Unpack key topics that impact banking, investing, financial services and the wider economy in this award-winning explainer series.
As consumers, we've become accustomed to buying and paying for just about anything through our phones. Ordering a shirt online and checking out through stored credit card details, renting a movie on your TV to watch immediately, scrolling through restaurant menus on a delivery app, and eating on your couch in minutes.
These uninterrupted experiences in our personal lives are driving the demand for the same seamlessness in business transactions, particularly when it comes to automating corporate treasury. This function manages all aspects of payments and liquidity for a company and has always involved a lot of paper, spreadsheets, and legacy systems. So what does its digital transformation look like?
This is Digital Treasury Unpacked.
Digitizing cash management has become critical as businesses look to gain market advantage and hit business targets while ensuring customer expectations for a great experience, fast transactions, ease of use, and data insights.
Digital needs can vary based on the company's age and how it operates. Does it have multiple cash management platforms? Have these been modernized over time? Does the company operate internationally? A global e-commerce company could be looking for a daily view of its cash balances across international accounts, or a food delivery operator wants to pay its drivers instantly in a certain currency, or a utility company wants to offer customers an electronic option for paying their bills, like using an e-wallet rather than writing a check.
But digitization isn't just about evolving for the future. It's also about business resiliency. Historically, many of the tasks performed by a company's treasury team have been manual. They require multiple authentication devices, various spreadsheets, and excessive time spent crosschecking incoming and outgoing payments to make sure that everything matches up with account statements.
Corporate treasurers wanted better visibility to data. Many companies have various bank partners, making it harder to see a consolidated view of their accounts. Also, many have adopted multiple internal systems over the years that aren't compatible. Having automated access to information like foreign exchange rates, cash balances, and currency reserves is critical for decision making, particularly in such a fast moving market environment when data can become outdated in minutes, or even seconds, like during the COVID-19 pandemic.
For example, global companies often experience foreign exchange mismatch. Accounts are set up in one currency, but incoming payments enter the account in another currency. Different foreign exchange rates can impact the amount that settles into the account and companies used to spend time researching rate changes to correct the discrepancy. Now they can access digitized, up-to-date rates for automated corrections.
Other top requests include a digital method of reconciling payments and forecasting cash flow to help companies plan for different market scenarios. To automate any of this, access to up-to-date data is the critical first step, and Application Programming Interfaces, or APIs, are playing an increasingly bigger role in this.
In the past few years, APIs have rapidly grown as a way to speed up innovation and help digitize traditional pain points in the corporate treasury space, all through automation. We all use APIs every day, even if you don't realize it. Like a mobile savings app pulling your account balances across different banks into one view. An API makes that happen. Or a ride sharing app connecting you with a driver based on your location. That's also an API.
APIs enable two different systems to connect and communicate securely. There are two main types of APIs. Data APIs automatically retrieve information, like account balances. Process APIs trigger a service, like initiating a payment. For example, a company reaches out to their bank with a request to see a daily view of their account balance each morning.
The requester's identity is authenticated through an API and a digital token is provided to securely access the information. Through this API, the bank provides the data directly to the company's treasury management system in real time. Without an API, this would all happen manually and could take up to three days. As consumers demand easier and faster experiences, an increasing number of businesses are expected to ramp up their treasury digitization plans to quickly meet demand.
Consumers demand seamless digital transactions in their personal lives, but how does this uninterrupted experience translate to the corporate world and what part does digital treasury play? Learn how the transition from paper to automated cash management is driving business growth and resiliency.
The material contained herein is intended as a general market and/or economic commentary and is not intended to constitute financial or investment advice. Any views or opinions expressed herein are solely those of the speakers and do not reflect the views of and opinions of JPMorgan Chase. This information in no way constitutes JPMorgan Chase research and should not be treated as such. Further, the views expressed herein may differ from that contained in JPMorgan Chase research reports. The information herein has been obtained from sources deemed to be reliable, but JPMorgan Chase makes no representation or warranty as to its accuracy or completeness.