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Real-time spells the end of the treasurer

I’ve had a couple of good debates in the last week or so about the value of real-time everything.

Everything is instant, immediate, no waiting, it’s real-time.

We expect instant gratification in everything we do and, any waiting, it’s click and delete.

Case in point: the PC gets stuck. How long do you wait before you reboot? A minute? Ten minutes? An hour?

You don’t expect to wait and we now expect real-time instant gratification in all dealings in our personal lives.

I wouldn’t expect to make a mobile phone call to my mate in Hong Kong in d+5 so why should I wait that long for a payment?

I don’t.

So why should I hang around waiting for a payment to process?

I shouldn’t.

And yet, there’s very little real-time in the payments world.

It still takes D+5 for direct debits under the latest legislation – the Payment Services Directive (PSD) – and that is ridiculous. That’s five working days, so you send a payment on a Friday and it may take till past a week on Monday to get there.

Ridiculous.]

Particularly when so many other things in banking are getting real-time.

Faster payments in the UK delivers real-time payments, or near enough.

In the City, low latency high frequency trading can move a transaction around the world faster than two quick blinks of the eye, or under 400 milliseconds to be exact.

In near real-time, PayPal allows me to send payments between individuals and small businesses not only domestically, but across most borders. That’s better than many banks who ask you to come down to the branch and fill in forms in triplicate for an electronic cross-border payment to be instructed.

And it all feels like real-time.

Meanwhile, some banks claim to be able to take a treasurer’s end of day position and switch the whole treasury cash pool to another centre half-way around the world, in the click of a button, in real-time.

The end-of-day for Global Widgets Inc approaches at 16:55 in Hong Kong and click, the whole thing switches to Brussels for at 8:55, ready for the opening of business.

All of this makes for an interesting new world as we need wait for nothing. It’s all in real-time.

But there’s a problem with all this.

The problem is that if you can switch and manage and track and see the global cash and financial operations of a multinational business in real-time from any desk with access, then why do you need a treasurer?

A treasurer is there to net and pool and settle and report the financial position of the company. They are not there to issue and track purchase orders and invoices, although they might get involved in that. No, all that stuff is for the administrators and financial controllers. The treasurer is there to deal with the complex analysis of cash positions and outstanding trades, clearing and settlement.

But if we move to real-time cash reporting, real-time netting and pooling and real-time settlement at trade execution, then what is the treasurer to do?

Oh dear, not a lot.

A bit of information analysis, a bit of supply chain improvement, a bit of profit maximisation.

Shoot, that’s all the stuff the treasurer is supposed to be doing anyway isn’t it?

Only with a tenth of the staff they have today.

And this is the rub.

I remember talking to COOs about Corporate Actions automation about five years ago, and most resisted the idea of automating the process as they would lose many of their empire as the staff who administered such areas reported to the COO.

In other words, the very person who has to make the decision for the new system is that same person who has to layoff all their staff and close down the old system.

No wonder (some) treasury heads don’t like the idea of real-time treasury workstations or information services for the business.

About Chris M Skinner

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here…

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  • Thanks for a great blog and interesting opinions. However I must disagree with you. The role of the treasurer is not only this:
    “A treasurer is there to net and pool and settle and report the financial position of the company. They are not there to issue and track purchase orders and invoices, although they might get involved in that. No, all that stuff is for the administrators and financial controllers. The treasurer is there to deal with the complex analysis of cash positions and outstanding trades, clearing and settlement.”
    Agree that’s in the treasury’s remit today since the systems are not up to date. However I have yet to meet a corporate treasurer who does not salute automation and STP to limit the need for manual labour especially in this area.
    However this is not the core of corporate treasury. Do not forget funding, working capital management and risk management. The importance of these areas has increased radically the past year and this is the remit of the treasurer. The treasurer will disappear as a function only when corporates can run without money and financial risk.
    Best regards
    Magnus Lind
    Chair
    European Treasurers’ Peer Group
    http://www.TreasuryPeer.com

  • Thanks for a great blog and interesting opinions. However I must disagree with you. The role of the treasurer is not only this:
    “A treasurer is there to net and pool and settle and report the financial position of the company. They are not there to issue and track purchase orders and invoices, although they might get involved in that. No, all that stuff is for the administrators and financial controllers. The treasurer is there to deal with the complex analysis of cash positions and outstanding trades, clearing and settlement.”
    Agree that’s in the treasury’s remit today since the systems are not up to date. However I have yet to meet a corporate treasurer who does not salute automation and STP to limit the need for manual labour especially in this area.
    However this is not the core of corporate treasury. Do not forget funding, working capital management and risk management. The importance of these areas has increased radically the past year and this is the remit of the treasurer. The treasurer will disappear as a function only when corporates can run without money and financial risk.
    Best regards
    Magnus Lind
    Chair
    European Treasurers’ Peer Group
    http://www.TreasuryPeer.com

