Treasury ’22: Getting Ready to Reboot for ’23 and Beyond

Six key themes that will keep treasury fully engaged throughout the second half of 2022 and beyond.

Introduction

The past couple of years have been a test of resilience and creativity for most businesses. But now, as a corner is seemingly starting to be turned, many are beginning to look further ahead than tomorrow or next week or next month. The challenges that lie in wait during the rest of in 2022 are still numerous, but they are well understood and, for the well prepared, they are not insurmountable.

Perhaps one of the most immediate, albeit unpredictable, macro-level challenges faced by most businesses today is interest rate risk. We’ve seen demand pressure increase across multiple sectors and industries in recent months, but with supply chain bottlenecks and labour shortages, prices have surged in some regions. This may prove to be an economic blip, but it is nonetheless raising the spectre of above-normal inflation, which is in turn driving certain central banks to opt for interest rate increases to try to contain it.

Turbulent times are obviously forcing corporate treasurers to focus on their fundamentals, with liquidity and short-term cash management topping the list of concerns for many. Cash will remain king for some time to come. More accurate cash flow forecasting will help mitigate interest rate risk, especially where treasury is able to review its investment horizons, adjust its interest rate exposures, and explore investments with shorter duration. Robust cash flow forecasting is also essential for monitoring debt covenants because interest rate rises, for net borrowers, will lead to an increase of the interest expense line in their P&Ls. What’s more, when interest rates rise, they will do so at different rates in different regions. This potentially brings FX rate volatility into play for companies with international operations, impacting from both a commercial and financing perspective.

Of course, managing financial risk is all part of the treasurer’s lot, and one more threat that will not be going away anytime soon is cyber risk, with fraudsters and other so-called ‘bad actors’ seeking to disrupt business and personal lives. The weakest link in a predominantly digital chain is always the human, sometimes inadvertently, sometimes not. The problem with treasury attacks in particular is that the function is dealing with large sums and highly sensitive data every day, so it is even more important over the coming months that treasury knows exactly how to tackle this persistent threat, and recognises that one of the keys to safety is collaboration.

It’s expected that 2022 will continue to be a year of even greater focus on treasury digitalisation. What started with a trickle a few years ago increased to a torrent as the pandemic hit, as businesses and consumers were forced online. The way in which firms manage payments and collections has arguably changed forever, with channel options, connectivity and automation driving rapid progress towards a real-time environment in which treasury can and must be a key stakeholder.

While some may argue the digitalisation of treasury was inevitable, events of the past couple of years have accelerated uptake. Now, the implementation of effective technology has become a race. In 2022, businesses and their treasuries will surely be seeking to better address the challenges and opportunities, forged in unfortunate circumstances but driven by opportunities that stem from established technologies such as API-based connectivity and the adoption of robotic process automation (RPA), as well as new concepts including account-to-account payments, unified commerce, request to pay (RtP), and buy now, pay later (BNPL).

Technology will in no small way also help to drive forward long-standing cross-border trade issues. Once again, there has been much momentum gained during the pandemic, with the push for digitalisation aided by necessary changes to domestic laws that underpin the use and acceptance of electronic documentation and signatures.

But it’s not just a technological issue facing global trade. With the 2021 supply chain disruptions far from over, and ongoing geopolitical and supplier concentration risks raising concerns, efforts by businesses to reshore and nearshore supply chains demonstrate an acute awareness of current perils. Expect the rest of 2022 to be a period in which companies continue reimagining their supply chains, with the digital agenda driving process fluidity and the just-in-time (JIT) inventory model increasingly being overthrown by the just-in-case (JIC) approach.

BNP Paribas is acutely aware that collaboration is, and will remain, key to trade and supply chain evolution. Its efforts in this direction are manifold. “We are creating communities in areas including digital technology, cyber resilience, corporate social responsibility [CSR], payments and treasury in general, such as the Journeys to Treasury initiative with the European Association of Corporate Treasurers, SAP and PwC, and our Treasury Board events,” explains Jan Dirk van Beusekom, Head of Strategic Marketing for Cash Management and Trade Solutions, BNP Paribas.

One such initiative is Eliant, a new collaborative platform for addressing working capital optimisation and supply chain resiliency. It provides domestic and multinational companies with strategic and responsive inventory capital solutions, the aim being to optimise supply chains, balance sheets, and buffer inventories. The solution sees BNP Paribas provide debt and receivables financing as well as structuring advisory and referral services to Eliant. Partners include Athene, which will serve as the primary capital provider to Eliant, and Apollo, which will act as the investment manager, supporting an in-house team at Eliant deliver customised supply chain inventory solutions to customers across industries and geographies.

The bank is also active in supply chain initiatives on blockchain and platforms such as Concur and Marco Polo. Indeed, it was a co-founder in 2018 of the Trade Information Network (TIN), which aims to fill the financing gap in early stages of the supply chain and make it easier for suppliers to obtain financing from their bank or other network members. As van Beusekom explains, TIN enables companies to share transaction data including purchase orders, invoices and shipment information simply and securely with banks when they request financing.

