Before looking ahead at what is to come in 2020, it would be wise to first briefly touch on the accuracy of our 2019 predictions.
Our Prediction: Interest rates would increase, driving more attention to optimizing working capital and minimizing borrowing.
What Happened: Interest rates didn’t move as much as expected one year ago, although the best practices to reduce idle cash and streamline working capital remain great 2020 ideas!
Our Prediction: Cross-border payments – I talked about how non-bank payment channels might become more relevant to corporates for cross-border payments.
What Happened: This potential has yet to be realized, in part due to greater efficiencies offered by traditional payment channels, including SWIFT with the official launch of SWIFT gpi. We also saw large payment players such as Visa lay the groundwork for alternative B2B payment networks, making further payments innovation likely in 2020.
Our Prediction: APIs – 2019 saw the first APIs between banks and treasury system providers, with a handful of top global banks either releasing APIs or finalizing the testing of their TMS and ERP interfaces.
What Happened: As predicted, these banks have begun to embrace the opportunity to deliver real-time payments and real-time cash reporting, new services that are intended to complement existing banks’ cash management offerings.
Our Prediction: Data visualization. We predicted that treasury teams would begin to see the value of data visualization – dashboards that could help make data more business intelligent.
What Happened: This prediction did materialize. At Kyriba, we on-boarded more than 50 of our corporate clients with dozens of cash management, forecasting, payments and compliance dashboards to create a more interactive analytical experience. Some technology providers have made visual dashboards their entire product with no traditional ‘user interface’ at all. There will be more progress to report in 2020 – so much to be excited about.
Our Prediction: Blockchain – we said that blockchain wouldn’t make progress in treasury in 2019.
What Happened: It didn’t. The same counterparty risk and scalability issues remain obstacles to be overcome. Our prediction wouldn’t change for 2020 either.
Our Prediction: Robotics – we talked about robotic process and artificial intelligence making an impact in 2019.
What Happened: Many finance teams (including treasury sometimes) have begun to realize the opportunities RPA and AI can offer with more to come in 2020, so further progress will be discussed in our 2020 predictions below!
To conclude 2019, we were largely in line with our assessment of what the year would offer corporate treasury teams. Looking ahead to 2020, here is what we expect the top 5 themes to be:
- Data-driven Decision Making – Between both the EuroFinance and AFP conferences this past fall, dozens of presentations referenced the need to capture and analyze more data to increase the effectiveness of treasury’s decision making. Examples include the detection of payment anomalies, building more effective cash forecasts and reducing net currency exposure within cash flows and the balance sheet.
- Data analytics impact every industry and every department within an organization. As a result, the demand for treasury tools that can capture, validate and find meaning in financial data will continue to increase in sophistication and drive more treasury purchasing decisions – including treasury management systems. At Kyriba, 50 percent of our product roadmap is allocated to features and services that help our customers leverage their data. There is every reason to believe this trend will continue well past 2020.
- Artificial intelligence – Building on the theme of data, many treasurers are demanding artificial intelligence be built into their ERP and TMS platforms, with more than 25 percent of treasury RFPs requesting insight into artificial intelligence and machine learning capabilities.
- While many treasury professionals can confidently distinguish between robotic process automation and artificial intelligence (hint: one is pre-programmed automation while the other features software that learns from the data it consumes), 2020 will be the year that machine learning becomes part of the regular treasury management workflow. Use cases such as detection of payment anomalies, smart forecasting and cash reconciliation, and potentially hedge optimization are currently in testing with corporate customers that are eager to harness the new technology. While 2020 is unlikely to feature completely intelligent software platforms, treasury should expect to see meaningful progress from each of their treasury software providers (or start questioning if they are with the right TMS provider).
- Digital Transformation – Until this year, digital transformation seemed like one of those ambiguous terms that meant ten different things to ten different organizations. In 2019, we started to see actual examples of finance-led digital transformation: centralizing payment controls and approvals in a single payments hub, standardizing how bank accounts were opened,closed and managed through electronic approvals and documentation exchange, and complete straight-through processing for investment and FX trading – just to name a few.
- In 2020, we are unlikely to see any treasurer admit to performing manual tasks or using spreadsheets to manage cash positions and forecasts. Cash, treasury and payments automation will simply be expected in 2020 – and those unable to demonstrate greater technology maturity will risk being left behind within their organization or when trying to seek new career opportunities.
- Geopolitical Risk – The political volatility we experienced in 2019 was a painful reminder to CFOs and treasurers that geopolitical awareness is more than just hedging currency exposures. Brexit, tariff wars, on-again/off-again trade agreements, inability to rely on interest rates to manage currency levels, the potential introduction of state-backed (or state-regulated digital currencies) and election-induced political instability all combined to make 2019 the worst year for currency impacts on earnings in recent memory.
- What we did learn – and what corporate CFOs are demanding in earnest – is to provide a better understanding of risk exposures, including within balance sheets, so that the CFO’s teams can implement better long-term business practices to organically reduce net exposures. In some cases, this is currency driven; for others, it is about shifting to shared services operations or changing open trade terms with the supply chain. Either way, the key for CFOs and treasurers is to capture and understand as much financial data as possible so that they can make informed, data-driven decisions.
- Real-time Treasury – The rise of banking APIs has created the opportunity to connect with treasury teams in real-time. Currently, bank APIs can offer real-time payments (and acknowledgments) and, while paying suppliers in real-time is less interesting to treasury teams today, most finance teams agree that receiving payment in real-time is a great idea to optimize working capital. As a result, we should expect request-to-pay in real-time to drive real-time payments, with some progress to be expected in 2020.
- What will become a reality this coming year is the delivery of bank balance and transaction reporting in real-time. This is exciting to many treasury teams that feel cash management workflows and decisions are based on receipt of intraday bank reporting. This is especially the case in the United States, whereas in Europe cash decisions are made based on current day reporting that is received at the beginning of the business day. With real-time reporting, the expectation is to receive a constant stream of bank reporting data as if users were logging into each of their bank portals every single second. This additional information supply will challenge many cash managers as to when the ideal timing for investing and borrowing decisions should be made. In general, in 2020, this will be a good problem to have.
Whether your hope is for better risk management, to better harnessing of treasury data, or a more real-time treasury experience, we very much hope that you enjoy what 2020 has to offer for treasury teams around the world.