
Here is what she thinks are relevant for
companies today based on common sense
signals. Her first point is advice about
China: China is no longer a leader as a
competitive manufacturer. Foxconn, for
example, the largest private employer in
China (Foxxconn assembles much of the
worlds iphone and ipads) have said they
will build production facilities in the US.
That is a hell of a signal.
Another strong signal is the shift to digital
money. In the past, when there was too
much debt to pay off governments simply
abandoned the whole system of money
and accounting. It sounds radical but Brit-
ain did it in 1984 when they abandoned
the Talley Stick system and introduced
paper money. You will see governments
do this again with blockchain in conjunc-
tion with e-money, she says.
Digital money will in effect eliminate the
black market and therefore increase tax
revenues. It will also make tax payments
immediate: both revenue and timing fur-
ther help governments manage the his-
toric debt burden.
On the US she says that many compa-
nies dont realise that the most dynamic
location on the planet is the Mexico/
Texas region. They are the hottest
emerging and industrialised economies
anywhere, juxtaposed. They think the
Trump wall will destroy that area. But
Mexicans are no longer going north
because there are so many jobs at home
and Americans are happy to fly over the
wall in search of profit opportunities,
NAFTA or no NAFTA.
Five second summary
If you keep being blindsided by
events like Brexit and Trump, then stop
drilling down into data and instead look
for common sense signals. If the Chinese
are manufacturing in the US then
Shenzhen isnt cheaper than Wisconsin
any more. Adjust to that change. If
governments introduce blockchain in
sync with e-money, expect that the debt
will become easier to manage.
So are economists looking in
the right places? Can a more
fit for purpose approach
work better?
TREASURY PERSPECTIVES 2017/2018 // 9
 Intelligent perspectives

I-TREASURER

Is the current obsession with artificial intelligence in all things financial just
hype, or is the technology truly at a tipping point? How will it affect treasury
and what do treasurers have to know about it? By Leslie Holstrom.

Consultants, tech vendors and futurolo-
gists are in no doubt at all. Artificial
intelligence (AI) is going to transform
everything including the financial ser-
vices sector. The combination of limitless
data storage, continued increases in pro-
cessing power and the rise of distributed
computing, and rapid advances in our
ability to train machines in various ways,
will hand large chunks of human activity
to computers within the next five years.
Whether the most aggressive predictions
come true or not, it is already true that AI
is being used in sectors as diverse as
finance, healthcare, transportation, man-
ufacturing, the law and customer service.
For corporate treasurers, this spread has
two immediate implications: first, given
the alleged benefits of AI in terms of pro-
ductivity and data-driven insight-genera-
tion, how can they benefit internally from
this technology? Second, how will the
drive to adopt AI by the financial services
industry affect the relationship between
companies and their providers of financial
products and services?
entire operating model and the core pro-
cesses of the finance function.
But before those more glamorous func-
tions, AI will probably first be used to
automate the mundane and repetitive.
Solving regulatory overload
Financial reporting and compliance,
from KYC in trade finance and supply
chain, to simply dealing with banks on a
day-to-day basis, is increasingly complex,
burdensome and expensive. It requires
increasing numbers of staff to process
huge volumes of data to generate the mul-
titude of internal and external reports that
are demanded by committees, the board,
auditors, shareholders and regulators.
Reporting and compliance adds little pos-
itive value to the business but a failure can
create significant cost.
The first step in solving this problem is
automated reporting for the most basic,
standardised and formulaic reports.
These may be mundane but they still
involve large numbers of people per-
forming low-value-added tasks. Some
companies have already started to use
robotic process automation (RPA)
essentially software bots to replace
humans in these processes, but they
have faced the problem that while the
bots can be programmed to deal with
some exceptions, they still stumble
when tasks require even a small amount
of wisdom. Adding machine learning
allows RPA to deal with much more
complex tasks and gives it the ability to
go beyond volume-driven aggregation
to functions such as intercompany rec-
onciliations, the quarterly close and
earnings reporting.

AI in the treasury and finance function

Current AI solutions, in general, rely

upon a number of basic skills: some
apply fixed algorithms to large datasets
and recognise patterns which humans
can then interpret as useful insights;
some can be trained to replicate pro-
cesses to which they are repeatedly
exposed, including those that require the
ability to interpret natural language; and
some can adapt their responses by learn-
ing when they are exposed to new data.

Combining one or more of these abilities

allows software to mimic customer ser-
vice agents, to read and review complex
documents, to match buyers to appropri-
ate products and services and to provide
sophisticated analysis of Big Data in
close to real-time. In so doing, it is possi-
ble to imagine AI restructuring the

10 // TREASURY PERSPECTIVES 2017/2018 www.eurofinance.com


In the UK, Arria has developed natural
language generation software (NLG)
that is being used across a wide range of
industries to humanise and simplify the
analysis of data heavy reports. KPMG
has been using innovations from
McLaren Applied Technologies (MAT)
in its audit processes where predictive
analytics automates evidence gathering
and the production of complex data
reports, saving time and improving cli-
ent services. Deloitte recently announced
a partnership with Kira Systems to aid in
contract and document reviewing, and
has already rolled out a customised ver-
sion for audit processes with further
applications being explored for tax and
advisory practices.
And J.P. Morgans Contract Intelligence
(COIN) system has replaced the 360,000
hours spent each year by lawyers and
loan officers interpreting commercial-
loan agreements and other contracts.
COIN runs on a cloud-based machine
learning system and as well as being
many times faster than its human coun-
terparts it has also managed to help J.P.
Morgan decrease the number of loan-
servicing mistakes that are, in part,
driven by the need to interpret 12,000
new wholesale contracts every year.
Again, it is the sheer scale of the data
crunching required that will force com-
panies to seek out this kind of solution.
The next level
More complex compliance requires more
sophisticated solutions. Even a medium-
sized firm may have to evaluate hun-
dreds of tax and legal updates a week
www.eurofinance.com
across an international network and
techniques such as natural language pro-
cessing and machine learning are being
used to understand the law, map com-
pliance needs and even analyse the costs
of compliance. By treating regulations as
data, software will dynamically bring
compliance into the enterprise risk envi-
ronment, enabling treasurers to take a
genuinely risk-based view of regulatory
compliance.
These drivers have spawned an entire
RegTech industry that aims to replace
the present combination of scattered
humans and fragmented legacy technol-
ogy to ensure that trades, customers and
the company are compliant.
The pace of change in global regulation
and the complexity of AML/KYC and
OFAC sanctions compliance are too
much for existing instructional algo-
rithms and rules-based systems. The lat-
ter flag cash transactions over a certain
currency amount, block transactions to
certain countries, use customer data to
select accounts for additional monitor-
ing, and categorise merchant accounts
based on prior transactions. But they
generate large numbers of false positives
which need human intervention and they
cannot cope adequately with deliberate
attempts at fraud or evasion.
An AI solution learns to identify prob-
lem transactions by analysing every data
point in the entire transaction database.
It develops rules of its own based on, for
example, customer location, transaction
timing, social media activity and rela-
tionships with other customers.
AI in AR
The same logic is driving the application
of the RPA/AI combination to accounts
receivable. AI algorithms are ideally
suited to resolving some of the key prob-
lems in receivables because they can
learn from previous experience and
behaviour patterns. This allows them to
build up a picture of good and bad cred-
its, early and late payers, fraudulent
activity and even message repair and
exception handling.
One key receivables problem has always
been the level of manual intervention
required to cope with the mismatch
between the way customers deal with
billing and the way a particular treasury
system would like them to. The multiple
exceptions, errors and idiosyncrasies of
the process defeat both the simplest sys-
tems that used optical character recogni-
tion (OCR) with templates and also more
intelligent rule-based solutions.
Now however, companies like US-based
HighRadius, Receivable Savvy and Ger-
manys collectAI are using self-learning
solutions to automate AR processes to
make debt collection more efficient,
reduce costs, improve cash flow and
increase customer retention rates.
These types of software do everything
from work out the best channel on which
to contact debtors to figuring out which
payments relate to which invoices despite
customers habit of using one payment to
fully or partly pay multiple invoices and
optimising early payment incentives to a
particular customer using algorithmic
invoice discounting to build intelligent
supply chain finance solutions.
Others, like YayPay look at a customers
payment habits and behaviours and uses
machine learning to predict the potential
day of their payment. This forecast is
then used by the treasury team (or other
automated solutions) to target the most
significant outstanding debt.
AI in AP
In the same way, the advent of intelligent
mobile bill processing technology able to
execute transactions to any schedule or set
of rules, will transform accounts payable.
One set of solutions uses supervised
machine learning to teach a software tool
the key data points on a set of scanned
invoices. After the training phase, the AI-
enabled tool can perform the data extrac-
tion completely on its own and only brings
invoices to the attention of a human where
it does not recognise them.
Here, the main benefit of artificial intel-
ligence is the ability to speed read huge
TREASURY PERSPECTIVES 2017/2018 // 11

volumes of invoices and to apply approv-
als rules to them. Almost as a by-product
of those processes, these systems aggre-
gate large volumes of data that, properly
analysed, can be used by treasury, pro-
curement or business units to ensure the
supply chain is as efficient as possible.
Similar solutions are available for T&E
processing and monitoring.
All these developments are recognisably
a linear continuation of the long-time
treasury drive for process efficiency and
productivity: cost cutting to you and me.
As well as forming the backbone of inter-
nal treasury, these AI-based solutions
will transform next-generation shared
service centres.
Where AI gets more interesting is in its
promise to revolutionise strategic and
value-added treasury functions.
Forecasting and ERP
What have treasurers put at or near the top
of their list of challenges for the last decade?
Forecasting cash forecasting, forecasting
for risk management, forecasting underly-
ing business variables from customer
orders, to supplier payments to procure-
ment need and to inventory levels.
12 // TREASURY PERSPECTIVES 2017/2018
That treasurers struggle with forecasting
is no surprise. Accurate forecasting
requires the intelligent evaluation of a
large number of internal and external
variables, the weighting of those varia-
bles, comparison with historical pat-
terns, the incorporation of real-time data
from the business, procurement and else-
where and a view on how good business
units themselves are at understanding
their situation. At even a small company,
this process involves far more data points
than a human, even one equipped with
Excel or even a good ERP system, can
accurately model.
Treasurers ought not to feel too bad it
turns out, across hundreds of studies
across a wide range of sectors, that a
small number of fairly statistical
algorithms, applied to past data, almost
always outperform even the most quali-
fied humans.
The latest solution is AI-based ERP
systems which promise to optimise
operational models and transform
business operations. So, for example, as
announced in mid-February, SAPs
S/4/HANA Cloud ERP product now
incorporates predictive analytics and
some machine learning capabilities in
its Analytics Cloud.
IBM Watson Analytics, Amazon Quick-
Sight, Microsoft Azure and Googles
Cloud platform also incorporate AI and
it seems clear that those treasuries able to
centralise the required datasets will be
able to choose from a wide range of pro-
viders able to intelligently crunch it and
provide the forecasts they need. Most
firms will simply rent these solutions
from the cloud.
In addition, companies like Microsoft
are making their AI capabilities, for
example in language processing and face
recognition, available through APIs and
they are linking with the largest open
source AI platforms, such as H2O.ai,
allowing other developers to add AI to
their products.
AI-enabled ERP solutions will combine
intelligent data analytics, smart automa-
tion, smart data gathering and sensor
technology with deep learning, natural
language processing and the technology
to respond appropriately to changing
situations in real-time. We are only at the
beginning of this process, but companies
like SAP are already deploying these
technologies and corporates will need to
re-organise all IT- and data-reliant pro-
cesses to incorporate the changes. The
impact on staff and organisational struc-
ture is hard to overstate. Is the day
approaching where an ERP (or TMS) sys-
tem will refuse a treasurers instructions
on the grounds that they are sub-optimal?
The impact of bank AI on treasury
It is clear that the incorporation of AI into
existing and new treasury technology will
have an increasingly profound effect on
the systems, status and staffing of corpo-
rate treasuries. But it may be the use of AI
by their providers of financial products
and services that has the greatest impact.
Transaction, risk and asset management
are, along with credit provision, the core
products treasurers need from their
banks. So how will banks adoption of
artificial intelligence change the world
for corporate treasury?
Artificial intelligence may well create
interesting new money management
tools, hedging systems and transaction
management services, but by far the most
important implication of AI for any bank
customer is how it will transform their
ability to derive insights from their data.
We have already seen in the retail market
that AI-driven bots can act as financial
advisers, matching customers to appro-
priate loan, credit card and investment
www.eurofinance.com
S P O N S O R E D A R T IC L E

A full spectrum of opportunities

in cash management
Digital technology is transforming and inspiring new work practices.

In todays digital world, treasurers expect to

extract value through digital capabilities and
channels to help them overcome treasury
challenges and seize growth opportunities.

Throwing new light on cash management

optimisation

Digitalisation is having a profound effect on

the way we communicate, commute and
consume services, including banking services.
As a result, banks are innovating to transform
and enrich their client experiences through
new solutions enabled by technology, as well
as providing new perspectives and taking a
multi-faceted approach to exploring potential
solutions. This is at the heart of our strategy
at DBS, and the inspiration behind the
development of our innovative dynamic
digital solutioning and advisory platform
DBS Treasury Prism.
The birth of DBS Treasury Prism
DBS Treasury Prism is a dynamic digital
solutioning platform that enables corporate
treasurers to simulate cash and liquidity
management scenarios within the context of
risk, return and regulation. It provides an
interactive interface for modelling structures,
benchmarking of solutions, guidance on
regulatory and tax implications, as well as
insights on local market practices.
In addition to the multi-faceted functionality
and insights that it offers, what distinguishes
DBS Treasury Prism is the way it has been
developed, which places the clients needs
and journey at the core of its development.
The result is a highly functional, pragmatic
and insight-led design based on in-depth
engagement and feedback from a deep pool of
both existing and prospective clients.
Embarking on the journey, DBS research and
insights emphasised:
Time challenges Treasurers say that it takes
too much time and preparation to define and
deliver an optimal cash management solution,
leading many to postpone or cancel the
implementation of new cash management
initiatives, particularly given competing
business priorities.
Keeping up to date Given the diversity and effectively using DBS Treasury Prisms dynamic
speed of change across Asia, treasurers and guidance on the latest restrictions, regulatory
finance managers lack the time and resources implications and documentation requirements.
to navigate and keep up to date with the
Transforming bank-corporate
plethora of regulatory and tax changes that
conversations
have an impact on cash management
decisions. This creates challenges when trying
Todays emerging technology solutions, from
to position a new cash management solution,
instant payments and collections through to
and treasurers may ultimately decide not to
bespoke use of industry standards and APIs
implement a new cash management strategy
to enhance integration, enables companies to
for fear of non-compliance.
unbundle bank solutions and reconstruct
Stakeholder engagement Treasurers them to build best-of-breed solutions. And
typically need to work with a large number of this digital transformation doesnt stop here.
stakeholders across the business, including
By leveraging digital banking capabilities and
central functions such as legal, tax and other
insights through online advisory tools such as
finance teams, as well as operating units.
DBS Treasury Prism, together with the banks
Consequently, the easier it is to collaborate
co-creation approach to new solution design,
and share knowledge, such as the ability to
treasurers and CFOs can keep up to date with
create a dynamic visualisation of account and
market developments and new opportunities,
liquidity structures, the more likely that a
and use this knowledge to shape the
cash management project will be successful.
companys digital strategy.
Implementation risk Implementing
Treasurers and CFOs will increasingly rely on
a new cash management solution, even
their banks advisory services to help articulate
with an existing bank, is seen as a high-risk
the value proposition of digitisation, and identify
project for corporate treasurers, often with
where the greatest value can be added. With a
significant internal scrutiny. Treasury
variety of drivers, whether technical, regulatory,
functions are often small, so it can be
or internal, such as supporting liquidity and
difficult to balance resources across
information requirements across the business,
day-to-day activities and specific projects.
online advisory services, such as DBS Treasury
Hence, treasurers tend to be sceptical about
Prism, can help to build multi-dimensional views
implementing new cash management
of potential solutions, pinpoint opportunities or
solutions unless they have assessed and
obstacles, and support treasurers in maximising
are fully assured of the benefits of doing so.
value for the enterprise.
Treasurers often express frustration that they John Laurens
are not necessarily able to replicate the Head of Global Transaction Services
solutions that they read about in the treasury
media or bank brochures due to regulatory or
tax considerations.