  • Oh, if only it were limited to the Treasurer. That’s a cost that all could agree on, including the Treasurer when he or she sees what it enables.
    Sadly, the issue of realtime goes far further. Once a corporate has realtime payments capabilities, all sorts of other magic is available for facilitating the entire financial business of the corporation. My own back of the envelope calculations and real experiences show corporate borrowing costs (alone) saving not basis points but percentage points.
    We may find that it is easy to point the finger to the Treasurer who is holding things back. But that’s just a convenient white lie.
    The real people who are holding it back are the banking industry, which stands to lose all those percentage points. It is impossible to take a percentage point off of a financial function without severe structural effects, and one million people who depend on the City for a job aren’t going to agree to that.
    But there is some hope. EU Directives basically banned these innovations in the past, but the newer versions have rolled back some of the outright bans, and made some of them possible. In some cases the innovations are almost workable, almost competitive, so it is likely that we’ll see these spring up in unlikely places sometime.

  • Oh, if only it were limited to the Treasurer. That’s a cost that all could agree on, including the Treasurer when he or she sees what it enables.
    Sadly, the issue of realtime goes far further. Once a corporate has realtime payments capabilities, all sorts of other magic is available for facilitating the entire financial business of the corporation. My own back of the envelope calculations and real experiences show corporate borrowing costs (alone) saving not basis points but percentage points.
    We may find that it is easy to point the finger to the Treasurer who is holding things back. But that’s just a convenient white lie.
    The real people who are holding it back are the banking industry, which stands to lose all those percentage points. It is impossible to take a percentage point off of a financial function without severe structural effects, and one million people who depend on the City for a job aren’t going to agree to that.
    But there is some hope. EU Directives basically banned these innovations in the past, but the newer versions have rolled back some of the outright bans, and made some of them possible. In some cases the innovations are almost workable, almost competitive, so it is likely that we’ll see these spring up in unlikely places sometime.

  • I appreciate your being provocative with the phrasing of what is a treasurer to do after ‘real-time’. However, you miss the strategic and tactical aspects of their job which is where the real value resides. And, when you talk about how Treasury groups can do the job with a 1/10th of the staff they have now, that seems to indicate the need for some remedial mathematics.
    People in charge of treasury operations care about gathering data, keying it in, reviewing trades, calling for trades, reconciling activity – etc. Work that needs to be done – but work than can largely be automated. These people have the hardest time letting go.
    Why Treasurer’s won’t go away (if you were serious):
    1. Debt and Capital Markets Management. Providing the proper structure for the organization and preparing it for the next 2, 3 or even 5 years. Treasurers look ahead.
    2. Visibility to Liquidity and threats to that liquidity. Treasurers and their team need to look farther ahead than this morning. Visibility requires treasury optics – tools to help you see what you need in the manner needed. Intelligence must be applied to the models and to the outlook to ensure this works well.
    3. Resiliency. If the world was perfect, you could hire consultants to make all of the projections, secure proper funding, and even create all of the accounting entries going out 10 years. However, this won’t let you manage relationships well – which is a crucial component for organizations that are resilient. And, the world isn’t perfect. Models we use for risk management aren’t perfect. So Treasurers have to prepare for events that can happen – and for those they can’t predict. This requires preparations that allow for rapid decisions based on good information. It also requires Treasurers and their teams to be situationally aware.
    4. Brain stem versus cerebral cortex. Treasurer and their groups need to act as the financial cerebral cortex managing all higher level functions. The automation and real-time activity is like the brain stem – controlling heart beat, breathing – the basic ‘operating system’.
    5. Business Partner/Internal Consulting. Acting as an agent of change. Providing an intellectual and financial discipline to business decisions. Without this…huge problems.
    I could go on. However, your point about real time and the use of technology WILL be able to eliminate the vast majority (all?) of treasury brain stem activity – over the next five years. Treasurer’s that focus on that alone – need to get real or they will be obviated by either real-time or by a solar powered calculator.
    See our blog entries at http://st.typepad.com/ and feel free to sign up for our Treasury Update newsletter at our website http://www.strategictreasurer.com
    Craig A. Jeffery
    Managing Partner
    Strategic Treasurer