Of course, new ideas and approaches are an essential part of delivering the right services. But treasurers have no desire to be offered an endless stream of solutions looking for problems. The issue for many banks is that they are trying to service a rapidly evolving digital landscape through an often unwieldy colossal structure. Speed and agility are not their forte.

This is why many banks are now opening up to partnerships with fintechs, other third-party providers, and even corporate clients. Co-creation, as it is termed, offers a convenient and logical way into the innovation fast lane, driven entirely by purpose. During the remainder of 2022, this idea will gain increased traction as banks strive for agility, fintechs seek access to a huge pool of clients to develop their solutions in the real world, and corporate clients take the opportunity to steer product development.

Perhaps, though, the biggest issue, for all, is the threat of climate change. With COP26 over, and governments agreeing to disagree on some key aspects, the business community has a leading role to play in driving sustainable practices. But ESG is about more than climate pressures. This is why it is becoming one of the defining themes of the next generation, as matters of reputation, investor confidence, and essential affirmative action power policy and strategy.

Throughout the rest of 2022, corporates will need to look much closer at their own ESG credentials, and those of their partners and suppliers. This raises the pressure for advancing industry standardisation and transparency around the measurement, reporting, and accessibility of ESG credentials. Treasurers are increasingly expected to use debt and investment products that fit ESG policy, but now the profession, as the nexus of much of the relevant financial data, has its best opportunity to help steer the design and implementation of that policy.

Over the next few pages, this whitepaper will dive deeper into these key themes, offering readers actionable insights, not just for the remainder of 2022, but for the longer term too.  

THEME 1
Cash and liquidity will remain a top priority

One of the key themes addressed in the 2021-2022 Journeys to Treasury report, a combined paper by the European Association of Corporate Treasurers (EACT), PwC, SAP, and BNP Paribas, is global liquidity. EACT’s research shows that treasurers are still struggling to keep tabs on their global liquidity and need real-time data to feed into their cash flow forecasting.

Christian Mnich, Vice President, Head of Solution Management Treasury and Working Capital Management, SAP, explains: “Cash is the lifeblood of a company and has been a very significant topic over the years. This past 12 months placed specific importance on the issue, because treasurers were forced to provide immediate answers to senior management as to what their current cash balances are, in which currencies, and where the cash is located. At the same time, they’ve needed an understanding of what their cash flows look like, in terms of payables and receivables, in order to have a robust sense of whether there is a potential liquidity gap.”

Looking at the number of systems typically used to deliver an end-to-end perspective on liquidity, the reality is that there is no single platform that can control everything. Therefore, the focus is on obtaining the maximum level of transparency available for the corporate treasurer through the connections between and interoperability of such transactional systems. This presents several challenges.

Organisations are grappling with a heterogeneous system landscape, in combination with many internal and external stakeholders. It is a real challenge to keep and consolidate all that information into a single system that provides answers on a day-to-day basis, while also depending on banks to supply information such as bank statement reports, as well as details from business units so that elements such as cash forecasting can be managed.

For the rest of 2022 these challenges will remain, particularly while many treasurers are still using Excel spreadsheets to manage cash flow information.

Driving standardisation and digitisation

Having a single channel to the bank, such as SWIFT, can be an advantage as it simplifies the level of communication and helps with streamlining, as well as having a scalable solution when, for example, a company wants to add new banks. This level of standardisation is key to improving the onboarding of partners and to having a certain level of communication standard that makes it easier to import bank statements, to keep up with cash balances, and having all payment status in one place. Once that is established, it can be built on, such as linking this information to transactional data for AP/AR, for example. And once a certain level of data quality is achieved, it becomes possible to add technology, such as simulations based on AI for scenario analysis.

The importance of ecosystems and co-operation between partners, including the role that partnerships with fintechs can play, is a point on which van Beusekom reflects. “Digitalisation has been a central theme for treasurers for some time, but in recent months we’ve seen an acceleration in digital adoption,” he comments.

“Initially, the focus was to plug gaps in automation, but now we are seeing that treasurers, together with system vendors and banks, are taking a longer-term, more strategic approach. With these technologies, treasurers are also addressing liquidity challenges around transparency, flexibility, and visibility. We see solutions in the pipeline regarding intelligent reconciliation, dynamic hedging, enhanced cash flow forecasting, real-time visibility of liquidity, as well as the use of bots to automate repetitive manual actions such as moving bank balances and cash allocation.”

But treasurers cannot overcome these challenges alone. The role of banks in treasurers’ digital strategies extends further than the point-to-point exchange of transactional data. Ultimately, it is an ecosystem of effort, including banks’ partnerships and integrations with fintechs, and during the remaining months of 2022, this way of thinking is going to become more prevalent. 

THEME 2
Payments will be stepping up another gear

There are a number of payments trends set to dominate 2022, and indeed the next few years. Instant, for example, is becoming the ‘new normal’, particularly in the 56 or so countries that are already live with real-time payments. However, Wim Grosemans, Head of Product Management, Payments & Receivables, Cash Management, BNP Paribas, comments that treasurers engaging with instant payments are doing so on a use case basis. “Where corporates and institutions are actively adopting instant payments is where they see a direct integration with their business processes,” he says. “This could be claims handling for insurance, for example, or as an alternative to B2C [business to consumer] acquiring payment service providers. This touches both payables and receivables.”

