Companies have been grappling with cash management almost since business began so it stands to reason that by now, corporates and banks alike should be comfortable with the practice. But despite the fact that cash management is such a basic function of commerce, players in this ecosystem continue to report high levels of frustration and complexity. Questions such as 'Who has paid me, and what for?' are clearly vital for corporates and should be easy to answer, and yet all of the evidence tells us that this is often not the case.
That's why we set out to answer the question, 'Why is Cash Management So Hard?'. Recognising that the issue is both technology and business driven, we invited our Chief Technology Officer, Neil Vernon, and our Senior Cash Management Solutions Strategist, Bill Wrest, to sit down in conversation with Gert Raeves of Adox research and talk the question through.
Enjoy the podcast in three bite sized parts at the links, or listen to the full conversation and read our summary below.
Part One: Why is Cash Management So Hard?
It quickly became apparent that the cash management environment is a complex one, as Bill explained that not only does it touch every part of the treasury function, it also impacts everything from forecasting to working capital management. It's clear that this complexity exists on the banks' side too. The siloed nature of banking infrastructure and businesses means that the availability of data is rarely simple, often needing to be pulled from a multitude of sources across the organisation. This challenge is exacerbated by the volume of transactional data banks are dealing with and the fact that messaging formats commonly used in the industry actually strip out a lot of what would be useful information. In Neil's words, many cash management issues are very much a data problem.
Data rears its head again when we consider customer relationships. Corporate customers - understandably - are not interested in hearing from banks about why their siloed legacy arrangements make obtaining information so difficult. They simply want access to accurate, up to date details of their positions and activities. However it's not only legacy systems which stand in the way of this. Bill and Neil both highlighted that not all banks have a customer-centric approach to solution development in this space and that some even consider asking customers what they want to be 'a radical thing to do!' Meanwhile there can be a reluctance in some corporate treasuries to fix what isn't technically broken - even if a lack of visibility is causing pain for system users and the business as a whole on a daily basis.
The regulatory environment was also a key topic for discussion. Neil's explanation of the client money space highlighted the additional expectations here and the implications for cash management. PSD II was also discussed. Whilst the benefits of this have so far been felt more by retail banking customers, it was agreed that corporate treasuries will also see the developments arising from this in the future.
Finally, the changing nature of the competitive environment threatens disruption to cash management services. The emergence of new market entrants and competitors means that the industry can't afford to press pause on innovation or continue putting up with sub standard technology, which means they in turn cannot meet the expectations of clients, who are beginning to question why their banking experience as a retail customer is so different to that as a corporate treasurer. With this being such a pivotal time for the industry, it's clear that those who do not adapt may not survive, making now the time to address the difficulties of cash management once and for all.
To discuss how we can help make cash management easier for both banks and corporates, please schedule a short demo below