Treasury Strategy & Transformation
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Head2Head: The Promise and Reality of Innovation

by Bruce Meuli, Global Business Solutions executive, and Jonathon Traer-Clark, Head of Strategy, Global Transaction Services, Bank of America Merrill Lynch

Jonathon Traer-ClarkJTC Every new thing creates two new questions and two new opportunities.” That’s what Amazon’s founder and CEO, Jeff Bezos said in response to the question: “What is innovation?” The word has been part of the treasurer’s vocabulary since the 1970s when the concept of corporate treasury as a profession first emerged. Ever since, corporate treasurers have been seeking new ways to manage and reconcile the flow of capital into and between parts of their businesses, a task that has now become increasingly multinational and digital in nature. Peer-to-peer lending, monetising data and more recently, digital payments, are amongst the buzzwords for today’s treasurer, but what questions and opportunities do such broad innovations present?

Bruce MeuliBM Only two questions and two opportunities? If only it were that easy! Any “new thing” prompts a countless number of questions and opportunities for a corporate treasurer. Using blockchain as a case in point, the potential move to a distributed ledger is predicted to improve efficiency and security when transacting, settling and recording payments. These are potentially fundamental changes to treasury’s way of life, because blockchain has the potential to create a new network of trust whereby a record of truth – who paid whom and when – can be shared publically. Some say it will meet the demand for fairer transactions, but there is still a great deal of uncertainty about the impact that technologies such as blockchain will have on corporates and their banks.

Jonathon Traer-ClarkJTC I think a corporate can already access fair transactions, so it’s important not to confuse recording a transaction and assessing its value. An open-ledger mechanism does not necessarily interpret the real value of an asset but crucially, it records the asset’s lifecycle – who bought what, when and at what price. The potential therefore exists to allow a treasurer to obtain secure visibility of its cash flow on a standardised, cross-border basis. It is this incrementally reconciled audit trail, together with the prospect of enhanced customer recognition that could present key opportunities for the treasurer.

Bruce MeuliBM Once a blockchain record has been created, it is there for everyone to see and use, and once a transaction update has been validated by the blockchain participants there can be no historical amendments. This is seen as a major benefit of blockchain but it may mean back-office operations will need to improve from an accuracy and timeliness perspective. From a KYC and pricing point of view, that’s pretty significant, and I see scope for the back office to adopt this real-time way of thinking. Large corporates have challenges around auditing and managing the truth across an often multinational supply chain which is constrained by the established system of batched payments processing.