While domestic instant payments schemes are flourishing, repeating this experience with cross-border payments has thrown up several pain points to challenge payments providers. For example, capital markets are not open 24/7, which means instant FX conversions on cross-border payments are not guaranteed. Additionally, delays can be caused by inaccurate or incomplete data, currency controls, and legacy systems that are not designed for real-time processes. The range of different local regulations also adds to a complex compliance picture for cross-border payments, adding a further source of friction.

SWIFT launched its Global Payments Innovation (gpi) initiative in 2017 to improve the speed of international payments and has already seen significant progress. Nearly 50% of gpi payments are credited to end beneficiaries within 30 minutes, and 40% in under five minutes. More than 95% are processed and credited on the account within the day. There are some cases where regulatory requirements still exist on the beneficiary side, which is nothing to do with technology or the beneficiary bank, which can slow things down. However, the regulatory environment must remain in place to reduce and tackle fraud and ensure compliance.

With developments such as gpi, and the more recent gpi Instant, which connects the SWIFT network and local real-time payment systems through integration with banks, corporates will increasingly be able to move towards a real-time, on-demand treasury going forward. This requires as much instant information as they can gather in order to obtain an accurate picture of their cash positions. As a demonstration of how to harness this opportunity, BNP Paribas client, Naval Group, won the 2021 TMI Award for Best gpi Implementation. By working with the bank to implement SWIFT gpi for Corporates and rolling out the bank’s new Pay and Trace capability, Naval Group can now self-track cross-border payments in real time. It can also access enriched data, including details on routing and fees, and feed this directly into its Kyriba TMS.

Application programming interfaces (APIs) are thus critical to facilitating this transformation, as they can enable different systems to ‘talk’ to one another. Steven Lenaerts, Head of Global Channels and Digital Onboarding, BNP Paribas Cash Management, says that APIs enable the embedding of seamless, frictionless exchanges between banks to corporate treasuries, and that demand is growing for this type of service. “Possibly fuelled by the pandemic, we have recently seen much interest in up-to-date access to liquidity positions to optimise liquidity management,” he notes. “The challenge is that, despite the overall readiness of the different actors in terms of API usage, uptake has been held back by a lack of standardisation.”

Standardisation is vital to enable interoperability between multitudes of corporates, banks, and vendors that all want to talk and transact with each other. SWIFT is addressing API standards and is currently driving the instant cash reporting in collaboration with many corporates, vendors, and banks, starting with what appear to be the most prevailing use cases.

In addition to API standards, other harmonisation initiatives will also vastly improve the processing of international payments in the coming years. One of the most significant projects is the migration from the SWIFT MT payment messaging standards to ISO 20022 for the entire industry. With the migration deadline of November 2025, the move to ISO 20022 aims to improve the data richness of cross-border payments. This can support more straightforward and efficient anti-money laundering (AML) filtering and compliance investigations. At the same time, the additional data fields will help reduce the number of rejected or blocked payments due to missing and incomplete information.

Central bank digital currencies (CBDCs) are another much-talked-about development in the payments space. Indeed, they are becoming more or less inevitable – more than 60 central banks have so far begun exploring the concept, according to the PwC Global CBDC Index 2021.

For Grosemans, CBDCs obviously have local use cases in replacing cash, but they will also play a role in offering new ways to manage high-value traffic from a local market perspective. “We also see initiatives out there from consortia, for example, that are trying to leverage on that, or use stablecoins, to try to interlink important currency traffic. This is going to play a role in corporate treasury management, and treasurers have to be ready. It’s going to take a few years, but it’s going to appear.” As the many CBDC projects hit maturity in the near future, this is a space for treasurers and their banking partners to monitor closely.

Another trend looking to the remainder of 2022 and beyond is that payment services providers, including the transaction banks and SWIFT, will be delivering enriched services and solutions, beyond pure payments and reporting. A good example of this trend is provided by the new SWIFT transaction management platform, the first release of which is planned for November 2022. Built on the foundations of SWIFT gpi, this orchestration platform will lay the foundations to achieve ultimately frictionless and instant cross-border payments. It aims to provide progressively features such as upfront validation of beneficiary details, central management of exceptions, an extension of gpi faster payments to lower-value payments, and new rich data services based on the ISO 20022 standard.

Value-added services include business-to-business (B2B) invoicing, e-invoicing, reconciliation automation, and even smart schemes that select the optimal payment means for corporate clients. Also known as banking-as-a-service (BaaS), this trend reflects the fact that corporate clients are expecting more from their banking partners in terms of the data they receive and the simpler customer experience they demand.

Lenaerts explains: “BaaS enables corporates to embed banking exchanges into their corporate processes in a frictionless and efficient way. This can also be for other corporate processes beyond treasury, for example, vetting counterparty bank co-ordinates prior to storing them in the master vendor data management system. This is not a treasury process, but it can also make use of banking services.”

