06-04-2022 | treasuryXL | Treasury Delta | LinkedIn | The optimal, objective, and transparent selection of treasury supplier solutions and/or banking services, observing procurement principles and guidelines, remains a complicated challenge for all treasurers. It is extremely time-consuming and cost-ineffective. This article highlights a niche fintech solution developed by Treasury Delta to successfully digitize the […]
05-04-2022 | treasuryXL | Refinitiv | LinkedIn |
In December 2021, LIBOR setting publication ceased on over two dozen settings. But the transition is far from over as phasing out continues for legacy contracts.
For more data-driven insights in your Inbox, subscribe to the Refinitiv Perspectives weekly newsletter.
Since the end of 2021, publication of 24 LIBOR settings has stopped (CHF, EUR, GBP, USD and JPY) and the most used GBP and JPY LIBORS are now being published with a new methodology called “synthetic LIBOR”.
USD LIBORs will continue to be published until mid-2023 using panel bank submissions. Discussions surrounding Euribor are ongoing, but EU regulators appear to be waiting until the LIBOR cessation has fully taken place to define a more detailed agenda for Euribor.
To sum it up – the LIBOR transition is not yet over!
Refinitiv Eikon gives you the information you need – whenever and however you want it
On 16 November 2021, the FCA confirmed Synthetic LIBOR to be allowed for the temporary use of “synthetic” sterling and yen 1M, 3M and 6M LIBOR rates in all legacy LIBOR contracts.
This applied to all other than cleared derivatives, that have not been changed at or before 31 December 2021.
The Synthetic LIBOR are published on existing Refinitiv Instrument Codes (RICS), as shown in Figure 1.
Synthetic LIBOR = ISDA Median Spread + Term Rate.
For example, the JPY 3M Synthetic LIBOR value published on JPY3MFSR= RIC is calculated as per below:
JPY3MFSR=; -0.00020630 = JPY 3M ISDA IBOR Spread (JPY3MFSRS=ISDA ; 0.0000835) + [JPY 3M term rate (JPYTRR3M=QCKJ ; -0.0002938) x (360/365) ; -0.000289775]
*Please note that Refinitiv is an authorised distributor of ISDA spreads. You can find ISDA fallbacks and Term Rates in the Refinitiv Eikon IBOR App.
The main challenge that remains is the USD LIBOR transition. Even with the cessation set to 30 June 2023, market participants have been asked to implement transition and identify fallbacks by regulators.
Even if the use of USD LIBORs has been discouraged and drastically limited for new contracts, data from DTCC and ISDA suggests that LIBOR contracts were traded in January 2022 but in low volumes.
The FCA defined clearly the stipulations in Further Provision and Information in relation to the Prohibition and the Exceptions:
The lack of credit component in SOFR appears to raise some issues, mostly from regional banks, that also stressed the fact that borrowers will struggle with SOFR. LIBOR is a forward-looking term rate and interests are known upfront, with SOFR and other alternative Risk-Free Rates (RFR), interest is compounded and only known at the end of the period.
*Please note that credit-sensitive rates such as Ameribor, AXI or BSBY are available in Refinitiv Eikon but are NOT endorsed by the ARCC or FCA.
On the cash market, the Alternative Reference Rates Committee (ARRC) Progress Report, published on 31 March 2021, estimated there will be approximately $5trn USD LIBOR referencing contracts in business loans, consumer loans, bonds and securitisations maturing after June 2023.
Many of these exposures may have suitable fallback language and will be able to transition away from LIBOR prior to cessation.
ARRC has selected Refinitiv to publish its recommended spread adjustments and spread adjusted rates for cash products. The USD IBOR Cash Fallbacks provide market participants, including lenders and borrowers, with an industry-standard agreed rate, which can clearly and easily be referenced in contracts.
Refinitiv launched USD IBOR Consumer Cash Fallbacks 1-week and 2-month settings on 3 January 2022.
As mentioned in the December 2021 Bank of England Risk-Free Rate Working group newsletter, the transition towards Risk-Free Rates is progressing steadily, as per the charts in Figure 5 for cleared swaps and exchange-traded futures:
In a Risk.net article, Philip Whitehurst, Head of Service Development, Rates at LCH (part of LEG Group) said: “Sterling LIBOR was the most substantial population LCH had converted, amounting to about 185,000 trades for around $15trn worth of cleared swaps. They were converted into Sterling Overnight Index Average (SONIA) equivalents on a compensated basis.
“The same was applicable for around 75,000 yen LIBOR trades, with aggregate notional of about $4.5trn, and 25,000 to 30,000 Swiss LIBOR trades worth about $1.5trn, as well as a very small population of euro LIBOR trades.”
Whitehurst stressed that Euribor trades were not converted.
On the OTC Derivatives markets, the adoption of new Risk-Free Rates is very high.
