Pulse check on
Almost one-third of attendees at the J.P. Morgan 2018 APAC CFO and Treasurers Forum in Singapore identified digital transformation as their top business priority over the next 12 months, with 56% saying that reducing costs and improving operational efficiency were the key drivers for this.
A panel session focused on the progress the treasury industry is making in the adoption of four emerging technologies.
WHICH NEW TECHNOLOGIES WILL YOU PRIORITIZE FOR INVESTMENT WITHIN TREASURY / FINANCE OVER THE NEXT 12 MONTHS?
Source: J.P. Morgan 2018 APAC CFO and Treasurers Forum survey
ARTIFICIAL INTELLIGENCE (AI): TEACHING THE MACHINES
AI has evolved from executing simple and repetitive tasks to human-like behaviors driven by algorithms that learn from the data they receive. For corporates, this goes beyond using technology to free up resources; it’s about increasing intelligence.
J.P. Morgan’s Treasury Services business recently launched a pilot program for a virtual assistant powered by artificial intelligence. Instead of filtering through the portal to perform certain tasks such as sending wires or exporting data, a client will be able to simply ask the virtual assistant for information on balances. More importantly, the virtual assistant will learn the client’s behavior and ultimately be able to make recommendations.
According to Umar Farooq, global head of digital channels, analytics and innovation for Treasury Services at J.P. Morgan, fraud is another area where AI is highly applicable. “We have lots of payment history data for clients. Instead of using humans to detect what's out of pattern, you can use computer algorithms that are faster, cheaper and more accurate.”
But experts agree that for AI to mature and gain broader adoption, data remains the challenge. “You have the systems, but how do we extract data? How do we gather data? Is that data in a form that is usable? That is very important,” said Jagannath Narendran, head of Japan and APAC region for Google Cloud. “If you are starting at the ground-up, it is easier to build datasets. But it is not as easy from a technology standpoint to build using existing systems.”
BLOCKCHAIN: THE JOURNEY CONTINUES
With distributed ledger technology (DLT) still at an early stage of development in the treasury space, priority should be on the careful selection of use cases that factor in benefits against the cost of implementation.
“The technology itself is not fully mature. So while there are certain problems that may be a good fit for blockchain, the technology may not be a good fit for the problem,” said Farooq, citing the low value payments in certain corridors around the world as an example. “If you want to move tens of thousands of transactions per second in these corridors, there is no DLT solution that can operate at that performance level.”
“With blockchain, we are fundamentally focused on where we will create new value for clients and improve the functioning of markets,” said Farooq. “I’m highly skeptical of most statements which start with ‘we should put this on blockchain’.”
A key challenge with blockchain is the ability to build a network. “With corporates, it would make sense to form consortia or a central party that can stitch the network together,” said Farooq. In September, J.P. Morgan expanded its Interbank Information Network (IIN) to 90 banks, the biggest number of financial institutions to join a live blockchain application. Using blockchain technology, IIN reduces the time correspondent banks currently spend responding to compliance and other data-related inquiries that delay payments.
API: BRINGING DOWN THE WALLS
CFOs and treasurers are increasingly hearing about the potential of application programming interface (API) in bringing data and services together in real time to provide robust actionable inputs, but there remain hurdles.
“Every software you use, you have an API to the operating system. It is nothing new,” said David Blair, managing director of Acarate Consulting in Singapore. “One question I would ask is, if all my banks have APIs, how many APIs am I going to have to code to talk to all of them? My concern about the API hype is we may overlook the underlying problem of getting all our data together in order to achieve near real-time transactions.”
“J.P. Morgan is investing heavily in APIs because of their potential to revolutionize the client experience,” said Farooq. As well as transaction ability, treasurers can use APIs to instantly obtain information from their banks and integrate it into their workflows. “APIs are where the walls between our corporate clients’ finance department, their front office and their strategy and product teams might start to come down over time,” he added.
“The information flows across the different banks are a great example of how you participate in the broader ecosystem as opposed to trying to create an ecosystem all by yourself,” said Narendran. “We need to start thinking about APIs as a strategic business tool.”
REAL-TIME PAYMENTS: 24/7 TREASURY?
Real-time payments (RTPs) are now a reality in the B2C and C2B spaces as disintermediation brings businesses in direct contact with their end consumers. Does the use case exist in the B2B context?