Uncertain benefits Many companies find it
difficult to quantify the cost and productivity
benefits of a new cash management solution,
which is a major obstacle when trying to
develop a compelling business case.
DBS Treasury Prism however, enables them to
simulate potential solutions and gain clarity on
the outcomes for their business to devise a
compelling business case. Furthermore, they
can manage project risk and complexity more
For more information, visit us at exhibition
stand S42 at EuroFinance Barcelona 2017 or
treasuryprism.dbs.com

products. AI is also being used to improve
retail credit scoring by looking at core
data more intelligently at firms like
online lender Elevate, Equifax and ID
Analytics. Experian too is researching
machine learning while relying for now
on traditional regression methods.
The same basic idea will be applied to
corporate banking and while the banks
emphasise how AI will lead to better ser-
14 // TREASURY PERSPECTIVES 2017/2018
vice, more accurate matching of prod-
ucts and services to client needs and
better pricing, treasurers need to think of
the possible downsides.
Banks have unimaginably large data-
bases of customer behaviour which, until
now, they have been unable to analyse in
any meaningful way. This data is not
simply basic data on loans, timely repay-
ments and core financial variables, it
includes details of every payment made
and received, the timing and location of
those payments, the behaviour of cash-
flows over time, data on FX flows and
hedges, data on indebtedness over eco-
nomic cycles and, importantly, data on
all the counterparties to these transac-
tions and, of course, the amount of money
the bank has made from all this activity.
The combination of Big Data techniques,
distributed cloud technology and AI will
increasingly mean that they will be able
to analyse this data. So what will they do
with it? On the upside, it should mean
that banks are able to offer a set of prod-
ucts radically improved by the addition
of AI-driven advice. So, for example,
banks will be able to analyse corporate
transaction data across the cash cycle to
determine which bills should be paid
when, which customers should be offered
discounts and what those discounts
should be. It could suggest how payment
terms could be altered more broadly to
improve the overall P&L and to model the
impact of suggested packages of products
and services tailored to the client.
The data could be used to look at balance
sheet optimisation, the best sources and
types of funding for particular projects or
acquisitions, for asset management and
hedging. And, because banks will use AI
for their own AML/KYC compliance,
they will be able to help corporates with
their supply chain and supply chain
finance optimisation.
www.eurofinance.com
In addition, because the banks will be
able to look at all their data, across all
sectors, geographies and company sizes,
they should be able to provide the kind
of benchmarking and advisory services
that treasurers have sought for the last
20 years.
However, there is a flip side to all this.
The banks investments in AI and
advanced analytics will be driven first
and foremost by a desire to improve
their own profitability. Their new-found
knowledge may well be used to examine
which clients are profitable and which
are not; how different products and ser-
vices should be priced according to indi-
vidual customers needs; which clients
are actually far more of a credit risk
than existing internal models and rat-
ings suggest because of their exposures
to other companies or risks made visible
by these advanced analytics; which cli-
ents do not meet their AML/KYC
requirements because of the nature of
their third-party relationships or pay-
ment flows and so on.
www.eurofinance.com
Already the banks have finally agreed to
pool anonymised credit data to improve
their own risk management and pricing
methodologies without AI. London-
based credit risk management startup
Credit Benchmark was founded in 2012
by ex-Goldman Sachs and Lehman
Brothers employee Mark Faulkner. It
specialises in pooling, aggregating and
anonymising credit risk data from lead-
ing global banks, so that financial institu-
tions can make better risk management
and capital allocation decisions.
In AML/KYC, there are companies like
ComplyAdvantage an AI and machine
learning RegTech startup to provide busi-
nesses with a feed of proprietary anti-
money laundering (AML) risk data as well
as on-boarding screening solutions and a
monitoring platform for know your cus-
tomer (KYC) processes. The system col-
lects data from sources such as Interpols
watch list, international sanctions and
media reports to automate due diligence
on clients that pose a criminal risk. Off
the back of this data it can provide solu-
tions like enhanced due diligence reports,
risk and compliance advice and HR ser-
vices. There is no guarantee that this kind
of development will benefit all corporate
customers and AI will simply make the
analysis more profound.
Not quite yet
The more ambitious of these advances
are some way off. Banks have found the
task of aggregating and centralising their
global databases extremely difficult and
they will continue to do so. Only when
that problem is solved can they then
begin to apply AI and other techniques
to those datasets and start to modify
their offerings meaningfully.
In the meantime, AI is being applied to
discrete functions that do not rely upon
that aggregation of customer data. So
companies will be able to benefit from
advances in, for example, asset manage-
ment where companies like Aidyia and
Kensho are using machine-learning to
run portfolios.
TREASURY PERSPECTIVES 2017/2018 // 15
 Payments perspectives
MORE THAN JUST RIPPLES
IN SWIFTS POND?
Cross-border payments have long been the bane of treasury: too slow, too expensive and
too opaque. Nimble FinTech service layers get all the hype, but the key competition is about
incumbency and the fundamentals of correspondent banking. By Mark Parsley.
Ask a corporate treasurer about the pain
points in payments and youd better pre-
pare for a rant: how long a payment takes
for the beneficiary to be paid; the predict-
ability of that time; impossibility of track-
ing payment status; inconsistency of data
requirements by different banks; poor
quality of remittance data sent with pay-
ments; costs and predictability of costs of
making a payment; the time and difficulty
of dealing with rejections, stopping pay-
ments and performing payment repairs.
All of these problems conflict directly
with treasurers need to automate pro-
cesses, prevent fraud, increase cash and
fee visibility and optimise liquidity man-
agement. They arise partly from the
archaic structure of the correspondent
banking system. This turns a simple pay-
ment between two parties into a game of
pass the parcel for six: payer, payers
bank, payers banks correspondent, ben-
eficiary banks correspondent, benefi-
ciary bank, beneficiary.
These parties do not themselves act con-
sistently: some have straight-through
processing (STP); some do not; some sit
on the payment longer than others; the
fees charged along the way differ bank to
bank, country to country. The addition
of KYC/AML, OFAC and other sanc-
tions and an inconsistent global regula-
tory playing field has simply thrown sand
into what was already a misfiring engine.
The contrast between this process and the
digital world most of us experience as
individuals is extreme as it is in other
areas of treasury. And it has not gone
unnoticed. Existing players, such as
SWIFT, Visa and Western Union have
launched new or improved B2B payments
solutions based on the existing system of
correspondent banks, and these compete
with new players like PayCommerce and,
though it is more for P2P and SMEs,
TransferWise. Others claim to have aban-
16 // TREASURY PERSPECTIVES 2017/2018
doned the old model and developed com-
pletely new systems based on distributed
ledger technology alone, Ripple being the
largest and best-established. (None actu-
ally uses a true Bitcoin-style blockchain
and so all rely more or less on existing
payment systems, whether ACH or corre-
spondent banking.) So which is best for
corporate treasury?
Building on the past
One way to address payments pain
points is to try to mitigate them within
the current infrastructure. This is the
approach taken by SWIFT with their
Global Payments Innovation (GPI). This
is simply the traditional SWIFT messag-
ing and correspondent banking system
plus what SWIFT calls a new set of busi-
ness rules captured in a set of multilat-
eral service level agreements (SLAs)
between participating banks.
In other words, SWIFTs member banks
at least those committing to GPI agree
to change their behaviour, to homogenise
their offerings, and to provide same day
use of funds, transparency and predicta-
bility of fees, end-to-end payments track-
ing and transfer of rich payment
information. Any banks that sign up to
GPI agree to cut down on the opaque
charging and delays from which they may
previously have benefitted and they also
have to ensure that all their partner banks
in the transaction chain also agree.
To improve transparency, SWIFT has
built an observer system which allows
GPI banks to monitor the SLA compli-
ance of their partners across the system
as well as a payment tracker, on which
payments progress can be viewed in real
time. This will be white-labelled by
banks for their clients.
Clearly a key challenge for SWIFT in
implementing GPI is persuading banks
to sign up to something that at least in
the short term appears to hurt them com-
mercially. The demands of the SLA force
them to do an existing job more quickly
and transparently, and without employ-
ing the tricks of the trade from which
they previously extracted additional
profits. These previous wrinkles include
percentage rather than flat fees, lifting
fees, additional correspondent banking
fees by intermediaries, float and FX
spreads that should simply be a fixed
spread over a real-time market rate. Why
should banks give these up?
SWIFTs answer, according to Wim
Raymaekers, Programme Director,
SWIFT GPI, is that GPI is about pro-
viding a better service by enhancing the
customers experience of making cross-
border payments. As a result, banks will
be able to retain and attract new custom-
ers and ultimately show leadership in
global payments innovation. They will
also achieve significant cost savings as a
result of the network and claim manage-
ment efficiencies they can achieve in cor-
respondent banking. Moving forward
with the availability of additional SLAs
and innovations, additional savings will
subsequently result from enhanced com-
pliance practices, optimised intraday
liquidity flows and increased straight-
through-processing rates.
These arguments seem to have been per-
suasive so far. According to SWIFTs
website, over 110 leading transaction
banks from Europe, Asia Pacific, Africa
and the Americas are already signed up
[to GPI] and more are expected to join.
These banks represent the overwhelming
majority of cross-border payments on the
SWIFT network.
A step in the right direction
The first iteration of GPI is not the end-
game and SWIFT itself acknowledges
www.eurofinance.com

that. The second phase goes one step
further, enhancing the digital transfor-
mation of cross-border payments by
enabling banks to offer new services
such as, for example, the facility to
immediately stop and recall a payment,
no matter where it is in the correspond-
ent banking chain.
Same-day settlement is better than the
three to five days it could currently
take, and it is a significant step towards
real-time (which is still not a priority
for most treasuries, according to
a recent SWIFT/EuroFinance white
paper). Similarly, with fee transparency
and predictability, GPI delivers post-
transaction clarity, and this can, over
time enable treasurers to predict costs
better. But treasurers ultimate wish is for
accurate upfront cost information.
And the payment tracker, critical as far
as any corporate treasurer is concerned
is clearly just a step welcome though it
is along the road to a more modern sys-
tem. It functions as a central payments
database, hosted at SWIFT, updated via
MT199 or API with data consumption
via GUI. So each bank in the chain
updates the SWIFT database via MT199
producing a set of messages that can be
viewed by the payer via a GUI that gives
details of when each bank did what. By
itself this does not provide full fee trans-
parency or predictability and it still relies
upon old technology at the banks tracking
payments through their systems quickly
enough to produce meaningful data.
SWIFTs claim that GPI will feature
transfer of rich payment information is
somewhat undercut by the fact that its
own documentation confirms that unal-
tered remittance information is limited to
the 140-character standard in its messag-
ing. While this could be used to deliver a
URL to a set of documents, its far from
delivering full remittance information via
the bank. Again though, the improve-
ments in information delivery are signifi-
cant and in many cases treasurers do not
need to key information via the banks.
The biggest threat to SWIFTs
supremacy and the largest
DLT-utilising payments
initiative is still Ripple.
www.eurofinance.com
Also, phase two of the SWIFT roadmap
for 2018 expects to deliver extended pay-
ment data.
But most important, no solution of this
kind addresses any of the fundamental
problems inherent in the traditional
infrastructure (the MT messaging stand-
ard was designed for X.25 networks in
the 1970s). In particular, it makes no
change to the basic counterparty struc-
ture of a traditional payment which cre-
ates the cost, delay and opacity in the
first place. If you believe that new con-
sumer demands and the digital-first com-
panies that service them are already
stretching the capabilities of the old sys-
tem, and that developments like the
Internet of Things (IoT) will make this
worse, then the GPI may well only be a
bridge to some new system of the future.
Further initiatives
SWIFT understands this. As Raymaekers
says, In addition, and more broadly,
SWIFT is also engaging the FinTech
community to assess available technol-
ogy against customer requirements. In
September we are hosting an Industry
Challenge competition for FinTechs to
develop overlay services leveraging the
SWIFT GPI platform. The FinTech
winners will be awarded 100,000 EUR
each to work with banks and SWIFT
on collaborative innovation concepts
that solve additional industry chal-
lenges in cross-border payments on top
of SWIFT GPI.
In addition, in January this year SWIFTs
exploration of the blockchain resulted in
the launch of a proof of concept (PoC)
scoped in collaboration with leading cor-
respondent banks to determine if
distributed ledger technology (DLT)
could help banks reconcile their nostro
databases in real time. Thirty SWIFT
GPI member banks are participating in
this PoC, set to show early results at the
next Sibos meeting. Wells Fargo, Bank of
New York Mellon, ANZ, BNP Paribas,
DBS Bank, and RBC Royal Bank are
among those participating.
As SWIFT explains on its website, under
the current correspondent banking
model, banks need to monitor the funds in
their overseas accounts via debit and
credit updates and end-of-day statements.
The maintenance and operational work
involved represents a significant portion
of the cost of making cross-border pay-
ments. This PoC will test whether distrib-
uted ledgers may be able to help banks
reconcile those nostro accounts more effi-
ciently and in real time, lowering costs
and operational risk.
SWIFT will deploy open-source
Hyperledger technology, and combine it
with key SWIFT assets to bring it in line
with the financial industrys require-
ments. Using a private blockchain in a
closed user group environment with spe-
cific user profiles and strong data con-
trols; user privileges and data access will
be strictly governed.
The fact that SWIFT is looking at block-
chain/DLT is a quiet acknowledgement
that the competition is doing the same,
and may well be stealing a march.
Baby steps to the future
For example, in an attempt to remove
some steps in the payment chain, and to
benefit from blockchain technology, Visa
is working with Chain to develop Visa
B2B Connect, to give financial institu-
tions a simple, fast and secure way to pro-
cess business-to-business payments
globally via a new near real-time trans-
action system designed for the exchange
of high-value international payments
between participating banks on behalf of
their corporate clients.
Chain, Inc. is a technology company that
partners leading organisations to build,
deploy, and operate blockchain networks
and is author of the Chain Protocol,
which powers the Chain Core block-
chain platform. Its strategic partners
include Capital One, Citigroup, Fiserv,
Nasdaq, Orange, and Visa.
As Visa and Chain describe it: Visa is
working with Chain to build Visa B2B
Connect using Chain Core, an enter-
prise blockchain infrastructure that
facilitates financial transactions on scal-
able, private blockchain networks. Build-
ing on this technology, Visa B2B Connect
will facilitate a consistent process to
manage settlement through Visas stand-
ard practices.
In other words, this platform will cut out
the majority of the correspondent bank-
ing steps in the standard payment by
allowing banks and corporates to make a
payment direct to one another using the
Visa infrastructure as a central clearing
TREASURY PERSPECTIVES 2017/2018 // 17
 point. A bank can pay into B2B Connect,
and Visa will pass the payment onto the
final counterparty, removing the need
for multiple intermediary banks.
The advantages, according to the devel-
opers, are familiar from the claims of
GPI: predictability and transparency
banks and their corporate clients receive
near real-time notification and finality of
payment; security signed and crypto-
graphically linked transactions are
designed to ensure an immutable system
of record; and all parties in the network
are known participants on a permis-
sioned private blockchain architecture
that is operated by Visa.
Are these claims true? We will know
when Visa rolls out the pilot and time
will tell if it emerges as a real competitor
to SWIFT on SWIFTs home ground.
As an aside, Mastercard added block-
chain APIs to its developer site to facil-
itate new commerce opportunities for
the digital transfer of value, following
Visas announcement that the B2B Con-
nect pilot would start this year. Master-
Card has, however acquired VocaLink,
the operator of UK ACH clearing which
is a partner in many immediate pay-
ments schemes worldwide, including the
US, Singapore, the UK and Sweden.
This is a shrewd move as VocaLink
understands both ACH and card pay-
ments and has experience of corporates.
While the components dont yet fit
together, watch this space.
18 // TREASURY PERSPECTIVES 2017/2018
Making waves
But the biggest threat to SWIFTs
supremacy and the largest DLT-utilising
payments initiative is still Ripple. Ripple
claims to be a real-time gross settlement
system (RTGS), currency exchange and
remittance network that uses a sub-set of
blockchain technology called Interledger
Protocol (ILP).
So what happens in a Ripple transac-
tion? (You can find out on YouTube.)
Ripple still uses the idea of correspond-
ent banking. So in a transaction between
two institutions there still sits an interme-
diary bank. These are the key stages:
 he originating bank sends
T meaning higher auto-reconciliation
1 out a request to the beneficiary
bank and correspondent bank
to obtain their processing fees
and, if required, FX rates.
 re-transaction
P validation:
2 this includes compliance
screening and account verifi-
cation checks. Since all parties
have this information, they
can pre-validate the transac-
tion to ensure STP.
 he originating bank accepts
T native to the existing infrastructure, the
3 the best quote for which they
can meet the compliance
requirements. The benefi-
ciary bank can then lock the
quote. At this point Ripple ini-
tiates a hold on the funds in
the banks ledgers.
 he ILP ledgers generate
T tional features from SWIFT, may be
4 cryptographic signatures to
verify that funds are commit-
ted to the transaction. The
funds are simultaneously
released across all the parties
ledgers ensuring no settlement
risk.
 pon completion Ripple pro-
U
5 vides a confirmation message
to all parties.
All of this happens within one or two sec-
onds faster, cheaper and less compli-
cated than the current process with
end-to-end visibility and rich informa-
tion exchange.
The benefits for treasurers are clear: set-
tlement risk is almost completely elimi-
nated (risk remains if banks are not
operating at the same time); Ripples auc-
tion system assures best FX execution;
counterparties in the transaction chain
can be limited to those who match pre-
specified compliance criteria; Ripple
uses standard ISO and MT messaging
(which of course means it is subject to
some of the same limitations as SWIFT);
there is no loss of data in the transactions
rates and all fees and costs are known
upfront.
Also, corporates using Ripple are only
indirectly exposing themselves to a Fin-
Tech start-up because their banks, not
they themselves, are the counterparties
in the network. Treasurers are still inter-
acting with trusted bank partners.
Is blockchain the answer?
For Ripple to become a significant alter-
blockchain has to be proven suitable for
the purpose. Plenty of people say that it is
not. So, as explained above, SWIFT is
exploring a blockchain PoC but in
announcing that initiative it also says that
whilst existing DLTs are not currently
mature enough for cross-border payments
this technology, bolstered by some addi-
interesting for the associated account rec-
onciliation, says Wim Raymaekers,
Head of Banking Market and SWIFT
GPI at SWIFT. This PoC gives us the
opportunity to test DLT and determine if
it can be applied to this particular use
case. It will initially show early results at
the Sibos meeting in Toronto.
www.eurofinance.com
S P O N S O R E D A R T IC L E