Banking-as-a-platform (BaaP) is also gathering steam within this trend. This is where a bank essentially offers a catalogue of services provided by the fintech community, delivered via APIs, to its corporate clients. Bank involvement provides an extra level of trust and reassurance for the corporate.

Looking ahead to 2023 and beyond, these very promising evolutions in the payments world are going to deliver many opportunities. However, rather than trying to tackle several projects at the same time, the key for treasurers is to first look at their processes and be led by the challenges they need to solve. Lenaerts concludes: “You can’t do everything at once, so try to identify the weak spots in your treasury processes and address those first. When you address them, look at the specific use case, limit the use case and experiment with those innovations. Evaluate the value they add to your processes, mature in that technology, and then scale afterwards.”

Retail payments pioneers

The retail payments arena is in the middle of a golden age of innovation. The already transformative sector was supercharged by the Covid-19 pandemic, as companies raced to offer e-commerce stores and online payment options to retain and grow their customer base. As a result, the decrease in cash usage also accelerated during this time. In 2020, for example, data from trade association UK Finance shows that the number of cash payments made in the UK fell by 35%.

Pein sees three key drivers of this payments revolution: “The first trend is the role that technology is playing, particularly with regard to immediacy. Payments used to take one day, and even more for cross-border, and now you can verify them through instant notifications. Then there is the digital revolution in smartphones, which has made payments almost invisible. This creates a high-quality integration for banks and payment service providers with the client. Finally, there is the evolution of regulation, through developments such as open banking, enabling startups to provide specific payment services.”

Todd Clyde, CEO, Token, a BNP Paribas fintech partner, agrees with Pein, particularly on the immediacy point, noting that developments such as the adoption of real-time national clearance systems, such as the Faster Payments Service in the UK or SEPA Instant Credit Transfer in Europe, have had a tremendous impact.

“SEPA Instant was a major upgrade to the national clearing systems in Europe, bringing instant settlement to banks,” Clyde says. “And PSD2 [Payment Services Directive 2] has been an amazing catalyst to how banks provide APIs that enable consumers to access data or initiate payments from their accounts.”

These two trends are creating a tremendous inflection point, enabling account-to-account (A2A) payments to emerge as an alternative form of payment to cards and digital wallets. What’s more, A2A payments are helping to challenge the boundary between the in-store and e-commerce shopping experiences and ushing in the notion of unified commerce.

This blends the physical shopping experience with the benefits of online retail by combining in one platform functionality such as e-commerce, m-commerce [mobile commerce], order fulfilment, inventory management, customer relationship management, and point of sale (PoS) capabilities to give real-time visibility for management, and a seamless experience for the customer. The challenge for traditional shops is to bring the online warehouse directly within the physical store, to increase the space to display items, and to decrease the number of cash desks. Unified commerce is the solution that seemingly goes way beyond omnichannel.

For corporate treasurers, this matters because the payment is a vital element at the centre of such a digital transformation. The importance of the payment in every customer journey presents a great opportunity for treasurers to be at the centre of their own organisation’s digital transformation.

Bridging the gap

A2A payments play a crucial role in bringing about the unified commerce vision outlined above, supporting the shift from physical to digital transactions. “We can bring offline payments into online payments,” explains Clyde. “We accomplish this by using a QR code, a ‘pay by link’ or a ‘request to pay’ [see below] to bring the payment from an instore PoS to the shopper’s mobile device for the payment. You could be in a warehouse store configuring a large purchase, and right there at the checkout you’re prompted to your phone or to your email to push a payment, rather than pulling out a card.”

Corporate treasurers have the potential to obtain the same benefits from an A2A solution as consumers in terms of low-cost payments, faster settlement times, and the ability to reach anybody with a bank account. But corporates also have the challenge of reconciling payments. To solve this issue, Token has blended A2A with request to pay (RtP).

“RtP simply enables a supplier to encode a transaction with the details of both the purchase and other beneficiary account information, and then when the payment is initiated those same details are combined with the payment and travel with the payment,” notes Clyde. “This solves the major headache of reconciliation. It is an excellent example of how A2A payments can be tweaked to accommodate the corporate needs and solve a big problem in B2B payments as well.”

Retail payments advance continues

A further trend to look out for is the unbundling of services traditionally seen around credit card payments. “A credit card payment is a 30-day loan, a loyalty programme, cashback and purchase protection,” says Clyde. “Those services are now being unbundled from that format and are being rebundled around A2A.”

Another concept, buy now, pay later (BNPL), has grown exceptionally over the past year or so, mainly thanks to the boom in e-commerce, which looks set to continue throughout 2022 and beyond. “BNPL is a great way to increase the value of a consumer’s basket,” says Pein. “For some large marketplaces that have completely integrated this kind of payment, BNPL can represent 30% or even 40% of their sales. This means that it’s no longer just one form of internet payment – it is the payment method that e-commerce websites rely on. But not all merchants are equipped yet, so there is even more growth ahead for this.”

