We were pleased to host two sessions with our peer group members and John Laurens and Mark Troutman from DBS Bank in Singapore. We selected DBS because they are making significant progress in the digital space, and have the good fortune to have recently revamped all their internal systems, making it easier to align them with today’s technology.
The sessions followed on from our technology series, where treasurers agreed we are moving to real-time treasury and instant data – but felt that they did not have the budgets, and were not in a position, to drive this change. According to John Laurens, a large budget is no longer required – and these changes are often coming into the business outside treasury. The discussions were lively: it is possible that they show the path forward.
The game changer, according to John, is APIs (Application Programming Interfaces): they mean data can be brought in from many different systems in real time, and used to enhance speed and efficiency. A lot of the discussion focussed on APIs, but they are a means to an end, not an end in themselves. Most treasury activity is about gathering information and processing it. APIs are simply a quicker and more efficient way of doing this than many traditional approaches.
Business change is happening
Many treasurers link real time payment information and processing coming into their businesses with retail operations, especially on-line sales. There is also an increasing shift away from traditional distribution channels to direct sales, especially via the internet: COVID 19 has accelerated this. As a result, many of our members link real time data to B2C; it does not apply if your company is B2B.
Others see benefits to real time data, but view it as a “nice to have”, with a weak business case.
John and Mark’s experience tells a somewhat different story. They have handled many cases where initiatives have been taken elsewhere in the business, and treasurers have had to handle the fallout. On-line sales are an obvious example, but there are unexpected situations. In today’s world, competitive differentiation is often a question of customer experience: one insurance company has linked its systems to on-line travel databases. When a flight is delayed for reasons covered by travel insurance, the insurer’s internal IT systems automatically trigger an on-line payment to the traveller, who is notified by SMS. The result is that the payment is often received while the traveller is still stranded in the airport, and before they have even filed a claim: this kind of positive customer experience drives repeat business.
It is understandable that most people doubt whether the benefits of real time treasury justify a large investment, or a large project. DBS’s experience is that, with the use of APIs, it is not a large investment, and treasurers who have a real-time view of their cash and the payment pipelines find that they gain credibility with senior management, and improve their processes. Also, younger generations assume that all information is real time, while we are all used to having real-time data and controls on our personal bank accounts.
The IT Investment
Most treasurers struggle to obtain a significant IT investment. In any case, the treasury processes are the final stage in a long process which goes through many other functions and systems, most notably the ERP system. Most treasurers do not see themselves justifying a major IT investment.
Again, John and Mark have a different experience. It is difficult to put a precise number on an implementation involving APIs: there are too many different situations. But DBS’s experience is that the cost is usually in four figures, i.e., below US$10,000. If it goes above $10,000, it is still usually a long way from being a six figure number.
Equally, most treasurers are wary of setting in motion a large project to install a major IT system. Again, the experience of APIs is that a large investment is not required: as they involve getting the information which is needed, where it is needed, when it is needed, they typically involve a number of small-scale, incremental, actions. Often, over time, the existing heritage large-scale systems simply fall into disuse, as all the data is being provided via the APIs, and processed elsewhere. API based solutions often continue to exist alongside host to host payment systems, and they can be used with most TMSs.
How to handle APIs: security, standardisation and controls
A major concern is the proliferation of APIs: most treasurers see difficulties in managing libraries of them.
John and Mark understand this concern, and hope that, at some point, the banking industry will come up with some form of standards – this is a significant benefit with SWIFT. Today, DBS manage a library of about 500 APIs for their customers. However, most of the APIs they provide are focused on the notification of incoming payments – the top 20 APIs are reasonably consistent.
DBS expect that, at some point, large corporate customers will come to the bank with their own suite of APIs, and require the banks to handle them, and manage the resulting complexity. One of the participants is already doing this, though they have not yet made it a condition for doing business.
Security is always a concern with IT systems, but APIs are usually relatively simple and have a single purpose, which makes them easier to monitor. More important, they enable new forms of control. We are now all used to receiving notifications and providing approvals on our mobile phones when we make purchases with our personal credit cards: we can expect to see more real-time exception reporting on our corporate accounts.
A major takeaway from the discussions is that this technology moves us on from the world where you need to make a huge investment and drive a major project, for which it is very difficult to build a business case.
One participant found that they could not implement APIs because they were waiting for their TMS provider to install a major update to enable them, while another, who does not yet have a TMS, wondered whether they really needed one, if they could get all the information they need reported directly into their own treasury dashboard.
The important thing to remember is that what matters is the information: the means now exist to get information from many sources, usually in real time, and process it how you want. And this can be done piece by piece, with a low budget. Each mini implementation will either show its benefits, or fall by the wayside.
If John and Mark are correct, we are on the verge of a significant change in the way we work. As treasurers, we are naturally conservative: if we have processes and solutions which work, why take the risk of changing them, for benefits we have not yet seen?
At the same time, we have all seen the changes brought about by mobile phones and the internet – there is no reason to believe treasury processes are immune.
Watch this space!
The Real Experiences with APIs in Treasury Videos
After the peer group sessions, Damian Glendinning, John and Mark talked about the issues raised by the peer group sessions and combined it with DBS’s experiences in implementing APIs for clients.
View the videos here:
Episode 2: Low cost incremental change is now possible
Episode 3: Practical considerations of APIs
Episode 4: Change the way you think about change