Treasury transformation: Could robots soon rule the world?

Digitization of economy

 

The digitization of the economy is a fact, whatever your point of view and your business activity. We will be all hit, in a form or another. No one will escape to this major transformation. To paraphrase Alvin Toffler, we could call it “the fourth wave”. Should you accept it or reject it, no doubt, our ancient world is under a major transformation or what Maurice Levy from PUBLICIS called the “Uberization” of the economy. As all other finance functions, corporations and jobs, treasury has been facing challenges, changes and evolutions in the last 10 years, since the Global Financial Crisis. Actually the function has evolved over years, but more significantly over the last ones. As already said: “You will either be the disruptor or the disrupted. There is no middle ground” (Singularity University).

Treasury function is a relatively young and new function, created 40-50 years ago maximum (as we know it today). It has evolved enormously over half a century. However, since the last crisis, even more than ever. The financial crisis has been a sort of catalyst for further changes. We could even talk about a revolution.

 

“The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn.” (Alvin Toffler)

 

Towards Treasury V.4.0

 

There are few major changes and key elements which explain this new situation: new regulatory environment more stringent, new complex IFRS accounting standards, combined with technological developments and new IT solutions (including fraud and cybercrime coming together with technological evolution), high market volatility, complexification of (doing) business and as a whole an obvious acceleration of things.

 

Treasurers entered in what I qualified as the V.4.0 definition of their role. Treasurers are specialists and even hyper-specialists. And therefore, they are more than other exposed to technical and IT evolution or we could claim “revolution”. The treasury department is the one using the largest number of IT solutions in the whole finance department (e.g. TRMS, Payment Factory, platforms for dealing, dash boarding tools, netting, market data feeding tools, etc…). Every day new solutions become available. However, the diversity and the multitude of solutions make interfacing, “Straight Through Processing” (i.e. STP) and connectivity complex and sometimes even impossible. It makes the “Business Intelligence (i.e. BI) and the dash boarding more complicate than man thought. The multitude of formats of data coming from several applications make consolidation difficult. It is why paradoxically EXCEL has never been so used, despite the IT evolution and specific solutions available. The “big data” and data analytics is a challenge we can now face. There are decision-making solutions and tools to crunch huge data numbers and to aggregate them into a common formats to produce useful dash boards. A major issue remains in the aptitude to smartly use available data, too often unused by treasurers.

 

The Bitcoins and cryptocurrencies will maybe not challenge real currencies. We will see. Some bankers are doubting they will emerge as a real competitor to classic ones. However, the block chain derived technologies have demonstrated that the underlying technology will enable a multitude of other solutions. It also was a sort of booster for pushing banks and market infrastructures to eventually move and find other solutions (e.g. SWIFT GPI, KYC register, e-payment methods, etc…).

 

One characteristic of this financial revolution is the number of new entrants, the myriad of FinTech’s offering interesting App’s and the new Peer-to-Peer solutions, reinforcing the disintermediation. The difficulty lurks in the multitude of solutions proposed. How to choose the right e-payment method in this jungle, for example? What will be the emerging standard(s)? Who are the best partners? These are the obvious and relevant questions we all raised.

 

Disruption or continuation? Evolution or revolution?

 

Are robots about to steal your job? I don’t think so. They will come and do part of your job. However, not all tasks and certainly not immediately. When baby-boomers were young, they thought cars would fly in the year 2000 and they aren’t still flying… although it will come by 2020, as we heard.

 

Is it a threat or an opportunity? It depends on what you’ll make out of it. For example, block chain and derived technologies will enable new solutions, offer more disintermediation of banks and increase productivity, reduce cost and increase transparency. They will even be applied to State functions and services, in some specific cases.

What should we do to remain optimum, to face technological challenges and to adapt our function to future requirements? We need to be agile, to be (more) curious about new solutions, to be pro-active (rather than retroactive) and to be pioneers, instead of conservators.

 

One thing is certain: things won’t be the same and will keep changing at a faster pace, no doubt! We should be prepared to run faster and therefore we should workout now. “The better is ahead” wrote a famous novelist. Let’s take the best of our challenging future and become modern treasurers.

 

François Masquelier, Chairman of ATEL

 

November 2017