  • I appreciate your being provocative with the phrasing of what is a treasurer to do after ‘real-time’. However, you miss the strategic and tactical aspects of their job which is where the real value resides. And, when you talk about how Treasury groups can do the job with a 1/10th of the staff they have now, that seems to indicate the need for some remedial mathematics.
    People in charge of treasury operations care about gathering data, keying it in, reviewing trades, calling for trades, reconciling activity – etc. Work that needs to be done – but work than can largely be automated. These people have the hardest time letting go.
    Why Treasurer’s won’t go away (if you were serious):
    1. Debt and Capital Markets Management. Providing the proper structure for the organization and preparing it for the next 2, 3 or even 5 years. Treasurers look ahead.
    2. Visibility to Liquidity and threats to that liquidity. Treasurers and their team need to look farther ahead than this morning. Visibility requires treasury optics – tools to help you see what you need in the manner needed. Intelligence must be applied to the models and to the outlook to ensure this works well.
    3. Resiliency. If the world was perfect, you could hire consultants to make all of the projections, secure proper funding, and even create all of the accounting entries going out 10 years. However, this won’t let you manage relationships well – which is a crucial component for organizations that are resilient. And, the world isn’t perfect. Models we use for risk management aren’t perfect. So Treasurers have to prepare for events that can happen – and for those they can’t predict. This requires preparations that allow for rapid decisions based on good information. It also requires Treasurers and their teams to be situationally aware.
    4. Brain stem versus cerebral cortex. Treasurer and their groups need to act as the financial cerebral cortex managing all higher level functions. The automation and real-time activity is like the brain stem – controlling heart beat, breathing – the basic ‘operating system’.
    5. Business Partner/Internal Consulting. Acting as an agent of change. Providing an intellectual and financial discipline to business decisions. Without this…huge problems.
    I could go on. However, your point about real time and the use of technology WILL be able to eliminate the vast majority (all?) of treasury brain stem activity – over the next five years. Treasurer’s that focus on that alone – need to get real or they will be obviated by either real-time or by a solar powered calculator.
    See our blog entries at http://st.typepad.com/ and feel free to sign up for our Treasury Update newsletter at our website http://www.strategictreasurer.com
    Craig A. Jeffery
    Managing Partner
    Strategic Treasurer

  • Chris, I’m with Magnus on this one. You state “A treasurer is there to net and pool and settle and report the financial position of the company. ……The treasurer is there to deal with the complex analysis of cash positions and outstanding trades, clearing and settlement.” The problem today’s treasurer has is that too much time is spent chasing and organising raw data, instead of analysing and acting upon properly organised and presented mnagement information. They want to be spending their time thinking about “what do I do with the money” not “how much have I got and where is it”.
    I follow your blogging about new payment methods and insitutions with the greatest of interest; but in the real world who is going to pick up on those banking innovations and work with the banks to broker them into the corporation? In my clients it’s often…..the treasurer (the same can be said of some card innovations). So when, finally, the dream of accurate, timely, comprehensive cash reporting is finally achieved – we can all find plenty of really value added things to do, some of which Magnus listed (working capital management, funding etc).
    Keep blogging and provoking us; it’s making us all think.
    Adrian Rodgers
    PS while I’m on; you also state that “They are not there to issue and track purchase orders and invoices, although they might get involved in that.” Factually correct, but when we think about who analyses and runs the banking tenders, and who introduces and drives through the Payment Factory concept in a major treasury, once again we find the treasurer earning his salary. When I’m working with clients on banking tenders, a major driver is to improve the quality of the data flow between corporate and bank; not for the benefit of treasury per se, but in order to streamline the business process, P2P, O2C or whatever. Corporates want STP too, but so often the data limitations of the banking systems are a barrier.

  • Chris Skinner

    Fascinating to see such a response guys. Obviously this one struck a chord.
    And yes, @Magnus, @Craig and @Adrian, I may be a little dismissive of the value of a treasury operation, but how many treasurers’ are truly able to articulate and explain the value they deliver to the business? From my own experience, not many.
    If treasury operations cannot demonstrate and clearly present the value they deliver to the business community then, with the onset of real-time monitoring and tracking of all things financial, there will be a danger of their being seen as redundant and being made just that.
    There are challenges ahead but if the business community feel they can track everything through automated solutions direct, then life will be very different for tomorrow’s treasurer to today’s worker bee.
    In particular, as I said, providing more effective supply chain and profit maximisation – which means working capital, funding and risk management – will become their focal point and, therefore, their clear value-add to the business.
    Wow, Magnus! Now I know what treasurer’s should have been doing all along!
    Meanwhile, @Ian, your comments make perfect sense and yes, it’s not just treasury.
    All best
    Chris