One point in, all world around

Midea Group implements Global Account Overview provided by Bank of China.

The successfully implemented Global

Account Overview Project of the Midea
Group Co., Ltd, hereinafter referred to as
Midea Group in June 2017, marks the new
phase of the global cash management
cooperation between Bank of China and
Midea Group.

As a global diversified household appliance

enterprise with an integrated industry
chain and a small household appliances
product group, such as air conditioning,
refrigerator and washing machine, Midea
Group has a leading position in China. In
the early days, Bank of China has built up a
close cooperative relationship with Midea
Group in domestic cash management. With
the transformation to a global enterprise,
Midea group urges to create a pathway for
domestic and overseas capital and achieve
high-efficient global capital centralized,
which has become a favorable opportunity
centralized collection and payment, cooperation with Bank of China in global
for Bank of China to further the cooperation
comprehensively satisfying Midea Groups cash management, Midea Group meets
with Midea Group.
domestic, cross-border and other business the requirements of capital visibility,
requirements. Among them, Global Account capital controllability, capital efficiency
Overview as a punch line of realizing global and cash flow optimization, and ultimately
accounts visualization, obtained high achieves win-win cooperation between
recognition from Midea Group. Midea Group and BOC.

Global Account Overview of Bank of China

After digging into the customers needs for
cash management, Bank of China has paid
high attention and made a good preparation
with quick response. With the integrated
operation of BOC group at home and abroad,
Bank of China has cooperated efficiently
with Bank of China Hong Kong and other
overseas institutions. With a leading
position in global cash management, Bank
of China provides Midea Group with
expertise of overseas capital centralized
from the perspective of global fund visibility,
controllability, operation and multi-currency
enables Midea Group to set up a customized
regional framework according to its
globalized strategic layout, monitor the
financial status of the global accounts at the
same interface and inquire the transaction
reports, which highly accords with
continuous global outreach of Midea Group.
Meanwhile, the accomplishment of Global
Account Overview fully presents the strong
comprehensive strength and the service
advantages of the domestic and overseas
integration of Bank of China, and highlights
the competitiveness and competence of
Bank of China in global cash management.
Up to now, Global Account Overview of
Midea Group has covered 39 enterprises
and 91 accounts, including the accounts in
Guangdong province, Jiangsu province and
Anhui province in mainland, and five
overseas countries and regions, such as
Hong Kong, Indonesia, Vietnam, Austria For more information, visit
and the United States. Through the www.bankofchina.com/en
 He is backed up by Stephen Grainger,
Head of North America at SWIFT, who
says, there is a recognition in the indus-
try that perhaps distributed ledger
technology at this point isnt ready for
the wholesale application to manage all
correspondent banking.
The bankers on SWIFTs GPI Vision
Group also explain GPIs reliance on tra-
ditional processes by claiming that nei-
ther banks nor their regulators are ready
to risk the international payments system
on an untested technology. So Tony
Brady, managing director and head of
global product management for BNY
Mellon Treasury Services, who is a
member of the SWIFT GPI Vision
Group, says: Our early view is that
while blockchain and distributed ledger
have a fair amount of promise, its a lit-
tle early to try to tackle cross-border
payments, particularly high-value
cross-border payments where were put-
ting millions of dollars at risk.
Its not just SWIFT, which has perhaps a
vested interest in downplaying the new
technology. As explored in the block-
chain article (page 30), the Canadian
central bank has come to the same con-
clusion and in May, the Bank of England,
in its paper, A blueprint for a new RTGS
service for the United Kingdom, also
Get informed
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20 // TREASURY PERSPECTIVES 2017/2018
said the Bank has decided not to build
the renewed RTGS service on Distrib-
uted Ledger Technology, in light of its
findings that the technology is not yet
sufficiently mature to provide the excep-
tionally high levels of robustness required
for RTGS settlement Further work is
required to address privacy and system
scalability in particular, and these and
other topics suggested by this initial work
will drive the Banks future research pro-
gramme on this technology.
Ripple rebuts the criticism of its use of
the blockchain by saying that ILP gets
around the issues raised because it simply
connects existing bank ledgers rather
than holding the ledger itself. In effect,
banks connect their core systems to the
Ripple network analogous to how they
currently connect their core systems to
the SWIFT network and the ILP is used
to co-ordinate the payments. This
addresses the fears banks have expressed
about the blockchain around privacy,
scaleability, regulatory approval and the
issue of having to get all parties to a block-
chain to agree to validate a transaction.
However, even Marcus Treacher, Global
Head of Strategic Accounts, Ripple and
formerly HSBCs Global Head of Pay-
ments Innovation and a member of the
Global Board of SWIFT from 2010 to
2016, admits that a single blockchain is
not viable, the future is in different cur-
rency blocks with Ripple an interconnec-
tion. The fact that he has joined the new
company, along with Marjan Delatinne,
who had been leading customer engage-
ment for SWIFTs GPI, suggests that
Ripple believes the blockchain can be
part of a new global payments system in
some way.
Whats not to like?
For treasurers the battle looks like a win-
win. If Ripple does what it says, treasur-
ers will benefit. If it fails but in the
process forces SWIFT to improve its core
offerings, then treasurers benefit. And
GPI, as Raymaekers says, is real! More
than 40 global transaction banks have
begun actively using or implementing the
SWIFT GPI service, with another 50 in
the implementation pipeline. Hundreds of
thousands of GPI payments have already
been sent across more than 85 country
corridors. Treasurers are already win-
ning.
www.eurofinance.com
S P O N S O R E D A R T IC L E
Uniting the strengths of travel
managers and treasury
Valuable arguments for professional T&E payment solutions.
In many companies, the decisions to be made
concerning Travel & Entertainment payments
are becoming more multi-disciplinary, and
besides travel management increasingly a
matter of treasury. Hence treasurers are more
interested in understanding the background
of T&E payment decisions. Travel managers,
in turn, are more interested in understanding
the work performed and the challenges faced
by treasurers.
The following arguments are the uniting
benefits of travel managers and treasury
when they decide for professional T&E
payment solutions:
Improved liquidity
All T&E payment solutions offer greater
liquidity than alternative payment methods,
such as petty cash or direct invoicing.
However, unless travel accounts for an
exceptionally high proportion of the
companys costs, small differences in
payment terms will have almost no impact on
the companys overall working capital.
Improved process efficiency
Seamless financial system integration
Electronic invoicing lets you upload format-
friendly information seamlessly into your
accounting system. No manual entry is required.
Rapid invoice reconciliation
For users of a centrally billed T&E payment
account (also known as a lodge card), a single
invoice covers all payments by your employees.
A reconciliation process that used to take days
can now be completed in minutes.
Prior to signing with AirPlus, reconciliation and
accounting of employee travel took up to a week.
Now it takes us 30 minutes to reconcile employee
travel information. We get the detail we need,
last-minute bookings are easier and we can
instantly account for what we spent.
Teo Contreras,
Assistant Financial Controller, PGS Americas
Minimize cash advances
Cash advances can be eliminated by
employees paying directly through their T&E
payment solution or withdrawing cash on
their corporate cards while travelling.
Lower payment costs
Handling costs are much lower than
cheques or wire transfers. Credit is interest-
free for the vast majority of travel expenses.
Improved compliance and risk management
T&E payment solutions mitigate a wide range
of operational, financial and reputational risks.
Prevent employees from over-spending/
spending outside policy You can limit how
much employees are allowed to spend through
monthly limits and individual transaction
limits. You can also control who they are
allowed to pay by setting limits on which types
of merchant may accept the card.
Make T&E payments without plastic cards
Companies dont like giving plastic corporate
cards to everyone who works for them, e.g.
contractors, interns or new employees.
Products like lodge cards and virtual cards
allow closely controlled payments for T&E
without having to issue any plastic.
Improved visibility
Understand your T&E spend better
By channelling all T&E payments through
one process globally a process with
excellent, precise reporting you can fully
understand how much T&E is costing your
company, and when you need to pay.
Track budgets AirPlus payment solutions
allow the addition of up to nine separate fields
of employee data at time of payment. That
allows you to easily break down spend by
employee, client, project or department. And
so can your budget-holders. Daily transaction
feeds into your expense reporting system
ensure fast visibility of total spend.
pigprox Fotolia #104758470
By Thorsten Grf
Head of Strategic Accounts
Gain better supplier deals
Detailed information about how much
employees are spending, and with which
suppliers, makes the difference when
negotiating corporate discounts.
About AirPlus International
AirPlus is a leading international provider of
solutions for the day-to-day management of
business travel. 49,000 corporate customers
count on AirPlus for the payment and analysis
of their business trip costs. Products and
services are marketed worldwide under the
AirPlus International brand. The AirPlus
Company Account is the most successful
central bill account based on UATP.
Contact:
AirPlus International
Dornhofstrae 10
63236 Neu-Isenburg
Germany
T: + 49 (0) 61 02 204 444
F + 49 (0) 61 02 204 3490
btm@airplus.com
For more information, visit
www.airplus.com
 Payments perspectives
A FUTURE-PROOF PAYMENT SYSTEM?
While SWIFT, Ripple and others battle it out in one region of RTGS space, treasurers
can ask their banks for a different payments mechanism, one also being transformed by
FinTech and the blockchain. If cost is an issue, or if your digital business creates a high
volume of low-value payments, what about ACH? By Simon Brady.
Automated Clearing Houses (ACHs)
provide domestic clearing at exception-
ally low cost and with very high trans-
parency and service levels. Because
clearing is critically important to the effi-
cient operation and integrity of the finan-
cial system, ACHs are typically classified
as SIPs or systemically important pay-
ments systems and so they are to an
extent future-proofed: they will be main-
tained and their activities are monitored
by a governing body, usually the national
central bank.
Most banks do not provide individual
businesses with the option to send money
using the countrys local ACH systems
but it has long been clear that a global
ACH, a consolidation of the local ACHs
into some kind of network, could create a
powerful alternative cross-border pay-
ment system.
However, with no global ACH standard,
and over 26,000 rules that govern bank
routing in all the different countries, plus
ever-increasing compliance requirements,
attempts to create such a network in the
past have failed to make progress.
PayCommerce
To turn cross-border ACH into a rela-
tively seamless and easy-to-use service,
banks needed to be able to join a net-
work with a single commercial agree-
ment that uses technology to do the
heavy lifting for them. PayCommerce is
one: founded in 2006 it is a global ACH
payment network provider which pro-
vides wholesale FX services and a local
ACH solution across borders. PayCom-
merce says it can save users up to 80%
on the cost of a payment.
There is a new generation of tech busi-
nesses that are very global and have a lot
of payment needs, whether collections or
settlements, so our focus in the next few
years is on this new generation of compa-
22 // TREASURY PERSPECTIVES 2017/2018
nies and large corporates. We provide a
single platform for enterprise-wide pay-
ment needs, whether outgoing or collect-
ing payments. There is a lot of cost saving
when you streamline the platform and
provide an enterprise-wide solution, said
Abdul Naushad, PayCommerce Founder
and Executive Chairman, describing the
initial ambitions of the company.
PayCommerce has come a long way
since then. In April 2017, the company
announced that it had achieved a mile-
stone of over 100 banking and financial
services institutions in its consortium,
spanning more than 80 countries.
According to the company, PayCom-
merce enterprise customers include
seven of the top global banks, 11 of the
top 50 US banks, 14 Global Fortune
500 firms and eight US Fortune 500
companies. Additionally, the PayCom-
merce platform has processed over US
$400 billion, consisting of over 300 mil-
lion transactions in the last 12 months.
Earthport
Its main competitor is Earthport, which
also claims to be the leading payment
network for cross-border payments pro-
viding international ACH payment
capabilities to its consortium bank part-
ners, representing cross currency pay-
ments in more than 60 countries and 25
currencies. Like PayCommerce, Earth-
port effectively re-intermediates banks
into a global ACH payment system and
lets banks, money transfer organisa-
tions, merchant acquirers, gateways
and newer global payment providers
make payments globally on behalf of
customers or directly to suppliers or
global sub-merchants.
Tipalti
The previous two companies provide
banking services to banks, which can
then offer an improved service to their
corporate clients. However, corporates
can access global ACH more directly via
a cloud-based portal such as Tipalti
which is a global payment automation
service that gives global ACH as one of
its choices of payment channel. These
portals offer a range of integrated ser-
vices, including payee registration
through to invoice processing, tax and
regulatory compliance, remittance, pay-
ment issue resolution, fraud risk mitiga-
tion, payment reconciliation and payee
reporting. The systems also check that
payees are not on any international anti-
terrorism, anti-drug trafficking, and
anti-money laundering watch lists prior
to payments being made.
Choosing this type of system, rather than
asking your banks to utilise a different
channel, means integration with ERPs,
accounting and performance manage-
ment systems. So the choice is not simply
a new, cheaper payments channel offered
by your banks, it is a fully-featured auto-
mated payments and remittance system.
Blockchain
Both PayCommerce and Earthport
started out by focusing simply on the
value-added parts of the transaction
chain: initiation, processing, capture and
customer service: they did not aspire to
create real-time, instant payments in
competition with other RTGS networks.
However, both companies have also
announced blockchain-based initiatives
to take their consortium networks to the
next level, Earthport announced its gate-
way partnership with Ripple in August
2015, which led to the launch of the
Earthport Distributed Ledger Hub for
multiple ledgers, announced in January
2016. This was designed to provide con-
nectivity to additional distributed ledg-
ers as they emerge, all available via a
single relationship with Earthport.
www.eurofinance.com
The structure of transactions is not
changed by the addition of blockchain,
the Ripple technology simply speeds up
the transaction and all counterparties
reconcile to single balances on the Rip-
ple Consensus Ledger. In other words,
the addition of Ripple unites corre-
spondent banks and market makers in
the same ledger which allows all the
transaction information to be shared
between Earthport the banks and the
FX market makers.
In April 2016, Earthport executed the
first cross-border payment transaction
received via distributed ledger for San-
tander UK, enabling it to become the
first UK bank to use distributed ledger
technology (DLT) for cross-border pay-
ments globally.
PayCommerce has developed a different
blockchain model based on its proprie-
tary Federated Ledger to enable real-
time, instant payments, clearing and
settlement integration for its banking
consortium. The Federated Ledger is a
hybrid, integrating both distributed and
centralised ledgers which enable faster
payments across networks via its messag-
ing platform. According to the company,
this takes the next step in instant pay-
ments by uniting disparate regional and
country systems onto PayCommerces
bank consortium model which is interop-
erable with other global systems and net-
works to maintain ledger balances across
all parties.
www.eurofinance.com
The Federated Ledger is a hybrid of both
distributed and centralised ledgers. It
acts as an integration point across differ-
ent networks of the distributed ledgers.
But it is still the consortium banking
model that, in both cases, creates the
foundation on which the global network
is based.
PayCommerce has announced the
launch of the pilot programme to deliver
instant payments between the US and
India then extended to UK to India later
in the fourth quarter. In 2017, the firm
plans to roll out additional originating
and receiving countries including Mex-
ico, other GCC countries and South
Africa; followed by Australia in 2018.
The first phase of testing has been
completed and the firm sees 2017 as
the year in which it rolls out a multi-
country real-time, cross-border, account-
to-account service.
For corporates these developments
mean ever simpler and cheaper access to
faster, more visible payments. There is
also clearly a process of convergence
between the larger bank networks, and
the use of blockchain technology, which
will increasingly pit these consortia
against each other and against incum-
bents such as SWIFT. For banks this
will create a complicated set of choices
about technology and partners. For
treasurers it simply means a wider range
of ever simpler, cheaper and faster pay-
ments channels.
TREASURY PERSPECTIVES 2017/2018 // 23
 FinTech & banking perspectives