GBP, CHF and JPY swaps are now exclusively done on new Risk-Free Rates. SOFR swaps are progressing versus LIBOR, at a quite slow pace, and now represent close to 50 percent of the traded notionals, according to ISDA swaps info figures.
Unsurprisingly, the exception remains EUR, where fewer than 30 percent of the traded notionals are on €STR.
Cross-currency swap markets are rapidly ditching legacy interest rate benchmarks in favour of RFRs.
Since the beginning of 2022, trades in euro/dollar cross-currency OTC swaps have almost exclusively referenced the secured overnight financing rate (SOFR) and the euro short-term rate (€STR).
DTCC data repositories from U.S. markets data show how 95 percent of USD / GBP, USD / JPY and USD / CHF now trade RFR versus RFR.
The transition has been pushed by RFR First initiatives, the second phase of SOFR First, launched in September 2021. It stated that interdealer trading conventions for cross-currency basis swaps between USD, JPY, GBP, and CHF LIBORs will move to each currency’s risk-free rates.
Cross-currency swaps prices can be found in Refinitiv Eikon, using the OTC advanced search tool, the OTC Pricer App and the Swap Pricer app, which now allow price cross-currency swaps based on new RFRs.
Although 24 LIBOR settings have already been discontinued, this does not spell the end of the LIBOR transition.
Market participants are still actively transitioning away from LIBOR trades in USD, while getting prepared for other IBORs transitions in the Eurozone and the rest of the world.
Refinitiv Eikon gives you the information you need – whenever and however you want it
04-04-2022 | treasuryXL | Kantox | LinkedIn |
“The year of predictable unpredictability”, as The Economist calls it. But what challenges lay in store for risk managers in 2022 when it comes to their FX risk strategy?
Let’s start with the first of our challenges that will affect your FX risk strategy in 2022, namely shifting interest rate differentials across currencies. This is the result of central banks reacting to inflation and inflation expectations. This will, in all likelihood, lead to increasing differences between FX rates with different value dates—also known as forward points. Central banks from a wide range of countries have adjusted their short-term interest rates in 2021, and more are set to act in 2022: Chile, Brazil, Czech Republic, UK, Hungary, Poland, NZ, South Africa, and South Korea among others.
Is your company well-prepared to manage those shifts? Is it well-prepared to take advantage of favourable forward points? In the event of ‘favourable’ forward points, for example, when a company sells and hedges in a currency that trades at a forward premium, pricing with the forward rate would allow that company to price more competitively—without endangering its profit margins.
As Toni Rami, Kantox’s Co-founder and Chief Growth Officer says, “most companies fail to take advantage of this opportunity, either because they lack the technology to do it, or because they are not aware of it, or because of both”.
Is it well prepared to protect itself from unfavourable forward points? This is shaping up to be a key concern in 2022. It would be the case, for example, of a company that sells (and hedges) in a currency or in currencies that trade at a forward discount, like a Europe- or a US-based firm that sells, for example, in Brazil.
This company could protect itself by setting boundaries around its FX pricing rate by means of automated and dynamically updated profit-taking and stop-loss orders in order to delay as much as possible the execution of the hedges. Failure to have this mechanism in place will mean:
(a) unnecessary financial losses due to the cost of carry (a key point in 2022 given recent developments in central bank policies)
(b) too much capital tied up in terms of collateral/margin requirements
(c) not enough time at your disposal in order to fine-tune and improve your forecasts (FX surveys consistently show that CFOs and treasurers would like to have more time at their disposal to fine-tune and improve their forecasts)
Turning to the second challenge, is the ongoing pressure on profit margins. There is a clear need for better, more dynamic pricing systems, as McKinsey surveys consistently show. Does your company have a proper system to price with FX rates? On the face of it, this looks like a simple proposition. It’s not. It requires a system to fetch the appropriate FX rate with criteria in terms of:
(a) sourcing the FX rate;
(b) communicating that FX rate to commercial teams
(c) updating that rate according to time-based or data-driven criteria.
And it also requires a system to create the FX-pricing rules that your business needs. Failure to have these systems in place will likely result in not being able to properly set the pricing markups —per client segment and per currency pair— that your commercial strategy requires and not being able to adequately use the forward rate for pricing purposes.
Take, again, the case of unfavourable forward points, namely a firm that sells and hedges in a currency that trades at a forward discount, or that buys and hedges in a currency that trades at a forward premium. With the proper pricing rules in place, the firm needs to price with the forward rate. That would allow it to avoid unnecessary financial losses on the carry. In 2022, with several EM central banks preparing to further raise short-term interest rates, this is likely to be a critically important element in any FXRM strategy.
