by Viola Hechl-Schmied, Product Owner for Machine Learning at ION Treasury.
With today’s fast-paced financial world, currency movements and geopolitical changes, treasurers are now expected to combat market volatility with less resources as they evolve into a more strategic role.
While on the one hand treasury teams are striving to become leaner and more efficient, on the other, they are increasingly having to deal with a wider array of challenges on top of cash visibility and forecasting.
To succeed, treasurers need to ensure that vital processes around cash and liquidity management, FX and regulatory compliance are undertaken seamlessly. With a backdrop of instability, including heightened inflation and interest rates, the onus is on treasurers more than ever to be able to understand and analyze financial data quickly to pivot and maximize cashflows. As a result, companies are increasingly looking to move their corporate treasury function into a real-time operation.
Deloitte’s 2024 Global Treasury Survey, published in November, found that real-time payments are the most likely instruments to be adopted over the coming year. This is because moving to a real-time world ensures transactions are settled instantly, empowering treasury teams with more timely and accurate views of cash positions that can reduce the unpredictability of money flow.
What’s more, the move to real-time treasury highlights the impact of artificial intelligence (AI) and machine learning (ML), which are increasingly becoming central pillars in enabling treasurers to achieve this agility. These technologies allow teams to process vast amounts of financial data in real-time, identify patterns, and predict market trends.
So, what exactly is real-time treasury?
Real-time treasury is the culmination of banking, liquidity, technology, and payment systems evolving to operate in one continuous motion. At its core, it allows the monitoring and managing of all financial activities to be done instantly, enabling treasurers to access the right information at the right time, allowing quick decision making and proactive risk management.
AI and ML are increasingly underpinning the transformation towards real-time treasury, reducing manual workloads by digitizing treasury processes, automating repetitive tasks such as reconciliation and cash tagging, improving fraud detection, and providing near-instant insights into complex data.
Real-time Application Programming Interfaces (APIs) are also central to real-time treasury; these interfaces relay information rapidly with “always on” connectivity. They enable seamless integration of banking data in real time, helping with bank reconciliation, cash positioning and fund transfers.
This is how a business can consolidate data aggregation and bank reconciliation onto one platform for immediate access, while reducing manual errors. But real-time treasury is not just about implementing an API, it’s about ensuring end-to-end processes are based on real-time information.
AI: a central pillar of real-time treasury
By using AI and ML to provide an accurate view of global cash positions across multiple bank accounts and subsidiaries in real time, treasurers can make better decisions related to cash flow management. With its instant access to financial information and transactional capabilities, real-time treasury can empower treasurers to make informed decisions, optimize treasury operations and drive strategic value for the organization.
The proliferation of real-time payment systems has also necessitated a similarly rapid response to fraud payment, and AI-powered payment screening solutions can prevent fraud before it even happens. Through analyzing the flow of historic payments, AI can learn a treasury department’s ‘normal’ behavior, which is screened against new payments to identify anomalies. Be it fraud or user errors, AI ensures that any deviations are detected and flagged in real time.
Challenges of real-time treasury
Like any transformative initiative, implementing real-time operations into the treasury function is a complex, time-consuming, and disruptive process. To do so successfully, the entire company needs to understand the intrinsic value this journey will hold, as well as the likely disruption that’ll take place to reach it.
Implementing real-time treasury requires substantial investment in training as well as ongoing maintenance. The business case for real-time treasury is robust, but this must be communicated and its alignment to the overall strategic goals of the organization highlighted.
Those with existing legacy systems will face increased challenges, particularly as moving the treasury function to a real-time operation requires advanced technological infrastructure and the ability to integrate existing systems with real-time data processing capabilities.
To underpin successful AI and ML systems, the organizational data that systems operate on must be of high quality and appropriately configured to support the necessary decision-making process. Poor data quality can lead to flawed insight and decision making, undermining effectiveness.
Real-time operations spur proactive decision making
The three key benefits of real-time treasury are enhanced liquidity, risk management and efficiency. A modern real-time treasury model combines AI and ML technology, data integration, automation and analytics to enable treasurers to manage cash, liquidity, and financial risks with precision and agility.
Deloitte’s Global Treasury Survey 2024 found that the top priority for treasury departments is to focus on enhancing liquidity risk management, while visibility into global operations, cash, and financial risk exposures continues to be the most challenging and time-consuming area. Harnessing the power of AI and ML to transform the treasury function into a real-time operation will be a game changer for businesses on both accounts, offering instant visibility into cash flow, liquidity and transactions across global operations.
The significance of real-time treasury is not just simplifying operations and increasing transaction speed. By receiving timely information, treasurers are empowered to navigate the complexities of the global financial landscape and fulfill a more strategic role.