TAILORED TREASURY:
THE PROMISE OF FINTECH
Disruptive new technologies promise to shake-up the payments
space by offering highly-tailored services to specific market segments.
What does it all mean for treasurers? By Simon Brady.

At the fundamental, cross-border infra-

structure level, the services offered by
banks to their customers are being trans-
formed by new FinTech-driven network
initiatives. But for most treasurers, Fin-
Tech treasury solutions are service layer
integrators that allow companies to plug
into multiple external systems and auto-
mate one or more treasury processes at
the same time.

The choice solutions in the payments

space is bewildering, but most are aimed
at smaller and midsized companies that
need to receive multi-channel digital pay-
ments as part of the digitalization of their
business and who need to make increasing
volumes of low-value payments for
example firms that do business with many
small vendors or marketplaces.

Online payments and processing

So, to list just a selection: Adyen, Stripe,

2CheckOut, Tipalti, Braintree (backed
by PayPal), GoCardless, Paymill, Credo-
rax, YapStone, YeePay, Omise, Trustly
Group, Bridgepoint, Cheddar Up, Fly-
wire, CyberSource (a VISA company),
Payoneer, WePay, PaySimple, Network
Merchants, Citrus Payment Solutions,
Exchange Corporation, Zooz, Mobeam,
Slimpay, ToT Money, Quisk, Alpha Pay-
ments Cloud, Sequent Software, Razor-
pay, Payza, Authorize.net, BlueSnap,
Bitpay, Skrill and many others in the
payment gateway space.
This wave of largely new companies is
often seen as an explosion of innovation
but many of them look very similar to the
Authorised Payment Institutions
launched in Europe following the first
Payments Services Directive and spurred
on by SEPA. For example, Nuapays
SaaS solution allows companies to easily
set up payment and collection accounts,
make and receive payments, create auto-
mated payment and collection schedules
and have access to full reporting via an
online dashboard. The service is an off-
shoot of Sentenials well-established
Cloud platform for acquiring ACH
transactions, SEPA credit transfers and
direct debits. That payments processing
business that directs more than 35 bil-
lion worth of payments to European
banks annually. Sentenial also provides
its payments origination and processing
services directly to corporates and to
other payment service providers (PSPs).
For corporate treasurers, Adyen and
Tipalti are gaining ground. Adyen is a
global platform that connects businesses
directly to Visa, Mastercard, Paypal and
all the other key payment methods, ena-
bling them to accept payments across
online, in-app, and in store. It is a well-
established platform that doubled its
transaction volume to $90 Billion in
2016, and has recently added Microsoft,
Sephora, Symantec, WeWork and
Bonobos to its impressive customer roster
of companies like, Uber Facebook,
Evernote, Etsy, Nike, Spotify, Airbnb,
Mango, Vodafone, Booking.com, KLM,
Superdry and Groupon.
Tipalti (see article on ACH) is one of the
leading providers of B2B supplier pay-
ments to global enterprises. The com-
pany claims to be the first-ever cloud
platform to automate the entire end-to-
end accounts payable workflow. Its aim
is to create an automated, seamless sys-
tem to allow accounts payable depart-
ments to manage their entire global
supplier payments operation. It handles
the payment chain from invoice
processing, supplier on-boarding, tax
compliance, anti-money laundering
compliance, global payment remittance,
and payment reconciliation and AP
financial reporting.
Unlike most FinTechs, Tipalti is invest-
ing heavily in infrastructure to allow it to
service companies from smaller fast-
growing operations to global enterprises.

24 // TREASURY PERSPECTIVES 2017/2018 www.eurofinance.com

Big overlaps

All these companies all offer different
ways to achieve an overlapping set of
functions: to replace expensive or slow
money transfer services, to provide, gate-
way, and payment acceptance capability
and, in some cases secure PCI DSS com-
pliance. In the case of a company like
PaySimple, these core functions are
wrapped inside an integrated automatic
billing and e-invoicing system. It, and
others, also provide APIs for the develop-
ment of additional services such as build-
ing an online store.
In most cases, the solutions are designed to
solve problems encountered by merchants
in their online channels, especially smaller
companies without the expertise or infra-
structure to develop their own systems.
So Payoneer provides international pay-
ments capabilities for companies that do
business with multiple small vendors or
marketplaces (like Airbnb) cross-border.
The beneficiary simply opens a Payoneer
account and retrieves the money in the
currency preferred via a card number or
bank account transfer.
Similarly, Transferwise, which started out
as a consumer payments platform, has
launched a B2B payment service as well as
a batch processing service for multiple
invoices. As yet, it is a small player that
uses a peer-to-peer methodology to exe-
cute at the mid-market rate. This means
that it cannot guarantee a time frame for
transactions (quoting between one and
four days) and there are various other
limitations in the service which make it
useful only for the smaller SMEs.
COOL INNOVATION FROM DBS BANK
Ever wondered how fantastic it would be
to automatically model your current cash
and liquidity structures, discover how
optimal they are and then get recom-
mendations, also automatically, on how
to achieve a better solution? Singapore-
based DBS bank, fast gaining a name for
itself for its innovation in customer offer-
ings, has developed a digital simulation
platform called Treasury Prism which
does just that.
DBS Treasury Prism takes into account
regulatory and tax changes in each
country where a customer might have
business operations and what is possible
in terms of treasury and cash manage-
ment solutions in each market. You can
compare optimised accounts in order to
find the best solution to realise cost-sav-
ings and optimise liquidity and save
from net debt reduction. An optimisa-
tion score, derived from an algorithm
factoring in tax, yield, banking and cor-
porate costs, allows you to compare and
contrast various strategies.
EuroFinance saw early versions of the
platform many months ago and were
impressed at both the concept and how it
was being developed. DBS formed a mul-
tidisciplinary squad to work with 70 cur-
rent and prospective clients to understand
their banking and cash challenges. The
group identified five critical areas from
time challenges to regulatory constraints
in order to design the functionality of
Treasury Prism. The platform has been
further developed with rigorous client
feedback and its now at delivery stage.
The result is a well-designed tool that
eliminates time challenges that treasury
faces when trying to map out an optimal
cash management solution. It also quan-
tifies the cost and benefits of a new cash
solution which means that it in effect it
can produce a compelling business case
for change. Also given Asias fast-chang-
ing regulatory environment, rather than
rely on external help to navigate complex
and rapid changes, Treasury Prism takes
those into account as they happen. The
resulting visualisation of account and
liquidity structures across markets that
Prism delivers is also helpful in securing
cooperation across the business and just
makes it easier to see what can work best
for treasury.
Treasury Prism supports a treasurys
current and future needs in a conveni-
ent, ecient and value-rich way that
also allows benchmarking of solutions,
says Iain Taylor, Managing Director
and COO, DBS Global Transaction
Services. This is a single source of
advice and information to help treasur-
ers optimise cash management.
Best of all Treasury Prism is bank agnos-
tic, enabling treasurers to independently
model structures whether a DBS client or
not. And, it is free.

Stripe provides e-commerce merchant

payment services through open API
development as well as competing with
firms like Braintree and Cybersource as
a gateway and payments enabler.

PaySimple provides automatic billing,

e-invoicing, and payment acceptance
services, including a device add-on to
accept card payments. So it competes
with other merchant gateway and ser-
vices providers.

And some companies attempt to add

value by helping to maximise consumer
purchases. So Klarna, for example,
extends instant credit for online pur-
chases to consumers without them hav- Explore optimised simulations
ing to provide payment details.
A A summary of your current simulation is displayed on the simulation bar.
Solutions for SMEs
B Treasury Prism generates multiple potential solutions based on your balances
Small and midsized businesses who want and flows, and displays these simulations by highest benefit score. If you have a
to expand internationally, but have no preferred criteria, you may filter the simulations accordingly.
infrastructure for making or receiving C Select up to 4 simulations and compare with your current simulations.
international payments, can choose from