For Clyde, BNPL is just one example of a more significant trend that will expand beyond 2022. “I expect to see lending at PoS, and purchase protection being offered at a PoS, particularly around airline ticket purchases,” Clyde says. “I see the loyalty offers at PoS. This is why banks need to compete in that new layer, because it puts them behind that payment while enabling them to bundle new services for customers.”

Treasurers seize the moment

For corporate treasurers, developments such as A2A represent a chance to actively drive a digital transformation within their own organisations. Pein comments: “What we are seeing from our clients, corporates, and merchants is that it’s time for investment. After Covid, we see many companies investing in unified commerce and their own digital transformation. The treasurer is the perfect candidate to realise that transformation and to be at the centre of this project, thanks to the role that payments will play in those transformations.”

Clyde agrees, concluding: “A2A is emerging as a very promising payment method and I would encourage corporate treasurers and payment professionals to take a look at that as a payment mechanism. We see it providing lower costs, improved conversion rates, and we’ve solved the challenge of reach by using PSD2 APIs.”

B2C to B2B to D2C: payments keep evolving

A notable driver in the evolving role of the treasurer has been the increasing adoption in the B2B space of trends and best practices traditionally associated with B2C companies. This existing trend was supercharged by the pandemic, as firms scrambled to ensure they had an option to sell and deliver their goods and services online, in many cases selling direct to consumer (D2C).

“It’s not simply how customers transact that is changing, it’s the way that sellers engage with them through new business models,” notes van Beusekom. “In the past, many companies sold through distributors, retailers, and third-party marketplaces, which made it more difficult to develop direct insights and engage directly with consumers and build that loyalty and trust that you need in doing business. Companies are developing new business models based on e-commerce marketplaces and social media platforms to better understand and respond to customer priorities, to personalise experiences, and to build relationships.”

Indeed, Nicolas Vincent, Partner, Retail & Consumer, PwC, notes the following in the recent Journeys to Treasury report: “Payments play a key part in the convenience, speed, and quality of the customer experience. Given treasurers’ roles in facilitating and reconciling efficient, secure payments and collections, they are therefore vital to business performance and, as such, are no longer a cost centre, but a centre for value creation.”

In some cases, to move to a D2C model represents a transformation of a company’s entire product portfolio. For example, customers may want to pay for only what they use, when they use it. Shifting business models result in a change in incoming payments and customer risk dynamics.

Van Beusekom explains: “Replacing larger payments from the distributors with an increasing volume of lower-value payments means that the reliability of incoming payments becomes increasingly important, as companies take on a greater risk to customers – particularly when adopting subscription or contract models. Tools such as direct debits may become more important in some markets. These are developments that we have followed closely, and we’ve introduced Direct to Pay (DtP) and RtP instruments recently. But this also requires new skills such as managing escrow, international tax, and customs, which may not have been in the scope of the treasurer before.”

Pein agrees. “Treasurers need to be at the centre of the revolution in payments and sales models that we are seeing today. Working closely with a trusted partner bank is essential to ensure that the right payment and cash management solutions are in place, and to gain the necessary insights into payment cultures and regulations in each market.”  

THEME 3
Tackling cybercrime will become a collaborative effort

Cybersecurity will be top of mind again for corporates going forward, says Nicolas Trimbour, Head of Fraud Prevention & Chief Data Officer for Cash Management, BNP Paribas. Fraudsters are becoming more technologically savvy, simultaneously succeeding with simple phishing techniques such as the business email compromise scam, and the sophisticated and most prevalent form today, ransomware.

With cyber-attacks today a major threat to businesses and organisations of all sizes in all geographies, companies are more vulnerable than ever as they follow the path to digitalisation, and especially as many adopt new ways of working, such as homeworking. Indeed, as businesses are becoming more dependent on a larger variety of IT systems, their complexity and disconnectedness often make them more vulnerable to cyber-attack. Its little surprise then that global crime costs are increasing 15% year on year, and could reach $10tr. by 2025.

“It’s important to understand that cyber-security relies on an ecosystem approach,” says Trimbour. “You are not safe if your suppliers and business partners are not properly protected as well.” This will be the message from now on: work together, not alone.

To highlight the risk of isolation, he warns that it became a huge problem when the pandemic saw fraudsters use the lower levels of vigilance of homeworking employees to commit fraud, as if they were picking off the strays. “Many are sophisticated, organised crime gangs, capable of hacking a mailbox or using stolen information, often available on the dark web, to appear more credible.” It’s still social engineering, he notes, but it has become more realistic and plausible in the new environment.

“When asked about how to better protect against fraud, I like to present the model of a seasonal approach. You know winter is coming with the cold and rain, so if you want to go outside, you need to have several layers of protective clothing. It’s the same for fraud; the more layers of protection, the better you are protected.”

The first line of defence is corporate employees using proper procedures and collaborating. “Raising employee awareness is absolutely key, we provide various materials and share best practices with our corporates, helping to raise awareness,” he continues. “As an absolute basic, the first rule is not to open links or attachments in suspicious emails, and to at least be aware of email spoofs that look like the real thing. The second is to have a second person to validate a payment and to question anything suspicious. The third is to have a business continuity plan in place. So if a major ransomware attack does suspend activities, the business can at least continue making strategically important payments.”  