  • Chris Skinner

    Fascinating to see such a response guys. Obviously this one struck a chord.
    And yes, @Magnus, @Craig and @Adrian, I may be a little dismissive of the value of a treasury operation, but how many treasurers’ are truly able to articulate and explain the value they deliver to the business? From my own experience, not many.
    If treasury operations cannot demonstrate and clearly present the value they deliver to the business community then, with the onset of real-time monitoring and tracking of all things financial, there will be a danger of their being seen as redundant and being made just that.
    There are challenges ahead but if the business community feel they can track everything through automated solutions direct, then life will be very different for tomorrow’s treasurer to today’s worker bee.
    In particular, as I said, providing more effective supply chain and profit maximisation – which means working capital, funding and risk management – will become their focal point and, therefore, their clear value-add to the business.
    Wow, Magnus! Now I know what treasurer’s should have been doing all along!
    Meanwhile, @Ian, your comments make perfect sense and yes, it’s not just treasury.
    All best
    Chris

  • Jeremy Kidd

    Indeed, Chris – thank you for the controversial, discussion-provoking statements that I’m sure you yourself don’t totally buy.
    I think the key point out of all this is that real-time information will vastly decrease the need for the corporate Treasury to be involved in the operational aspects of A/P and A/R. Most of your points, Chris, really tie back to allowing payables and receivables folks to go about their business very efficiently without the need for Treasury to get involved. All of the other roles of the Treasurer’s organization would still be there, and in fact real-time payment processing and improved A/P and A/R processing will open up many new doors for the strategic Treasurer to improve liquidity, decrease bank charges, improve working capital, etc, etc.
    In fact, the next place my mind goes is that once payables and receivables are real-time and using universally accepted standards, why on earth do we need the banks any more? Let’s get customers and suppliers working seamlessly and directly together in real-time, then the limitations of banking systems become irrelevant. I’ve often wondered if there was a place for a non-bank third-party to sit in this space as a sort of payment transaction intermediary. Someone to manage a better data flow than banks are able to do that can just inform the banks of the money movements on the back end. The banks systems have been a barrier to efficiency for far to long.
    To their credit though, the core competency of the banks is (and should be!) the efficient processing of transactions. I think they’re justified in being slow to move because they need to keep those processing engines up. Rather than continuing to pressure them to manage all this other stuff, maybe it’s time to take them out of the loop on it and get an additional party. How about a company like Google or PayPal inserting themselves in this space?

  • Jeremy Kidd

    Indeed, Chris – thank you for the controversial, discussion-provoking statements that I’m sure you yourself don’t totally buy.
    I think the key point out of all this is that real-time information will vastly decrease the need for the corporate Treasury to be involved in the operational aspects of A/P and A/R. Most of your points, Chris, really tie back to allowing payables and receivables folks to go about their business very efficiently without the need for Treasury to get involved. All of the other roles of the Treasurer’s organization would still be there, and in fact real-time payment processing and improved A/P and A/R processing will open up many new doors for the strategic Treasurer to improve liquidity, decrease bank charges, improve working capital, etc, etc.
    In fact, the next place my mind goes is that once payables and receivables are real-time and using universally accepted standards, why on earth do we need the banks any more? Let’s get customers and suppliers working seamlessly and directly together in real-time, then the limitations of banking systems become irrelevant. I’ve often wondered if there was a place for a non-bank third-party to sit in this space as a sort of payment transaction intermediary. Someone to manage a better data flow than banks are able to do that can just inform the banks of the money movements on the back end. The banks systems have been a barrier to efficiency for far to long.
    To their credit though, the core competency of the banks is (and should be!) the efficient processing of transactions. I think they’re justified in being slow to move because they need to keep those processing engines up. Rather than continuing to pressure them to manage all this other stuff, maybe it’s time to take them out of the loop on it and get an additional party. How about a company like Google or PayPal inserting themselves in this space?

  • I agree with Iang, UK banks must be dragging their heels to increase funding costs to their customers. No one could take this long from simple incompetence 🙂
    Conspiracies aside…
    The thing about RT payments that interests me is that they allow processing logic at the end-points. I could send a payment to a brokerage and have it instantly bounced back if they couldn’t identify me as a customer. Or have my accounting system automatically negotiate dynamic discounting with a supplier. You can’t implement any interesting behaviour with a T+1 lag!