www.eurofinance.com TREASURY PERSPECTIVES 2017/2018 // 25

 the multitude of e-Commerce and pay-
ments platforms listed previously. They
can also look at a service like Western
Unions Edge platform, launched in
April last year. This is a business-to-busi-
ness platform that connects companies
with each other and which has been
designed to take on services like Amazon
and Alibaba. WU EDGE unifies AP and
AR workflows with Electronic Invoice
Presentment and Payment (EIPP) on a
single global platform. SMEs can invite
existing and new partners to trade glob-
ally and interact with them in real-time
to potentially enhance trade and growth.
It also provides analytics via its foreign
cash management and trade intelligence
modules to generate insights for compa-
nies wishing to optimise their cash flows
and profits.
Edge differs from competitors firstly
because it is designed to provide a plat-
form that connects businesses already
doing business with each other and sec-
ondly because it is based on an existing
network of 100,000 companies that
make payments through WU anyway.
Edge offers invoicing services in one
platform, and allows near real-time
service for 22 currencies at its launch.
The WU EDGE platform provides fee-
free, real-time transactions in 51 cur-
rencies, with capabilities in over 130
currencies overall.
WU Edge has competition of course.
Chinese e-commerce giant Alibaba has a
platform that allows wholesale buyers
and sellers of items to find each other and
facilitate payments. Amazon has a simi-
lar service called Amazon Business.
However, both of these services are a by-
product of marketplaces of physical
transactions. Edge is solely a platform for
companies to execute financial transac-
tions. It also provides analytics and help
with international compliance, unlike
most e-commerce platforms.
Western Union does face FinTech com-
petition. B2B start-up Currency Cloud is
one of the most prominent and in March
it raised $25 million from Googles ven-
ture capital arm, GV and others. The
company is both a plug-and-play pay-
ments platform as well as a set of APIs
that let developers create their own cus-
tomised access to global payments. Cur-
rency Cloud has had more than $25
billion sent across its network. It works
with other FinTech businesses such as
mobile remittance business Azimo,
crowdfunding platform Seedrs and for-
eign exchange card Revolut.
Treasurers can also look to FinTechs in
more specific treasury silos:
26 // TREASURY PERSPECTIVES 2017/2018
Accounts Payable Automation
The drive to remove paper invoices,
cheques and purchase orders is hardly
new. So ACOM has been automating
B2B payments since 1983; Corcentric
has been focusing on e-invoicing since
1998 and Comdata, the payment proces-
sor and corporate cards giant, was
founded in 1969.
However, there is a large group of newer,
mostly Cloud-based FinTechs, again
often smaller and midsized companies,
offering as a stand-alone service for one
or more types of payments. These typi-
cally offer to make batch payments, via
virtual card, ACH or wire, with all pay-
ments managed via the legacy ERP sys-
tem. The automation is not simply the
removal of paper, it is the aggregation of
data from multiple systems, business units
and locations to manage payments in one
place with comprehensive reporting.
FinTech is largely a
wait and see game for
corporate treasury, with
the most relevant action
happening at the banks.
To give some idea of the number of Fin-
Techs that pitch themselves in the billing
and payments automation space, this is a
list of just some of those that have been
successful enough to raise announced
VC funding: Zuora, MineralTree,
Nvoicepay, ConnectPay, Paymentus,
Payveris, Aria, MyCheck, Fortumo,
Tradeshift, Traxpay, Vindicia, Bill.com,
Boku, Transactis, PaySimple, Danal,
Judo and NumberMall.
These companies target specific business
types. Zuora focuses on businesses with a
subscription model. ConnectPay is a
card payment gateway. Payveris is a set
of digital tools and APIs designed for
small banks and credit unions to allow
them to offer digital payments and
money transfer solution. Boku is a mobile
payments solutions for SMEs. Mineral-
Tree focuses on accounts payable
for growing and midsized businesses.
MineralTree captures invoices as they
arrive, routes them for approval through
existing workflows and directly executes
payments.
The future these companies envisage is
one in which firms plug into one or more
cloud-based solutions on a subscription
basis to access particular functionali-
ties. Businesses that use this model will
avoid legacy system issues, nor will they
be forced to buy one system that does
everything they need. Instead they will
end up with a stack of solutions work-
ing together and integrated with an
existing (or new) ERP.
Supply chain finance
Getting supply chain finance to smaller
companies is another problem being
solved by technology though in this case
the solution may be a combination of
older technology and new joint ventures.
Demica has been providing working
capital solutions to large multi-nationals
via its reverse factoring platform for
some years. This type of SCF has been
confined to large corporations not just
because of the need to have significant
global banking relationships, but also
because only companies with fully elec-
tronic invoicing can get invoice approval
fast enough to enable approved invoices
to be funded by the banks.
To help access the estimated $3 trillion of
potential for SME SCF, Demica has just
announced a partnership with FCI, a
facilitator of supply chain finance tools,
to create FCIreverse, a solution that uses
FCIs relationship with hundreds of local
and regional banks and factoring com-
panies to allow FIs across the globe to
vouch for their own clients.
Demica CEO Matt Wreford explains,
This way of partnering regional banks
with each other is going to transform
the industry over the long-term. It
will enable supply chain finance to go
into the mid-market, where global
banks arent interested in operating.
And it will provide a lot more financing
to SMEs, because regional banks will
run smaller programs and onboard
smaller suppliers.
These SCF platforms need relationships
with banks to help with client onboard-
ing and credit provision, but they also
need access to more clients and more
financeable invoices. So in late 2016,
Demica also announced a venture with
Basware, the Finnish e-invoicing and
purchase-to-pay technology group that
will make supply chain finance available
to Baswares clients.
www.eurofinance.com
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 Joint ventures with e-invoicing networks
are a priority for another SCF platform
Orbian. In February this year it
announced a partnership with Tungsten
Networks, which has 251,000 suppliers
using its AP/AR solutions. Tungsten
gains the ability to offer SCF to its net-
work; Orbian gains access to the volume
of customers and financeable invoices it
needs to expand.
The overall market is certainly growing.
Prime Revenue, another leading plat-
form, had a record-breaking 2016. Its
20,000-plus customers in over 70 coun-
tries processed more than $100 billion in
supply chain financing (SCF) transac-
tions using the companys proprietary
platform. In addition, 3,500 new clients
were added to the platform.
These traditional players are compet-
ing with other marketplaces for receiva-
bles and confirmed payables. One of
these is LiquidX whose Managing Direc-
tor, Glenn Kocher, has described it as
aiming to be the Amazon or ebay model
for working capital and trade finance.
LiquidX is an auction platform that lists
the true sales accounts receivables, sup-
ply chain finance programmes and con-
firmed payables assets of only large cap,
usually publicly traded, MNCs. These
sellers gain access to asset buyers outside
their supply chain programme or core
bank group, including other global and
regional banks, hedge funds and institu-
tional investors. The platform has exe-
cuted over $13.4 billion of trade volume
and processed over $48 billion in post
trade settlement to date.
28 // TREASURY PERSPECTIVES 2017/2018
LiquidX differentiates itself from players
like Prime Revenue as the latter like
the other traditional platforms focuses
more on providing a technology solution
to the process problems that prevent
companies from accessing vanilla bank
receivables financing, rather than creat-
ing pools of new liquidity and a true mar-
ketplace for trade finance assets.
Munich-based CRX-Markets also has
an auction platform, though one that is
designed to generate securitised cash-
flows that can be sold as notes to fixed-
income investors, rather than as a
primary market for the underlying assets
themselves. And C2FO operates another
variant in which companies with excess
cash can set their desired rates of return
on the cash they wish to make available
and the market will fill those orders with
requests from suppliers that need cash
and which have posted the early payment
discount they are prepared to accept.
The C2FO marketplace matches these
orders in real time achieving the best
rate of return for the companies with
cash and the best rates for the companies
that need cash.
A bewildering choice
The biggest problem for anyone looking
at FinTechs today is simply the number
of companies. It is a given that most will
either fail or consolidate and right now
are too small to be serious choices for
corporates of any size. Most are also
simply service layers offering better
wholesale pricing or services to people
who previously lacked that access. In
addition, almost none provide any fun-
damental alternative to the underlying
infrastructure upon which the financial
system rests. Peer-to-peer models do so,
but are unreliable and small. Larger
players, like Apple and Google may be
in a position to create entirely new
systems, but these would inevitably be
regulated as heavily as their traditional
peers, so the benefits of using them
would be uncertain.
For now, FinTech is largely a wait and
see game for corporate treasury, with
the most relevant action happening at
the banks. There, both developments
such as Ripple and SWIFT GPI, as
well as consolidations like D+H/Misys,
promise increased efficiency and lower
cost within the parameters of the con-
ventional financial system.
Larger players,
like Apple and Google
may be in a position
to create entirely new
systems, but these would
inevitably be regulated
as heavily as their
traditional peers.
When it comes to FinTech, treasury is
already some way up the learning curve.
In a recent EuroFinance poll of 250
companies, asked, are you using any
payment services provided by financial
technology companies?, 36.3% said
yes. And of the 63.7% who said no,
64.8% said that they would consider
doing so in the future.
These responses suggest that treasurers
are adopting the simpler and more
mature SaaS and Cloud offerings, and
waiting to see which companies emerge
from the swarm of new start-ups with a
resilient and scaleable technology and
business model before committing. In
the words of one of the more cautious
treasuries: I dont dismiss anything but
we dont know who those companies are
and we are not going to be the first ones
to use them.
www.eurofinance.com
Those companies that have taken the
plunge in payments are implementing
solutions such as C2FO, a receivables dis-
counting solution and are hoping to use
new solutions to eliminate bank payments
portals. They are also being forced to look
at FinTech solutions in geographies from
which their core banks have withdrawn.
Other treasurers interviewed by EuroFi-
nance have confirmed that they are
actively investigating FinTech solutions
but that the issue is how these would
work for us. One treasurer believes,
There is a real revolution in that area. In
the next three years it will change the way
we do KYC documentation, trade finance
and anything where we have to move
money. Where there is a lot of paper work
there is a lot of efficiency to be gained.
But there are cautionary tales too. One
treasurer admits: We have had really
bad experiences with being the first
mover. It is difficult. The risk of failure is
high. Now we will wait and see.
As well as a legitimate fear of the bleed-
ing edge, treasurers may have another,
less obvious reason for waiting. Asked,
Are you satisfied with the data that you
are able to get from your current pay-
ment processes?, 67.2% answered yes.
This response might be proof that these
treasurers have put in place the vast
majority of the best practice solutions
recommended in modern payments. On
the other hand, it may reveal a danger-
ous level of complacency and unsolved
inefficiency. Time will tell.
www.eurofinance.com
INNOVATION IN RECEIVABLES
What are banks doing to meet future
innovation expectations from treasury,
particularly as leaps in retail experience
promise better efficiency, usability and
lower costs? Bank of America Merrill
Lynch, like other large banks is keenly
looking at AI, robotics and other tech-
nologies as well as participating in block-
chain consortiums to test payment and
trade solutions. It is using AI on its own
internal processes to speed up and deliver
better outcomes on repetitive processes
which in turn will benefit its clients.
Banks have no choice but to jump on the
innovation bandwagon, and teaming
with FinTech companies who have devel-
oped great solutions but dont have the
customer network to deploy them, is seen
as the way forward to keep relevant and
retain customers. Bank of America Mer-
rill Lynch is active in the R3 blockchain
consortium, working with Ripple and its
distributed ledger technology as well as
partnering with Microsoft whose treas-
ury is acting as a guinea pig to test trade
finance solutions developed on the
Microsoft Azure blockchain.
There are many areas of treasury ripe for
improvement with new technology solu-
tions and while blockchain solutions are
getting closer, in the payments arena,
they are still some time away. The same
cant be said for the use of AI in
payments. Frictionless payments, for
example, are an endless source of
frustration for companies, particularly in
determining whos paying for what. Bank
of America Merrill Lynch, as part of its
commitment to enhancing customer
experience, is spending time looking at
where friction exists in treasury pro-
cesses and introducing both innovative
and better solutions to ease the pain.
Hence its new product called Intelligent
Receivables which matches incoming
payments with invoices using AI enabled
technology. In partnership with FinTech
company High Radius, it takes data from
clients and their open items file and
receivables position and uses AI to match
all incoming payments again all open
invoices with a near perfect match rate.
We are currently in a period of expo-
nential growth in technology and new
concepts, such as artificial intelligence
(AI), have the potential to drive value to
clients and make processes more effi-
cient, says Matthew Davies, head of
GTS EMEA for Bank of America Mer-
rill Lynch. For example, banks have
been offering receivables matching ser-
vices for a number of years but these
have usually been highly manual to set
up and therefore expensive. By using
AI, we can bring a far higher level of
automation. Intelligent Receivables is
designed for large or complex compa-
nies that are seeking to reduce costs,
decrease days-sales-outstanding and
improve cash forecasting. It works by
identifying payers and associates their
payments to remittances that are
received separately in order to match
against open receivables.
TREASURY PERSPECTIVES 2017/2018 // 29
 Blockchain perspectives
THE BLOCKCHAIN IN PRACTICE
Most treasurers get the theory, and most know something
about the many pilot projects and consortia working on
blockchain solutions, but what products actually exist and
how do they benefit corporates today? By Mark Parsley.
How corporates and their partners
deal with digitalisation will determine
whether or not they survive the next dec-
ade and treasurers and their boards
realise it.
One key technology that has moved from
the margins, through hype into the main-
stream is distributed ledger technology
(DLT), sometimes called blockchain. The
differences between the two are technical
and the arguments over definitions
arcane. Treasurers dont need to know
them. But in short, all blockchains are dis-
tributed ledgers, but not all distributed
ledgers are blockchains, and the key dif-
ferences concern how much centralised
control exists within the system and how
widely data within the system is shared.
In financial markets, unlike cryptocur-
rencies, permissioned or private block-
chains are required to provide
centralisation, which can then compro-
mise the immutability of transaction his-
tories (the centre could change data
without being seen) and there is a need
for only the parties to a transaction to
validate it, unlike a public blockchain.
But the basic idea is the same: a distrib-
uted ledger is simply a database that is
replicated on many machines and in
which control over the datas evolution is
shared between some or all of the entities
running the machines. The ledger vali-
dates, stores, and replicates transaction
data on many computers around the
world (hence distributed).
Cryptography and digital signatures are
used to prove identity, authenticity and
enforce read/write access rights. And the
system contains mechanisms to enforce
immutability: making impossible the
changing of historical records. In other
words, a distributed ledger is like a nor-
mal SQL database plus code that can
add new rows to the database, validate
that these rows conform to pre-agreed
30 // TREASURY PERSPECTIVES 2017/2018
rules and ensuring that all the copies of
the database are the same in real time.
The systems of most interest to banks and
large corporations do not just act as dis-
tributed databases of data, they also
embed smart contract technology. So do
treasurers think DLT will affect them?
EuroFinance recently asked 250 treasurers
whether they believe that DLT will funda-
mentally change the payments ecosystem.
Of those asked, 62.4% said yes. I am very
interested in DLT. We are not using it yet
but it is coming. I am interested in that
you can get all the data of your payments
in real time and it is secure; it means col-
laboration between banks and corps to
make corporates life easier, explains one
treasurer. And when will we begin to see
concrete products? In the next three to
five years we will see something we can
use, a tool for corporates.
Its not just payments. One treasurer
believes, DLT will have an immediate
impact on reconciliation. We know the
banks are really active in this area and
that they offering more services in intel-
ligent reconciliation. And one retailer
sees DLT as an enabler for innovative
loyalty schemes based on pseudo-curren-
cies and blockchain wallets.
DLT is also still top of the banks priori-
ties. In May, the R3 CEV consortium of
80 banks completed the largest fundrais-
ing to date for the emerging technology,
raising more than $100 million from
about half its membership as well as
technology group Intel, though the fund-
ing round was scaled back twice from
$200 million and then $150 million. Of
the 25 or so global DLT consortia (22 of
which were started in 2016), 13 are in
financial services. These include groups
such as B3i (insurance), the post-trade
distributed ledger group (clearing and
settlement) and R3, Digital Asset Hold-
ings and Axoni (financial services).
The last of these, Axoni, raised $20
million from Citi, J.P. Morgan, Goldman
Sachs, Wells Fargo, NEX Group, Thom-
son Reuters, F-Prime Capital and Digital
Currency Group (DCG), among others,
via December 2016 and May 2017 fund-
ing rounds. It is involved in trials of DLT
in trade affirmations and over-the-coun-
ter (OTC) equity swaps the latter a bank
effort announced in January to overhaul
the Depository Trust & Clearing Corpo-
ration (DTCC) Trade Information Ware-
house (TIW) using DLT. All the major
banks use the warehouse.
IBM has driven another DLT initiative,
also used by a number of banks, known
as the Hyperledger Project.
And both have competition. In February
30 big banks, tech giants, and other
organisations including J.P. Morgan
Chase, Microsoft, and Intel launched a
group, the Enterprise Ethereum Alli-
ance, to build business-ready versions of
the software behind Ethereum, an open-
source, public, blockchain-based distrib-
uted computing platform featuring smart
contract functionality and with its own
cryptocurrency ether (i.e. its in part a
rival to Bitcoin).
Treasurers need not worry too much
about that yet. For them and for the
banks, the key interest in these technolo-
gies is cost, transparency and informa-
tion richness. It is part of the hype that
what the internet was to information,
DLT can be to transactions it makes
them less expensive to share and record,
and reduces the cost of trust in transac-
tion systems.
www.eurofinance.com
R3s CEO, David Rutter likes to cite a
McKinsey study that claims banks spend
around $3.6 trillion globally supporting
their transactions with tens of billions in
annual savings there for the taking. But
what is the evidence so far that the tech-
nology can deliver improved services for
corporate clients?
Trade finance
While many of the earliest applications of
blockchain have been in payments (see
article on SWIFT/Ripple), trade finance is
where real-world corporate applications
may appear first this year. Trade is not fully
automated, it relies on chains of trust and
transactions involve significant amounts of
data and require complex tracking.
In 2016, HSBC and Bank of America
Merrill Lynch piloted a scheme using
Hyperledger Fabric to show that letters
of credit can be executed on the block-
chain. And Corda, the shared ledger
platform developed by a consortium of
more than 70 leading financial institu-
tions, brought together by R3, facilitated
invoice financing and letter of credit
transactions in trials with more than 15
banks using its form of ledger technology
and smart contracts. Its not clear when
or if this solution will be rolled out mean-
ingfully and possible changes in the rela-
tionship between Hyperledger and R3/
Corda different ways to implement a
digital trade chain (DTC) style solution
complicate the picture.
In a potentially more concrete develop-
ment, seven European banks are part-
nering on a new blockchain-based trade
finance platform for European SMEs
and plan to launch in the second half of
2017. The Digital Trade Chain (DTC)
initiative was driven initially by Bel-
gium-based KBC and is based on a per-
missioned ledger, with authorised parties
allowed to submit transactions on the
platform and manage open account
trade transactions for both domestic and
international commerce, with visibility
from initiation to settlement. The banks
involved are KBC, Deutsche Bank,
HSBC, Natixis, Rabobank, Socit
Gnrale and UniCredit.
SMEs looking to expand globally face the
problem that letters of credit, used by
larger firms, are for them complex, expen-
sive and time consuming and the alterna-
tive, open account trading, exposes one
counterparty or other to the full transac-
tion value risk at any point in time.
www.eurofinance.com
Maintaining secure records on a digital,
distributed ledger creates the required
combination of transparency, verifiabil-
ity, and immutability of agreements.
At the launch in January, KBC Group
CEO Luc Gijsens explained: SMEs
are having to run their businesses differ-
ently in an increasingly digital age. Our
successful DTC trial shows that block-
chain technology offers a number of
opportunities that we want to continue
testing and developing.
Deutsche Bank global head of disrup-
tive technologies and solutions Roberto
Mancone said: For DTC to be success-
ful, it needs to be available and accessi-
ble by a large number of SMEs hence
the importance of having a number of
banks involved.
A host of other proof of concept trade
finance transactions have been executed
including: S7 Airlines and Alfa-Bank
and the first Russian blockchain LoC
transaction; Barclays has completed a
test on technology developed by Wave to
use a blockchain letter of credit to close a
transaction between Ornua and the Sey-
chelles Trading Company; The Com-
monwealth Bank of Australia (CBA),
Wells Fargo and trading firm Brighann
Cotton successfully completed a trade
finance transaction experiment in Octo-
ber 2016 using blockchain, smart con-
tracts and the Internet of Things (IoT);
ICICI, Indias largest private bank, and
Emirates NBD, recently announced suc-
cessful international transactions for
both trade finance and remittances using
blockchain technology; UBS and IBM
have worked on a project that replicates
the entire lifecycle of an international
trade transaction on Hyperledgers Fab-
ric blockchain; and Bank of America
Merrill Lynch, HSBC and the Infocomm
Development Authority of Singapore
(IDA) have jointly developed a prototype
solution again on Hyperledger Project
blockchain fabric to replicate a letter of
credit (LC) transaction.
Supply chain finance
In March, Chinese online P2P lender
Dianrong and FnConn, a subsidiary of
Foxconn Technology Group which pro-
vides loans and financing solutions to
SMEs, announced the launch of Chained
Finance, claiming that it was the first
blockchain platform for supply chain
finance. The aim of the platform is to
help supply chain financing companies
potentially triple the number of small
suppliers they reach.
The two companies recently completed
a successful pilot and proof of concept of
Chained Finance by securing funding
for small and medium enterprises
(SMEs) in China that were otherwise
unable to secure needed capital.
Chained Finance originated US$6.5
million (RMB45 million) in loans for
these SME supply chain operators.
The solution is based on a permissioned
blockchain and Dianrong is an active par-
ticipant in Hyperledger. A permissioned
or closed-loop blockchain restricts the
number of users who can validate block
transactions or create smart contracts
(which are used in supply chain block-
chain solutions) to pre-registered and
authenticated users. This differs from the
fully distributed ledgers of Bitcoin.
The two firms chose the blockchain
because of the control and transparency it
allows over the financial history of borrow-
ers and the security of the data within the
system. They claim that Chained Finance
offers large multinational manufacturers
unprecedented transparency and risk con-
trol capabilities for their supply chain
finance ecosystems. The system will be
rolled out throughout China first but in
theory can be implemented globally.
TREASURY PERSPECTIVES 2017/2018 // 31
 It will have competition. In the UK, Tal-
lysticks is building a blockchain SCF
platform driven by companies need for
an automated solution the firm has
filed four patented processes, including
automated custodial transfer and auto-
mated transaction settlement.
A functioning blockchain-based supply
chain finance/bill discounting and
invoice payment solution has also been
implemented in India, by Mumbais YES
Bank. So far the project, using smart
contracts built on Hyperledger and uti-
lizing IBMs Hybrid Cloud technology,
allows consumer electrical equipment
manufacturing company Bajaj Electri-
cals to digitalise the process cycle for bill
discounting at Bajaj Electricals and
reduce it from four-five days to almost
real time.
The details of invoices processed in Bajaj
Electricals Oracle system are trans-
ferred to Yes Bank on blockchain, and
then are discounted and funds are dis-
bursed to Bajajs vendors. On the due
date, the solution facilitates an auto-
mated debit from Bajaj Electricals
account with YES Bank.
Again, the system ensures transparency for
all parties through the shared public ledger,
while the entire transaction history of a
vendor is recorded and immutable.
Partly driven by the enthusiasm of the
central bank, India is a hotbed of block-
chain activity. In November 2016, for
instance, the $17.8 billion multinational
Mahindra Group and IBM announced
that they would co-develop a cloud-
based application for tracking supply
chain transactions via blockchain.
However, there are certain limitations
with the closed-loop blockchain imple-
mentations that Kannan highlighted by
referring to the YES Bank/Bajaj Electri-
cals case. We define closed-loop as a
private network consisting of one com-
pany, one bank, and a set of suppliers.
Here, in a way, a supplier is forced to dis-
count his bills with a single bank. He
might not be banking with the bank as a
supplier or getting better rates else-
where, said Kannan.
32 // TREASURY PERSPECTIVES 2017/2018
Both these solutions are limited by the
use of the permissioned blockchain.
While adding more banks and compa-
nies to the list of approved counterparties
is a short-term solution, in the longer
term an open system would be much
more likely to be transformative.
Payments
Weve already seen how the blockchain is
affecting the fundamental plumbing of
the payments system (see article on
SWIFT/Ripple), but there are also initia-
tives that bring DLT closer to treasury.
In December 2016, BNP Paribas com-
pleted its first live cross-border B2B pay-
ments between corporate clients using
blockchain technology, processing sev-
eral payments for two of its longstanding
corporate clients, Amcor, global leader
in packaging solutions and Panini
Group, international leader in collecta-
bles and trading cards.
This news follows the announcement last
September that BNP Paribas is co-devel-
oping new products and services with a
number of clients, aiming to design the
next generation of Transaction Banking
and Cash Management products with
Blockchain technology. The Cash With-
out Borders proof of concept was
launched early 2016 after the Banks
Corporate Trade and Treasury Solutions
business embarked on a collaborative
process during its first-ever Blockchain
Bizhackathon.
Using Blockchain technology, BNP Pari-
bas successfully processed and cleared
for Panini Group and Amcor payments
in various currencies between BNP Pari-
bas bank accounts located in Germany,
the Netherlands and the United King-
dom. The payments were fully processed
and cleared in a few minutes highlighting
the real potential of this innovative tech-
nology which eliminates delays, unex-
pected fees and processing errors, paving
the way for real time cash management.
Panini Group Treasurer, Fabrizio
Masinelli said: Blockchain technology
applied to cross-border payments offers
an innovative way of processing in
near-real-time high-value transactions
between different companies. This proof
of concept shows how powerful such
technology can be and how it can be uti-
lised as an effective and efficient response
to the main issues that treasurers face on
a daily basis. This great achievement was
possible thanks to the collaboration
between Paninis Group Treasury teams
and the various teams of BNP Paribas.
Jacques Levet, Head of Transaction
Banking EMEA at BNP Paribas CIB,
commented: This proof of concept
demonstrates that blockchain technology
offers real opportunities to considerably
improve our offer for corporate treasury
managers. On the payments front, this
confirms our strong commitment to
follow closely and further accelerate
our participation in a number of market
initiatives aiming at improving the
corporate payments experience using
blockchain technology.
Visas bet on blockchain
We have also seen how re-invigorating
correspondent banking networks using
DLT can use the existing payment infra-
structure of, for example, ACHs to pro-
vide corporate clients with a transformed
service without the need to put all their
trust in new FinTech startups.
We are developing our new
solution to give our financial
institution partners an efficient,
transparent way for payments
to be made across the world.
A similar idea lies behind the joint venture
between Visa and Chain, a San Fran-
cisco-based enterprise blockchain infra-
structure startup. Again, the concept is a
merger of DLT with an existing, trusted
network of banks in this case Visas
17,000 banking partners to help banks
improve international business-to-busi-
ness payments for their corporate custom-
ers. The two companies are currently
building Visa B2B Connect, a Visa-oper-
ated payments system that uses a permis-
sioned, private blockchain architecture.
The companies claim the system will ena-
ble participating financial institutions to
quickly process and settle international
payments securely with near real-time
verification of blockchain technologies.
We are developing our new solution to
give our financial institution partners an
efficient, transparent way for payments
www.eurofinance.com
S P O N S O R E D A R T IC L E