Banks will continue to provide tried-and-tested solutions to protect clients, Trimbour goes on to explain. “As a bank, like all financial institutions, we are frequently a target of cyber-attacks. Because of that, we test our systems so we are sure they are safe from hackers, and we test them regularly to detect any irregularities. We also have strong certifications, so we can be sure that it is the right client connecting to our systems.”

Banks will continue to develop solutions that help clients detect suspicious activities before they make payments, with verification solutions checking that an account belongs to the right person, for example. With the bank processing many payments, actively filtering these using AI and sharing intelligence to help detect the unusual payments are also elements of the defence, adds Trimbour. 

With fintechs often being more agile than large banks, it is often a partnership that brings more efficient and immediate solutions for clients, notes Laurent Sarrat, CEO, Sis ID. “It’s about community and co-operation. Fighting fraud is not central to most businesses. But fraud is the only focus of the fraudster. Even major tech companies are subject to fraud, so there is no way to fight it alone. Simply, we are stronger together. This is what we build with Sis ID: a community of companies, joining efforts to fight against fraud.”

Bruno Francois, Deputy Global Head of Trade Finance and Network Management, BNP Paribas, notes that there is a spectrum of mature tech providers, such as banks, and newcomers “with very innovative ideas”. For him, “it’s all about finding the balance between innovating and finding new ways to do things, and protecting your data and security”. For banks, he says the number one concern is to protect clients from cyber-attacks “but the need is still to open up new services that may require new connections, with new exposures to new services”.

“Ultimately, it poses questions around who is responsible for the service, who is responsible for client data, and who is responsible for the end-to-end process to succeed,” he says. “The innovation opportunities are there, and the challenge is how to combine them in a safe environment where the client achieves the required results without creating any unnecessary risks. That’s the balance we are trying to strike.” 

One way in which protection is enhanced is through industry-wide collaboration. Indeed, in the spirit of collaboration, Payments 20 (P20), which aims to act as ‘the voice of the global payments industry’, has brought together some of the largest payment firms and law enforcement organisations to develop a standard approach that will help firms defend themselves against the growing, global cyber threat.

The advocacy group, alongside organisations including American Express, Elavon, Hogan Lovells, the UK National Cyber Security Centre, and New York State Department of Financial Services, published a new report in September 2021 entitled 20 Best Practice Recommendations for Improved Cyber Security Protection.

Aimed at non-cyber professionals, the report emphasises the urgency of implementing more efficient and comprehensive cybersecurity frameworks in response to the increasing capabilities of cybercriminals, scammers and other nefarious actors since the onset of the Covid-19 pandemic.

The uncertainty and disruption caused by the pandemic has presented cybercriminals with a wealth of opportunities to attack. Since March 2020, cybercrime has rocketed with 74% of banks experiencing a rise in cyber-attacks and three out of four financial institutions expressing significant concern about the historic rise in criminal activity and what will happen going forward.

The cyber-security problem now represents a serious systemic threat to the global financial system, a sentiment echoed by Chairman of the Federal Reserve Jerome Powell, who in April 2021 said he worried that a cyber-attack may result in the next great financial crisis. This highlights the need for a collective global, standardised approach towards counteracting the threat.

The best practice actions cover five areas:

Duncan Sandys, CEO, P20, says that as businesses across the globe embraced remote working and shifted operations online, the state-sponsored and professional criminal gangs exploited the weaknesses of security apparatus and the fears of individuals. “At P20, we believe everyone has a part to play in protecting their organisation and its reputation against this threat. This is why we joined forces with leading financial institutions, cyber-security experts and government officials to compile standardised, easy-to-implement actions for non-cyber experts that will go a long way in strengthening their organisations’ defences and protecting their customers.” 

THEME 4
The quest for supply chain efficiencies will continue

Bruno Francois, Deputy Global Head of Trade Finance and Network Management, BNP Paribas believes that more attention should be paid to supply chain activities. “For the remainder of 2022, the tension on supply and demand will eventually ease, but it’s not the case yet,” he states. “Issues with logistics, the cost of transport and raw materials, the scarcity of supplies and so on, are all still there. It’s still a big challenge, and this of course translates for treasurers into new challenges, such as how to finance working capital, how to manage suppliers, and how to collect money from clients. And when there is conflict, treasury also needs to consider new risk mitigation. For the rest of 2022, I anticipate quite an intense period for treasurers.”

It’s no surprise, then, that optimising supply chains is currently of the utmost importance for most businesses, notes van Beusekom. To do this, the key is to start with the elements that are controllable in-house, and then expand along the supply chain in both directions, from AP to AR. Projects should lead with the business’ own working capital, and then expand to incorporate supply chain finance (SCF) and credit management programmes. “Internal solutions are often cheaper and easier than tapping external sources, especially in times of crisis,” comments van Beusekom.

Working capital management involves trade finance, global markets including FX, interest and commodity hedging, leasing, SCF, factoring, cash management and other disciplines, which in most corporates and banks tend to be decentralised. “That makes it more complicated for treasurers to find what they’re looking for.”

