Corporate treasurers could be forgiven for feeling like they have been stuck in a financial time warp. Clunky user experiences, arduous manual processes and old-school hours stand in stark contrast to the increasingly slick, on-demand world of retail banking.
Yet market forces are driving banking innovations which promise significant downstream benefits for corporates. Banks are facing intense competition, with 8% of corporates already reporting that they are using non-bank specialists for credit and financing requirements. As under pressure banks look to meet increasing client expectations, tapping their vast pools of customer information to develop data-driven products and services has become a priority. In fact, 79% of banks recognise that demand for data-led services among their corporate clients is increasing.
But what does this mean for corporate treasurers, and how can this shifting dynamic support the ongoing evolution of the treasury function?
Why ISO 20022 is a game-changer
The number of banks identifying payments data transformation as a key strategic priority has doubled in the past two years, and the rollout of ISO 20022 messaging formats has undoubtedly been a major catalyst for banks to act in a bid to counter competition and meet evolving corporate expectations.
At a high-level, ISO 20022 enables standardised, relevant and enriched datasets that are directly associated with the payment message. This, in combination with the development of advanced real-time payments infrastructures across the globe, supports the instantaneous delivery of accurate and complete payments data.
The impact is considerable, significantly reducing the complexity and costs that have typically constrained the data-driven products and services offered to corporates. As one Head of Payments at a leading global bank explains: “The problem was the way that the banks and corporates communicated wasn’t always open and robust. ISO 20022 is the game changer.”
Put simply, ISO 20022 is enabling banks to do what they were already doing. Only better. And corporate treasurers that have been looking for banking partners to make their lives easier for years now stand to benefit.
What corporate treasurers want
ISO 20022 provides a foundation to solve a lot of headaches in the immediate short-term. For example, a recent survey found the bank data services that corporates would be most willing to pay for now are real-time cash balances (84%), enhanced security and fraud prevention (74%) and a single real-time balance dashboard across multiple bank partners (70%).
But as we look ahead, the majority of these services are likely to become ‘table stakes.’ Corporate treasurers will come to (and in some instances already do – as in the case of virtual accounts and expanded automation of payables and receivables) expect these capabilities as standard as part of a wider transformation of the treasury function that demands real-time visibility and access, improved risk management and end-to-end automation. Again, banking partners will rely on ISO 20022 to build the capabilities that underpin these services.
Given these trends, it is not surprising then that 74% of banks are investing in ISO 20022 new data-led services for corporate clients. Banks are at different stages of their payments data transformation strategies, but some have already started making moves. Take J.P Morgan and HSBC, who are actively investing in their payments infrastructure to support clients with new capabilities enabled by ISO 20022.
Corporate-banks relationships face a “moment of truth”
Yet it is important to recognise that ISO 20022 is far more than a bank-facing issue, and the practicalities of migration for corporates are not inconsiderable. Corporates with banking providers that can effectively support migration stand to gain ground and realise competitive advantage. It is telling that 32% of corporates (rising to over 50% in Asia) have stated that migration support is a strategic priority that they would be willing to switch providers for.
This reveals a wider trend on the development of the corporate-bank relationship. A commoditised approach based solely on the delivery and consumption of products is simply not enough.
In contrast, developing true partnerships with banking providers will empower treasurers to navigate change. In an increasingly uncertain world, for example, services that support corporates in mitigating and managing counterparty risk, commodity fluctuations and FX volatility promise to deliver significant benefits. More broadly, identifying bank partners with the flexibility to deliver continuous service enhancements to increase operational efficiencies and respond to emerging requirements will be critical.