An industry-led approach to security,

standardisation and innovation
By Yves Bontemps, Head of Corporate Solutions, SWIFT

Since SWIFT first welcomed corporates into

its community in 1999, the value proposition
for corporate users has developed
substantially. Initially, the SWIFT corporate
focus was on multi-bank connectivity, first for
exchanging confirmations and later, a wider
range of financial messages such as
payments, trade finance instruments and
account statement information. Today, while
connectivity remains an anchor of SWIFTs
corporate offering, corporate treasurers and
finance managers can also derive significant
benefit from SWIFTs wider suite of industry
rigorous validation. In early 2018, SWIFT will status information together with additional
solutions, whether a company uses SWIFT to
release a new Advanced Reader, a state-of- value-added functionality.
connect to its banks or banks own channels.
the-art token protecting users against
sophisticated attacks, including see-what- SWIFT gpi is quickly building momentum
Integration and automation
you-sign functionality i.e. the token will amongst banks and corporates. Banks
Automation of transaction and information display transaction details that can be recognise the opportunity to deliver an
flows is a priority for every treasury and matched against the originating system to enhanced service to clients, while
finance function. This relies on accurate data, avoid data tampering. corporates see the potential to revolutionise
so a growing number of corporations are international supply chains. By engaging with
using SWIFTRef, a reference data directory 3SKey in figures SWIFT and the wider SWIFT community on
that can be integrated into ERPs, treasury, gpi and other industry solutions, treasurers
payment and cash management systems,
enabling users to validate counterparty data,
15,000 and finance managers can help to shape
market practice of the future, define
Number of corporates using 3SKey standards and collaborate to overcome
such as bank BICs, to optimise straight-
through processing and minimise exceptions.
19/25 obstacles to doing business across borders
and facilitate efficiency and growth.
Similarly, data needs to flow seamlessly Top SCORE banks that support 3SKey
between systems, so SWIFT has
collaborated with banks and corporate users 113 SWIFT gpi in figures

to develop MyStandards, a repository for Countries in which 3SKey is supported

110+
global industry formats which now has over
110 publishing organisations and 28,000 54,000 global transaction banks
committed to gpi, representing
users. Many banks now use MyStandards Active users
Readiness Portal to facilitate and accelerate
the onboarding of new corporate customers +30% 75%
Year-on-year growth in user numbers of all SWIFT cross-border payments in
by up to 50 percent. For multi-banked
corporates, the value of MyStandards
includes the ability to compare counterparty Payments and supply chain innovation 220
countries
data formats and rationalise integration.
50
Since it was first introduced, over 4,000 SWIFTs role is not only to service the current
corporates worldwide have been exposed to needs of corporate and banking users, but
also to drive innovation and harness Banks have an active
the Readiness Portal.
motivation across the industry to shape the implementation project