Corporates are increasingly seeking support in the quest for supply chain and working capital optimisation and speeding up the cash conversion cycle. With the latter, much depends on the business’ position in the value chain, and its power to extend payment terms without upsetting relationships with suppliers. “There are fewer options regarding receivables, except with insight into collection methods, for example persuading clients to switch from cheques and manual transfers to direct debits or instant payments,” explains van Beusekom. “To enable our corporate customers to analyse their own clients’ payment behaviour, we provide them with dashboards both for Cash Management and Trade Finance, via TreasuryBoard.”

BNP Paribas has also developed Centric, a single sign-on working capital portal giving treasurers and other corporate stakeholders access to features including Connexis Cash, Connexis Trade, the Supply Chain and FX+ modules, as well as fintech partners such as CashForce. “This offers treasurers visibility and control over the chain from procurement to sales, and the ability to discuss with procurement and commercial colleagues how best to optimise working capital and the supply chain,” explains van Beusekom. “To keep free cash flow above strategic and reserve optimal levels, not to mention operational cash, treasurers need a broader view on cash in the entire corporate value chain.”

Mellado looks to the role that treasury and SCF has in the evolving response to ESG. “The position of treasurer, where the role is at the crossroads between procurement, financing and sales, puts them in the driving seat for ESG initiatives,” he notes. The strategy may come from the top, but the implementation of ESG initiatives is thus often down to the treasurer. “Treasury needs to be prepared for that,” he stresses. “They will need to allocate resources because success in this arena means access to robust data, and having the systems to analyse to be able to follow KPIs [key performance indicators].”

Recognising that ESG marks a new supply chain challenge for treasurers, Mellado feels banks are ideally placed to help identify the best approach. “There are plenty of financial solutions, and even tools for servicing KPIs, so we are able to advise clients on their best course of action. Again, it demonstrates the power of the partnership between bank and client in this ESG venture as it drives supply chain efficiencies.”

At a purely technical level, Alain Verschueren, Head of Innovation & DLT, at BNP Paribas’ Trade Finance Competence Centre, feels that there is still plenty  of work ahead. “The technology evolution is not over – and I don’t think it ever will be,” he predicts.

For instance, while the emergence of big consortia around DLT in trade finance has perhaps peaked, it is now a matter of driving uptake. But he believes too that more work is needed around interoperability and standards, with the fintech community having a significant role to play in closing the gap in trade financing. He adds that there is more to come in areas such as the Internet of Things, Big Data, AI, biometrics and quantum computing, as well as a necessary greater focus on security and traceability.

For Marie-Laurence Faure-Lepetit, Head of Digital Trade, at BNP Paribas’ Trade Finance Competence Centre, the evolution of technology is phased. The first considers the creation of the technology and its capabilities, and second seeks to define the application of the technology. She believes that the trade finance industry is at the start of the second phase. “The technology is there, and in order to get to the third crucial phase of market adoption, it is being tested, adapted, and fine-tuned to ensure it is usable for all players in the market.”

Faure-Lepetit foresees a focus on incremental innovation and anticipates rapid progress in the bank guarantees space, for example. Indeed, with fewer stakeholders in this domain – just the applicant, the guarantor and the beneficiary – she feels that “the challenges to digitalisation are not that onerous”. Successes to date include delivery of domestic digital guarantees.

Verschueren is keen to see more exploration in interoperability between the many platforms and progress in the field of sustainability where some “interesting innovative initiatives in the trade finance space” will help to achieve sustainability goals. 

THEME 5
Technological co-creation will become the norm

Treasurers are rightly wary of hype around innovation and new technologies, particularly solutions looking for problems. Co-creation between corporates and banks can help to avoid this pitfall by enabling treasurers to address real pain points with their banking partners, notes Pierre Fersztand, Global Head of Cash Management, Payments, Trade Solutions and Factoring, BNP Paribas.

“Co-creation has become a priority within our innovation strategy, and is part of BNP Paribas’ DNA,” he explains. “It revolves around the concept of designing and constructing the future of treasury together with our corporate clients. There is an incredible amount that technology can achieve, but we have to be careful that we leverage it to respond directly to clients’ needs. Honestly, I see too many innovations that are technology-driven only, rather than addressing a pain point or corporate requirement. What we are doing through co-creation is truly listening to clients and identifying the most important challenges that we can solve together. With this approach, technology is at the service of clients’ needs, rather than being a self-driven programme.

A solution will typically flow from a client advisory session, called a Treasury Board, that takes place twice a year, during which the priorities of co-creation are defined. “Treasury Board is essentially a VIP club around co-creation, which began in Europe with a small group of corporate treasurers in 2017, but has now expanded to other geographies,” explains Fersztand. “The idea is to create a community where we can discuss the changes that we can make together to improve our corporate clients’ business processes.”

The BNP Paribas concept is based on four pillars: listen to clients; give them the opportunity to influence bank strategy; build the bank offering for tomorrow – together; and integrate innovation. The philosophy is not necessarily about using new technologies, but creating new products and new value at every Treasury Board meeting.