Identity management
A key value proposition of SWIFT for both
corporate and financial institution users is its
security. 3SKey allows corporate users to set
up user level authentication for both
payments and bank account mandates,
whether through SWIFT or banks own
channels. 3SKey offers a single sign-on
process across platforms, and administration
of user rights across banks, therefore
providing a cohesive and convenient
experience for users whilst supporting
18
payments industry of the future. SWIFTs
gpi (global payments innovation) was
conceived to enhance corporate users banks are live
experience of cross-border payments. The
first phase of SWIFT gpi is already live,
providing same-day, traceable cross-border
payments with transparent fees and full
remittance data, together with a roadmap
for future digitisation and transformation of
payments. A key SWIFT gpi deliverable is the
tracker, a tool that SWIFT provides to banks
to be integrated into customer offerings, For more information, visit
providing real-time tracking of payment www.SWIFT.com/corporates
 to be made across the world, said Jim
McCarthy, Executive Vice President of
innovation and strategic partnerships at
Visa, in prepared remarks.
Visa is leveraging Chain Core to create
a permissioned blockchain network to
enable their financial institution clients
to directly exchange value on behalf of
their corporate customers, wrote
Chains cofounder and CEO, Adam
Ludwin, in a blog post. This network
allows institutions to move value with
greater speed, predictability, and secu-
rity than is possible today.
Competitors like SWIFT, of course, have
questioned the demand for real-time
payment pointing out that corporate
payers actually want to pay as late as pos-
sible. The counter argument is simple: if
you want to pay on day 30, then real-
time payments let you do just that, rather
than having to pay on day 27 and allow
three days for the money to arrive within
the 30-day limit.
And its not just bank networks that can
be used with or without blockchain.
Western Union recently participated in
a funding round for Digital Currency
Group (DCG), a firm that collaborates
with financial institutions to develop use
cases for DLT. One is to improve the
core migrant remittance service, But
another is to leverage the 100,000
SMEs that make payments through the
service to create Western Union Edge, a
B2B payments network. Right now, the
service is available in a dozen countries
and does not use DLT, but given the
relationship with DCG and the possi-
bilities of blockchain technology to cut
costs, increase security and boost visi-
bility not to mention the existence of
FinTech competitors using DLT in the
remittance space, such as Bloom
Solutions and it seems likely that the
service will utilise DLT at some point.
Foreign exchange
Some of the largest names in FX have
made significant commitments to DLT,
focusing on improving trading efficiency.
DLT should be ideal in this kind of mar-
ket, in which so many counterparties
buyer, seller, broker, clearer, and others
hold records of the same transaction. A
shared ledger updated in real time and
visible to all should slash transaction
times and costs.
For this reason, NEX Group, formerly the
interdealer broker ICAP, has invested (via
its Euclid FinTech investment arm) in
Axoni, a provider of distributed ledger
technology for the financial services
industry. NEX aims to use DLT to
34 // TREASURY PERSPECTIVES 2017/2018
process thousands of foreign exchange
trades and to give customers access as
participants in a DLT-based system so
that, initially, institutional investors can
more transparently track and value deals
in the spot market. NEX subsidiary, Trai-
ana subsidiary, which acts as a messaging
hub for $2tn of forex, fixed income and
swaps deals, is developing a combination
of smart trade contracts and a blockchain
product with the eventual aim of replac-
ing their current post-trade system.
Visa is leveraging Chain
Core to create a permissioned
blockchain network to enable
their financial institution clients
to directly exchange value on
behalf of their corporate
customers.
Another FX market giant, Citi, in
December 2016 made an undisclosed
investment in Cobalt DL, a London
startup also developing a DLT solution
to simplify foreign exchange trading.
Cobalt has also attracted two of the big-
gest traders of FX, Citadel Securities and
XTX Markets, as well as 22 banks and
financial firms. The firm believes it can
cut the cost of FX trading by 80%. The
system is to go live in the third quarter
and runs on technology supplied by Setl,
a UK blockchain software developer,
and data from Northern Ireland-based
First Derivatives.
Other key FX banks are members of
Ethereums Enterprise Ethereum Alli-
ance which has also executed a trial spot
trade using an adaptation of Ethereum
as the settlement layer. And Goldman
Sachs patented a permissioned block-
chain concept to achieve much the same
thing and which explicitly allows regula-
tors to access the database and provides
functionality to comply with anti-money
laundering (AML) regulation and know
your customer (KYC) laws.
None of this is directly available to treas-
urers, though the very largest MNCs
rival some hedge funds in their FX deal-
ing and so may gain direct access. The
real benefit for most corporations will
simply be in faster, more transparent and
much cheaper FX dealing. 2017 may
well be the year this starts to happen.
Capital markets
DLT is even beginning to invade the
capital markets. IBM and Japans SBI
Securities revealed last year that they
are working on a blockchain-based
bond trading platform using the
Hyperledger Fabric.
As an innovative technology, block-
chain has the potential to revolutionise
ways businesses work together with their
ecosystem of trading partners, said
Takeshi Fukuda, director of IBM
Research Tokyo, in a statement. The
technology establishes accountability
and transparency while streamlining
business processes.
But for treasurers the key development
will be the ability able to issue bonds on a
blockchain-based digital asset creation
tool. One example is three-year-old
startup BlockEx. After developing a
white-label cryptocurrency brokerage
platform to sit on top of existing
exchanges, BlockEx has built an exchange
for the issuance of digital assets including
bonds, equities and syndicated loans [that
will] collapse origination issuance, asset
servicing, exchange, clearing, settlement
and reporting into one platform. By tem-
plating and streamlining the legal process
it becomes possible to reduce the price of
origination up to 75% and time to origi-
nate and issue can be reduced to days. In
theory, this could ultimately squeeze out
bank syndicate functions.
The platform enables issuers to create
smart contracts that specify coupons,
payment dates and maturities, with the
flexibility to create retail-friendly payout
structures such as monthly or even daily
coupons. The digital assets are sold
directly to investors, cutting out bank
intermediaries and potentially slashing
issuance costs by more than half.
It allows a company to use the asset crea-
tion tool, pick documentation and raise
money in a single day, aims to settle trades
within 30 seconds and creates a secondary
market that generates an indelible history
of buying and selling activity using dis-
tributed ledger technology.
Perhaps the most exciting thing about
the concept is that it brings the benefits of
capital markets to SMEs because of the
reduction in cost, time and complexity.
and medium-sized enterprises eyeing
US$10m-$50m issue sizes, which are
largely shut out of the capital markets
due to syndication costs that average
www.eurofinance.com
US$200,000-$400,000 according to
BlockEx estimates.
The first issues are, apparently, happen-
ing any day now and similar efforts are
underway at other companies to apply
these ideas to other forms of bank loan
and to private and public equity issu-
ance. With Goldman Sachs having
announced that it already figured out
how to automate half the 127 steps in an
IPO, robo-issuance is on the way.
Enterprise risk management
Finally, DLT is breaching the inner sanc-
tum of corporate MIS systems the
ERP. ERPs do not look like ready candi-
dates for DLT. The key principle of an
ERP system is the central collection of
data for wide distribution, replacing
standalone databases linked to multiple
disconnected spreadsheets. The cen-
trally aggregated data is then available to
all business processes. This is pretty
much the opposite of a distributed ledger.
However, because DLT creates a tracka-
ble, immutable record for any kind of
transaction, from financial trades to
shipping manifests, from supply chains
to equipment maintenance schedules, a
DLT enterprise solution that draws data
from the ERP and is then used to create
a trusted transaction and data sharing
www.eurofinance.com
system between companies has got com-
panies like IBM excited.
So, for example, anytime a business pro-
cess requires an immutable, verifiable
tracking record, a DLT solution is useful
So, a new blockchain system from IBM
and Maersk aims to manage and track
the paper trail of tens of millions of ship-
ping containers by digitising the supply
chain. DLT can be used for audit logging
to satisfy regulators or for tracking which
users are using which computer systems.
Walmart has run a pilot to demonstrate
that DLT can be used to track produce
through the supply chain. And Sweden-
based enterprise software provider IFS,
has created a new proof of concept to
demonstrate how blockchain can be inte-
grated with organisations ERP systems
in the aviation industry to track mainte-
nance and parts.
In addition, in May, Hyperledger Project
member SAP announced SAP Cloud
Platform Blockchain, its blockchain-as-
a-service solution. Its very early days,
but it seems designed for companies that
are already using its ERP solutions, as
they look to implementing distributed
ledger solutions for data storage, man-
agement, and other applications. If SAP
thinks the blockchain works well with
ERPs, we can safely assume that it does.
DLT is coming fast
So what does this blizzard of jargon,
startups, joint ventures and pilots actu-
ally mean for the treasurer? The first
conclusion is that DLT/blockchain is
happening many times faster even than
was predicted a year ago. The objections
to the use of public blockchains in finance
and commercial transactions have been
easily overcome by the development of
private blockchains. The technology has
been applied to an extremely wide vari-
ety of markets and transaction types and
in most cases several competing organi-
sations have successfully completed pilots
and proofs of concept.
Can treasurers benefit right now from
easy-to-access DLT solutions that imme-
diately reduce the costs of their core pro-
cesses? Not quite. Will they be able to
this year? Possibly. Next year, definitely.
Do they need to understand the underly-
ing technology? Its better that they do,
so that they understand the security
implications if nothing else.
But, like all new technology, within a very
short time, we will all simply be using
interfaces that work better, faster and
more cheaply than the legacy systems and
we will neither need to know how they
work nor will we care.
TREASURY PERSPECTIVES 2017/2018 // 35
 SSC perspectives

TREASURY IS DEAD. LONG LIVE TREASURY?

If Global Business Services models can do a better job at HR, procurement,
networks, IT and data analytics, why doesnt it just take over treasury?
At some firms, its already happening. By Simon Brady.

Shared services are again all the rage as
companies search for the short-term wage
arbitrage of offshoring. At the end of
2016, Warner Music Group announced
the creation of a new US centre of excel-
lence for Shared Services in Nashville,
Tennessee, to aggregate its US Account-
ing Operations, Cash Management and
Recorded Music Rights Administration.
In June 2016, Eltel announced its inten-
tion to establish a new Global Shared
Services centre in Poland later this year.
The decision has now been taken to
locate the centre to Gdansk. The centre
will provide all Eltel businesses globally
with support services in the field of
finance, human resources and procure-
ment. And Nestl, as part of an ongoing
programme of structural cost saving, has
recently set up two more SSCs, one in
China and one in Portugal taking the
total to nine.
Initially, treasury is in control of the out-
sourcing of its functions. The creation of
one or more shared service centres is
driven by a corporate desire for lower-
cost, higher efficiency processes. Treas-
urers solution has been to centralise
treasury operations and to outsource
non-strategic treasury processes.
and applied it to an ever-broader range
of products and processes like payments
and FX. Often this is accompanied by a
restructuring of fragmented ERP sys-
tems, or at least the centralisation of
feeds from multiple ERPs into a single
system with analytics such as SAPs
HANA with a view to automating
functions such as cash forecasting.
Later process migration is not simply a
case of moving transactions and their
associated processes, but one of breaking
down and re-designing existing on-shore
jobs. In other words, once established,
SSCs expand their remit by identifying
other processes inside the company that
would benefit from being re-engineered
by what has become a centre of excel-
lence in process efficiency. For example,
commercial payments and collections,
which are not part of the definition of
treasury at a surprising proportion of
companies, also naturally sit in a shared
service centre.
So, over time, companies end up with
structures like Pfizer. It has in-country
SSCs where necessary its SSC in China
manages its in-country bank account
structure and in-country cash pooling, as
well as providing forecasts on cash flow
and FX exposure. The Dublin treasury
centre and in-house bank manages the
regional multicurrency notional pool, FX
hedging and liquidity and investments.
From SSC to GBS
So what happens next? Large companies
end up with a global patchwork of func-
tional SSCs, as well as, sometime, third-
party business process outsource (BPO)
firms. This patchwork creates exactly the
problem of fragmentation and de-cen-
tralisation that the SSCs were designed
to cure in the first place. One answer has
been the evolution of a Global Business
Services model to integrate all shared
services and outsourcing activities across
the enterprise. This model abandons
structures defined by narrow business
functions such as finance or IT and
focuses on delivering standardised, end-
to-end processes. Companies can achieve
this with their SSC structures and
Shell, AstraZeneca and others have their
own models for achieving standardisa-
tion but others believe the multifunc-
tional GBS model is best.

Typically, this process starts with stream-

lining bank account structures, bank
account management and pooling mech-
anisms, often by moving to a single bank-
ing partner. This eliminates manual
processes, creates greater cash visibility
and gives treasury access to real-time
information, allowing it to develop better
cash forecasting and insights into the
underlying businesses. Standardisation is
achieved through the adoption of ISO
standards or the creation of company-
wide process templates.

Shell for example, as part of the compa-

nys long-running treasury centralisa-
tion, started by templating the bank
reconciliations process and then rolling
that into the SSC. It then developed this
idea of a single company-wide process