A good example of a solution co-created with the Treasury Board is BENEtracker. This is a solution based on SWIFT gpi, which offers payments tracking to corporates and banks.

Other co-creation projects include Payment Watch, where a corporate wanted personalised alerts regarding potential fraud. Based on a number of rules and an alerting system, this provides the treasurer with certainty that they are paying the right amount to the right beneficiary.

Another idea came from a treasurer who wanted to simply press a button to open accounts, without using paper. The co-created Seamless Treasury Journey now covers end-to-end digitalisation from opening an account to making sure the account is operational.

A final example is Treasury Dashboard. This arose from a treasurer asking the bank for a global view of its data. Now, with one click, this treasurer can have visibility over their accounts, liquidity structures, payments, and connectivity set-up with BNP Paribas.

Looking to the remainder of 2022 and beyond, co-creation continues to play an important role within BNP Paribas’ strategy. “We are working on new ways of payment initiation and also following the development of real-time payments,” says Fersztand. “In addition, our clients are always exploring questions around cost reduction and optimisation. I think RPA will have a part to play here and that is something we are also working on.”

Elsewhere, he sees digitalisation as a major trend in the client-corporate bank relationship. “We already have Welcome, a digital tool for KYC and onboarding – which means that, today, onboarding is fully digital within BNP Paribas. To make further progress in this area, we have committed to report back to our clients about SWIFT’s KYC Registry and outline how we can work with them on further reducing the burden of KYC documentation.”

Another trend to mention, particularly since March 2020, is e-commerce. “We see many B2B corporate clients, driven by the Covid-19 crisis and global trends, now selling through e-commerce,” notes Fersztand. “Treasurers who have not had direct experience in the e-commerce environment before now want to understand how to manage digital sales in terms of treasury, knowing what is being sold and to whom, improving security, and automating reconciliation. This is a strong trend and an area that corporates and banks can certainly work on together to improve.” 

THEME 6
ESG will be driven further and faster

ESG is making its presence felt in areas such as supply chain management but, says Bruno Francois, Deputy Global Head of Trade Finance and Network Management, managing ESG “still requires a lot of resources”. This, he adds, is why it remains the preserve of the larger corporate. “For the SME, it’s more difficult. They have plenty of other issues to tackle.”

Acknowledging that ESG is still a developing concept and that “the banks are not yet fully equipped to assist them”, Francois believes most products related to ESG are sustainability-linked solutions that are typically applicable only to bond issuance, revolving credit facilities (RCFs) or other large transactions.

“For smaller transactions and for SMEs, we still need to find a framework that can be offered in the market by all banks,” he explains. “We are working with external parties, such as the International Chamber of Commerce, to develop that framework where we can be sure all banks and all corporates are applying the same principles.” Indeed, he accepts that if this is not achieved, there will be variable shades of green between institutions, and that this is unhelpful.

“We need a common base level, and one that is not too difficult to implement because, obviously, if you insist on too many criteria, it becomes a bigger challenge that will threaten success. But conversely, if it’s too easy, there is a danger of accusations of greenwashing. This is why we need to find the balance, to make ESG professional.”

Among the fintech community, Vincent Marchand, Head of the Fintech Lab, Global Cash Management, BNP Paribas sees a number of initiatives, especially in the payments space, where the focus is on influencing the spending and shopping behaviours of consumers. “The aim is to influence consumers to embrace the most sustainable brands and trends. This is targeting the reduction of carbon footprints by monitoring the levels of ESG adoption by big brands, and creating and sharing the vast pool of data that this creates.” 

Other fintechs, notes Marchand, are achieving this goal by directly addressing the carbon footprint produced by consumers when they spend on e-commerce platforms. “Those platforms sometimes help consumers to offset their carbon emissions by investing in green projects. While these are clearly consumer-focused approaches, Marchand believes these two fintech-derived payment models are beginning to enter the treasury space.

BNP Paribas’ commitment to making a positive impact is why it takes the TMI Treasury4Good initiative seriously. As the winner of the 2020 Global Bank of the Year for Sustainable Finance, the bank, ranked – first in the CAC 40 by EcoAct for its climate commitments – has a product set that is increasingly influential. Its Sustainable Working Capital System, for example, delivers sustainable trade finance and working capital solutions to support clients on their own sustainability journeys. ClimateSeed, its digital carbon off-setting platform supports client emission reduction projects.

Notably in this space, BNP Paribas client, the electricity, natural gas and energy services company, Engie, scooped the TMI 2021 Treasury4Good Award for best sustainable finance solution. The project featured a €20m guarantee facility for the issuance trade-related guarantees linked to projects that will provide environmental benefits.

Since the Covid-19 pandemic began, BNP Paribas has led or supported 24 social bond transactions, totalling $13.6bn. In October 2020, it was bookrunner to the European Union’s €17bn issuance of social bonds helping to finance member states’ employment support programmes. The bank also arranged supermarket chain Tesco’s recent £2.5bn environmentally linked RCF.  BNP Paribas demonstrates an innovative approach that has most recently manifested in the first ever EMEA Sustainable Deposit scheme, the result of collaboration with its client, Unilever.