36 // TREASURY PERSPECTIVES 2017/2018 www.eurofinance.com

So, Bayer Business Services is the global
in-house competence centre for business
solutions and business support processes
of the Bayer Group. In fiscal 2016, it
employed 5,560 people worldwide in 12
sites and achieved service volume of
more than 1 billion.
Standard Chartered Global Business
Services employs 13,000 people, servic-
ing most of the 70 countries where the
Standard Chartered Group has a foot-
print. It handles activities including
finance and accounting services, soft-
ware development and maintenance,
and providing compliance services
around Basel, anti-money laundering
and know your customer.
The most sophisticated companies can
end up creating a four-layered struc-
ture: the corporate centre; the centre of
excellence or GBS; functions embed-
ded in the business and, lastly, SSCs.
On this model the true GBS operates as
a true centre of excellence, which
attracts highly qualified staff undertak-
ing tasks which are far from purely
transactional. In this model the GBS
acts as a talent pool for the rest of the
finance organisation.
W(h)ither treasury?
The question for treasury starts off
being how well their companies can
migrate treasury processes into these
centres. But increasingly, if that migra-
tion goes well, it ends up being what of
treasury is left outside the SSC or GBS?
Does the outsourced entity end up run-
ning treasury or does it even end up
being treasury? At Vodafone, for exam-
ple, the GBS unit includes the procure-
to-pay cycle, the reporting cycle, cash
management and management account-
ing in its portfolio. And indeed a small
number of multinationals avoid the
complexities of the question by offshor-
ing the entire treasury function. The
question then becomes whether the
treasurer is then too far away from the
CFO and senior management. But these
are rare exceptions.
At some point, since most treasury activ-
ities are back-office processes in transi-
tion from disconnected and/or manual
to connected and digital, doesnt treas-
ury simply get broken up into a series of
automated templates and data-deliver-
ies, and outsourced to the SSC/GBS?
And if only highly-skilled, value-added
activities are to remain with the business,
what is the difference between 100%
owned SSC/GBS subsidiaries and true
outsourcing to a BPO provider? (See
page 38 for more on the future of the job
of treasury.)
www.eurofinance.com
The latter have developed from straight-
forward geographical wage arbitrageurs
to sophisticated creators of value-added
through analytics and digitalisation.
They are positioning themselves as both
a source of efficiency and of transforma-
tion. And their increased sophistication
has been driven by specialisation: BPO
offerings can be horizontal across a pro-
cess type or function HR, finance, pro-
curement and so on or specific to a
particular industry sector.
The traditional treasury response to the
idea that it is being subsumed or redistrib-
uted into these offshore units is that while
the processes outlined above do naturally
lend themselves to outsourcing, the treas-
ury back office is different. Yes, it executes
largely transactional processes, but they
require real treasury expertise to act as an
effective control. So offshoring them to
unskilled staff is risky because it creates
distance between the remote back office,
the front office and the group treasury.
Whether or not this is true is impossible
to prove one way or the other, but it seems
to fly in the face of the technological
advancements of the last few years. Geo-
graphical distance is not what matters.
Disconnection is what matters.
Rise of the robots
The rise of robotic process automation
complicates matters further. RPA is the
use of software robots to automate
administrative processes by replicating
the actions of human operators of com-
puter systems. This is a new form of auto-
mation that does not require traditional
Application Programming Interfaces
(APIs). The software robot is trained to
execute the actions of a human operator,
rather than programmed, and it is this
form of automation that is forecast to
remove the need for many low-skilled
data-entry and similar jobs.
This could have one of two effects on in-
house departments and SSCs. On the
one hand, any outsourcing whose pri-
mary purpose is the offshoring of low-
skilled jobs may find themselves made
obsolete by technology, since RPA
removes the need for humans alto-
gether. On this view, on-shore depart-
ments become more efficient without
the need to outsource and companies
should conduct an evaluation of process
optimisation, including considering the
benefits of RPA. That evaluation may
increasingly prove that offshoring is
unnecessary.
On the other hand, perhaps SSCs them-
selves will adopt RPA technology, mak-
ing the case for outsourcing to them even
more compelling. In this scenario, RPA
may also solve one of the perennial prob-
lems of offshoring to an SSC. Many com-
panies find that after offshoring,
headcount actually increases in the SSC
compared to the legacy process, some-
times by amounts significant enough to
negate much of the original business
case. Using RPA to optimise the SSC
may reduce this problem. It may also
mean that firms have a complex trade-off
between the RPA-enhanced onshore
model and the RPA-enhanced SSC.
Either way, regardless of function HR,
procurement, treasury, whatever the
only things that will be left outside the
process hub will be high-level, strategic
and value-added. In the case of treasury
its hard to see why those functions
would not be carried out by the CFO
and their team.
Treasury reborn
When EuroFinance first pointed out,
some years ago, the benefits of a single
enterprise-wide ERP, several treasurers
wrote in to say that the idea was impossi-
ble and unnecessary.
The rapid pace of digitalisation has over-
taken that criticism. Deloitte can now ask
companies, Do you have a single ERP
platform, enhanced with process specific
enabling technologies, robotic process
automation and cognitive technology?
Have you eliminated the need for man-
ual intervention in transaction process-
ing so that your colleagues can focus
solely on analytics and other value creat-
ing activities?
The elimination of manual processes and
the seamless integration of financial pro-
cesses across a business globally are no
longer pie-in-the-sky. Treasurers will
complete all these treasury centralisation
and integration projects. And what then?
What when the whole cash cycle, all the
ERP feeds and all the basic data analyt-
ics are done by a GBS unit (or in the case
of smaller companies, Cloud suppliers of
various kinds)?
At that point either treasury has disap-
peared, or it has been moved into a
global process unit that now already
claims to be less back-office resource
and more strategic partner and value-
creator in the business. Sound familiar?
Indeed, PwC, in its 2017 Global Treas-
ury Benchmark Survey 2017, titled
The virtual reality of treasury,
expresses the view that treasury should
be viewed not as a department but as an
enterprise-wide process. In some GBS
models, each function or process like
this has an owner. Perhaps the owners
of the finance function could be called
Treasurer. Just a thought.
TREASURY PERSPECTIVES 2017/2018 // 37
 Career perspectives
ITS TREASURY JIM,
BUT NOT AS WE KNOW IT
The past decade of developments in treasury paint a consistent picture: a relentless drive to
increase efficiency through technology; constant pressure to do more with fewer staff; a migration
of jobs and processes to offshore processing factories in which a combination of lower staff costs
and technology further reduce the need for human treasurers. By Katrina Rollinson.
As KPMG pointed out as far back as
2015 in their report, Treasury 4.0: Cur-
rently available systems and related con-
figurable system landscapes provide for a
very high degree of automation of treas-
ury processes (real straight-through pro-
cessing). This results in a major
reduction of manual activities and thus
significant gains in efficiency.
The report continues: Processing and
control activities throughout the cash
and risk management process, in par-
ticular, can be largely covered and auto-
mated in the system. The example of
cash management illustrates the poten-
tial for intelligent networking between
treasury management systems (TMS)
and various sources of cash-relevant
information. Cash positioning is then no
longer a manual coordination process
performed by the cash manager, but a
system-based activity that functions
almost completely without manual inter-
vention based on TMS rules from auto-
mated processing of account statements
and access to real-time cash and pay-
ment data through to the initiation of
cash transfers. Similarly, opening and
maintaining bank accounts ... can be
performed through automated bank
account management.
It is hard to conclude anything from this
except that even in 2015, treasurers were
co-operating in their own demise. More
and more of their time was being spent in
ushering in the efficiency, connectivity,
straight-through processing and automa-
tion that are key to visibility, real-time
analytics and better security and risk
management. This was surely time spent
removing the need for human beings.
The process has continued apace. One
treasurer interviewed by EuroFinance
describes their current project as
breaking down and redesigning exist-
ing onshore jobs for the purpose of
38 // TREASURY PERSPECTIVES 2017/2018
migrating work from OpCos to SSCs.
This sounds very like being asked to
map the core processes for which their
department is responsible so that they
could be outsourced.
This treasury started off migrating the
typical SSC treasury processes, bank (KPIs) and effective Service Level Agree-
reconciliations and bank account man-
agement, followed by cash forecasting
and bank guarantee management.
Over the years since, more and more
has moved out. Again, this is simply a
description of a set of job functions being
at best outsourced and at worst replaced
by technology.
Next generation SSC consolidation into
so-called Global Business Services (GBS)
subsidiaries, such as those operated by
companies from Lufthansa to Standard
Chartered take this process further still,
subsuming a wider and wider range of
global processes.
Treasurers are also losing their teams. As
PwC finds in its 2017 Global Treasury
Benchmarking Survey, Virtualisation is
prevalent in treasury and will shape
treasury probably even more than other
business functions. Already two thirds of
staff involved in treasury processes are
not reporting directly or even indirectly
to the treasurer. In most organisations,
if you lose reports, you are being
squeezed out.
Add robotic process automation, the next
generation of centralised SSCs and Big
Data, which increasingly requires AI-
driven tools to analyse it. Add an increas-
ingly cashless society which should
eliminate most if not all of the paper and
egregious reconciliation problems of the
present. Whats left for treasury?
Some treasurers fall back on the idea that
someone has to tend the machines. But
that is about the software, not treasury. A
slightly more optimistic view of this is
PwCs comment that: A number of
treasurers have outsourced their back
office and payment factory processes to
shared services and exposure reporting
increasingly involves local finance. These
treasurers are more concerned about
effective Key Performance Indicators
ments (SLAs) for these functions rather
than their day to day management.
What about compliance? Well most com-
panies have compliance functions
already and RegTech is a rapidly grow-
ing sector: compliance is now so complex
and expensive that here too automation
is companies desired endgame.
This is treasury transformation alright,
but not as envisaged by those who fore-
saw an evolution of treasury into a strate-
gic business partner. In this future,
treasury looks more like a low-level data
conduit feeding data to decision-makers.
Another common response is that by
removing the tedious, low value-added
activities from treasury, senior treasury
staff are freed up to focus on delivering
strategic insights. Just as in the consumer
domain, where people prefer to use search
engines and other forms of analytics to
gather their own data and insights, it is
likely that the C-suite will access analysis
directly from smart systems so treasury
must think hard now about what insights
they can contribute in the future.
And Jack Large, Editor of CTMFile,
represents those who believe that compa-
nies will regret the move away from hav-
ing separate treasuries though without a
detailed why: Slimming the corporate
treasury department too much is going
to cost hugely. Corporate treasurers need
to fight CFOs and CEOs being too
clever.
So is digitalisation the death of treasury as
it is so many other previously important
www.eurofinance.com
white-collar jobs? Is there even the pos-
sibility of another future?
In PwCs poll of CFOs, there is a glimmer
of hope. CFOs expect treasurers to take
responsibility for enterprise wide liquidity
and financial/commodity risks. They
urge treasurers to identify exposures pro-
actively and manage liquidity actively.
It is true that in all the talk of digitalisa-
tion, funding and risk management have
yet to fall victim to technology. However,
FinTechs like FiREapps are developing
analytics systems that integrate with
TMS and ERP systems and hold out the
promise of FX risk management automa-
tion; Goldman Sachs has mapped equity
IPOs into 127 steps and has already
worked out how to automate half of
them. Liquidity allocation and manage-
ment has been automated by a number of
www.eurofinance.com
players there is even a robot hedge
fund; and there are a number of block-
chain prototypes for automated bond
issuance (for example the partnership
between SIX Securities Services, the
Swiss post-trade provider and Digital
Asset Holdings, the blockchain devel-
oper). No treasury function seems safe.
In addition, treasurers themselves report
that they are increasingly being used in a
cross-business unit collaboration and
consultancy role outside of their direct
reporting chain. In this sense, treasury
has indeed the chance to become the
strategic business enabler weve all been
talking about.
As PwC observes: The CFOs ambition
is an open invitation to treasurers to claim
a more strategic role and become the cus-
todians of liquidity and financial risk for
their organisations. CFOs are urging
treasurers to be involved in finance pro-
cesses beyond the traditional scope for
treasury such as in working capital man-
agement and in actively managing new
exposures as these are created by core
businesses. Treasurers should seize the
opportunity. Going forward, they should
not only master traditional treasury top-
ics, but also business consultancy, project
management, (cyber) security and Fin-
Tech developments.
In this view, the treasurer becomes
almost an internal business consultant
whose core competence is process opti-
misation and risk management. So are
todays treasurers qualified for the job?
And if they are, is this new paradigm
treasury at all? Either way, its the end of
treasury as we know it.
TREASURY PERSPECTIVES 2017/2018 // 39
 Cultural perspectives

GLOBAL TREASURY: MANAGING

CROSS CULTURAL CHALLENGES
You might want to implement the same treasury structures globally but the way and extent to which some countries resist
can take you by surprise. In a series of interviews, leading multinationals reveal how treasury policies are understood and
implemented depending on the cultures. What are the most effective ways of overcoming resistance? By Mariel Barclay.

While treasurers make efforts to gain
efficiency and improve processes all over
the world, they can easily forget that cul-
tural differences and not just tax and
regulatory restrictions, will impact the
way people perform and prioritise activi-
ties. Indeed, cultural misunderstandings
are often at the heart of the delays and
frustrations in implementing projects.
But what do we mean by culture? One
way of understanding it, is as a set of
shared values, beliefs, symbols and
norms that influence the way a group of
people think, feel and behave. These are
deeply engrained. To complicate things
further, cultures are not just national but
also regional, corporate and personal.
Companies cannot change them, only
carefully tailor communication to help
build bridges.
The EMEA regional treasurer of a $20
billion company that prefers to remain
anonymous notes: In Germany people
listen and act. In the Middle East they
have a view on how things should be
done and I have to listen to them.
Although in the end we do what the cor-
porate dictates, I have to adopt different
communication styles.
Nicolas Levets first task as Group Treas- they were rapid to comply. Latin Ameri-
urer at Damart Somfy Group was to cans tried to negotiate but faced with the
ensure that subsidiaries implemented corporates refusal to compromise, they
policies established three years prior to had to agree. However, close follow up
his arrival, which until then had been and controls were necessary to ensure full
ignored. The corporate had over 100 compliance. China was prompt in agree-
bank accounts and required the closure ing but when auditors went to check, the
of local ones, sticking to a few core inter- local accounts were still in place.
national banks. Most subsidiaries had
argued that local banks were better but So what is an effective way to com-
when Nicolas Levet approached them municate with different cultures? To
with a clear mandate from the corporate manage cultural differences you have to
to enforce the policy, cultural differences start by understanding your own
became apparent in the way each coun- culture in a non-judgemental way and
try reacted. Although all resisted ini- link it to the operation at hand says
tially, when the Nordic subsidiaries Alex Schuster, Managing Director at
understood that there was no going back consulting firm Mentavis.
What the British say... What the British mean... What is understood...
With the greatest respect... I think you are an idiot. Theyre listening to me!
Thats not bad. Thats good. Thats poor.
That is a very brave proposal. You are insane! They think I have courage!
Very interesting. This is clearly nonsense! They are impressed!
Ill bear it in mind. Ive forgotten it already. They will probably do it.

Communication is often put to the test by Why do they think

cultural resistance when companies Im sure its my fault. Its totally your fault.
its their fault?
decide to centralise and standardise pro-
cesses globally. If you think that you are
I almost agree. I dont agree at all. They almost agree.
going to centralise and everybody is going
to fall into line, you are being unrealistic.
You must come for Dont get excited, I am sure Ill get an
A good communication and change man-
dinner. Im just being polite. invitation soon!
agement process is fundamental says
Alfredo Elespuru, Corporate Treasurer at
Gloria who helped centralise treasury at
Belcorp and Oriflame.

Subsidiaries typically resist as they see

their wallet and their autonomy being
taken away. However, reaction and
time taken to comply with corporate
requirements varies with every culture.
Understanding how to build trust and to
communicate with each is fundamental
to succeed.

www.eurofinance.com TREASURY PERSPECTIVES 2017/2018 // 41

 Fons Trumpenaars, a Dutch-French
author in the field of cross-cultural com-
munication created a seven-dimension
model to show what distinguishes people
from one culture to another.
The first dimension is universalism, the
belief that ideas and practices can be
applied everywhere without modifica-
tion. Laws, rules, values and obligations
are given high importance. People try to
deal fairly with others based on these
rules, but rules come before relation-
ships. At the other end of the spectrum,
particularist cultures believe that each
circumstance and each relationship, dic-
tates the rules that they live by. Their
response to a situation may change,
based on whats happening in the
moment, and whos involved. Typical
universalist cultures include the US,
Canada, the UK, the Netherlands, Ger-
many, Scandinavia, Australia, and Swit-
zerland. Particularistic cultures include
Russia, Latin-America, and China.
So what happens when universalist cul-
tures, such as the Swiss try to impose the
same practices everywhere without mod-
ification? How do they manage in Latin
America or Russia where a particularis-
tic outlook prevails?
Elespurus experience at Swiss multina-
tional Oriflame convinced him that It is
important to have a model that has been
tried and tested. If you intervene in sub-
sidiaries and you make a mistake, you
undermine the project, people start ques-
tioning it. When there are no clear roles
or processes, each situation, each subsidi-
ary becomes a model in itself. In my
experience, the best way to mitigate cul-
tural differences and the resistance to
change is to create a centralisation team.
They should go to the countries, collate
information on how they manage daily
operations, contrast that with the model
and bridge the gap.
You should also consider how multicul-
tural your centralisation team is. You
might want to keep some diversity within
the team but not so much that more noise
could be generated during the centralisa-
tion process. concludes Elespuru.
Beyond country and company cultures,
leaders also make their mark. Miguel
Premoli, VP Talent Management at Pep-
sico Europe explains: I have been at the
EU HQs of a company where the leader
was from the UK and that culture clearly
dominated until he was replaced by
someone from Spain. The dynamics and
the way of doing things changed, even if
policies and corporate culture remained
the same.
42 // TREASURY PERSPECTIVES 2017/2018
You also need to think about where you Cuervo allows people to get involved in
locate a hub. Some countries can have decision making and understands that
cost advantages but if the culture is very acquired companies with individualistic
risk averse they will need to test things cultures operate more efficiently if they
over and over again until they feel sure are given the opportunity to use their
they will work. Those are not great initiative. Loria explains: You need to
places for innovation, which demands spend time with the people in the com-
risk taking, adds Elespuru. panies acquired and build interactive
teams, making them participate in your
Another important factor to consider is objectives and participating in theirs. I
how different cultures deal and engage am going to achieve my goals if they
with time. Improving efficiency often achieve theirs.
involves prioritising and time manage-
ment. This varies widely among coun- Tony Osentoski, Head of Corporate
tries, potentially becoming a source of Treasury & Insurance, Asia Pacific at
misunderstanding. The language you Solvay agrees that focusing on building
use is important. I need this ASAP relationships is important in Asia too. If
might mean very different things you want a homogeneous approach you
depending on who you talk to. To avoid have to make the team come together,
confusion you must be clear and specific make it a priority so that everybody
about deadlines. understands what is happening in differ-
ent locations. This will help deliver cor-
Mergers and acquisitions are also testing porate objectives. We regularly have
calls in which we give people a platform
occasions and show the power dynamics
to present an update on their countries.
at play when different cultures meet.
They highlight a regulatory change or
Pepsicos Premoli, says: One has to
understand that mergers are never something that is happening and how it
between two equals, there is always one impacts them. That raises awareness
culture that predominates. among the rest of the group of what it
means to manage treasury in other
This was allegedly the case in the Nokia countries, the tasks they face every day.
Siemens initial joint venture. An ex-
employee recalls how difficult it was for Treasurers worried about achieving
the proud employees of an iconic Ger- maximum efficiency, integration and
control should know that treasury is not
man firm such as Siemens to accept
just about visibility of cash but also about
Nokias lead. Within three years most
visibility of peoples values and feelings.
treasury staff from Siemens had left.
These dictate the way they understand
Nokia eventually bought out Siemens
the world and their approach to work.
shares, taking total control.
Treasury is not only about reconciliation
For Pepsicos Miguel Premoli the best of accounts but about reconciliation of
outcome in a merger or acquisition is to cultures, managing financial risks and
extract the best of each team and bring cultural sensitivities, investing time in
them together. listening and communicating, borrow-
ing the best of each cultural system to
This of course requires an appreciation achieve synergies. 
of the other culture, be it national or cor-
porate. It is not uncommon for cultures
that have traditionally been on the
acquiring side to find it difficult to
accept being bought and managed
by firms from emerging markets.
Maria Loria, Corporate Treasurer
at Jose Cuervo, a leading tequila
company from Mexico, had a taste
of this when they started buying
companies around the world. Some
countries initially had reserva-
tions about being
led by a Mexican
company but her
recognition of
what the other cul-
tures could bring
to the table was
helpful. Her aim
was to look for syn-
ergies and to find a
win- win situation.
www.eurofinance.com
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