Finally, the uncertain FX markets outlook is a reminder of the importance of having a solid FX risk management strategy in place in 2022. According to Citi’s latest Treasury Diagnostics survey, 79% of risk managers have exposure to non-G10 currencies, in many cases unhedged because of costs, liquidity and regulations; 60% of treasurers expect a new client base in emerging markets to be the largest driver of FX-denominated sales growth. Yet 57% of CFOs say they suffered lower earnings in the past two years due to significant unhedged FX risk (worldwide), rising to 77% in EMEA. America: 61%, Asia: 43% (HSBC survey).
This requires automated hedging programs and/or combinations of automated hedging programs. Failure to have these programs in place in 2022 is likely to mean: (a) a high variability in performance, whether it is measured in cash-flow terms or in terms of accounting results; (b) failure to adequately protect and enhance operating profit margins; (c) the possibility that your customer’s FX could turn into your own credit risk if excessive currency volatility forces them to wait for a better exchange rate to settle their bills.
Worried about your FX risk health? Take our free assessment and get a personalised insights report in minutes.
31-03-2022 | Pieter de Kiewit | Treasurer Test | LinkedIn |
On a regular basis, we write about your career planning in treasury, our opinions, and observations. Two articles on the website of Treasurer Search that are strongly related to this and very well viewed are:
Also, you might have noticed that we are big fans of the Treasurer Test, which helps treasurers in visualizing their skills and personality.
30-03-2022 | treasuryXL | VU Amsterdam | LinkedIn |
Are you up for the next step in your career? Would you like to further develop your knowledge, skills and professional view on this fast-changing world?
The Vrije Universiteit Amsterdam invites you to join the Online Open Evening on Wednesday, 6 April 2022.
Get inspired by our program manager Robert Dekker and ask your questions during a live stream Zoom session.
Fundamentals of Treasury Management 19.00 – 20.00 hrs.
This is what graduates say about the course
Ahmed Fathi Ahmed – EMEA Sales Advisory Cash Management – BNP Paribas: ‘The certification Fundamentals of Treasury Management is an excellent way to build a solid background in a Treasury Management field. Indeed, it allows me to develop a very finest and an efficient toolbox with regards to International Cash Management, Supply chain and Trade Finance. That has helped me to better serve the large corporate that I manage in my company. Furthermore, I was thrilled to meet talented treasurers and professors which expanded my corporate network.’
Next course starting May 2022 More information & registration.
We are looking forward to welcoming you!
Best regards,
Herbert Rijken
Programme director
30-03-2022 | treasuryXL | Nomentia | LinkedIn |
An in-house bank is a group or a legal entity that provides banking services to different business units within the organization. The in-house bank replicates the services that are typically provided by banks. The in-house bank offers solutions for payments, liquidity management and cash visibility, payments on behalf (POBO), collections on behalf (COBO), FX requests, funding, and working capital to business units.
When organizations are looking for a way to improve cash flow processes, cash visibility, and reduce bank fees, the in-house bank can be a great alternative compared to working with countless banks internationally.
While the in-house bank is not an option in every country due to regulations, when it’s possible to use it, it will decrease the company’s vulnerability to regulatory changes as these could negatively impact business operations. Organizations are not only protecting themselves against regulatory changes of countries, but also against changes on the bank’s side for example when it comes to updating new payment file format standards.
Among the many benefits of implementing an in-house bank, centralized control, improved liquidity management, reduced banking fees, automated bookkeeping, globally harmonized payment processes and full visibility into subsidiary balances are perhaps the most important ones that organizations can realize.
Centralized control by the group is by far the biggest benefit of adopting an in-house bank to help with topics such as global payment processes, financing, investments, corporate-wide FX risk exposures, and hedging.
An in-house bank is especially favorable for companies with large amounts of cash or when there’s a constant need to move money between subsidiaries and the group. While the group gains a bigger control, business units and subsidiaries will have their own sub-accounts within the in-house banks. The balance limits are set and reviewed centrally based on the organization’s treasury policy by the group.
The group will be able to minimize global payments that include foreign exchange or cross-border payment fees as all the transactions can be conducted centrally instead of going through local payment processing third parties. With an in-house bank, there’s clearer visibility into the overall net positions per currency to manage and it’s possible to hedge FX risk at the group level for currency protection and fewer hedging transactions.
Also, subsidiaries do not necessarily need to go to banks for loans, but instead, the loan can be funded by the organization. Lending money to the subsidiaries can be significantly cheaper than paying high-interest rates to a third party like a bank or a creditor. Centralizing the internal financing to the in-house bank provides an easy way to document the processes for compliance as well as the process becomes more simple as all the applications will go through the group.
With a centralized in-house bank, treasury will have greater control over all the treasury processes, and this could significantly improve the liquidity position of the company.
Through the in-house bank, liquidity can be centrally managed and the group can decide whether external funding is required based on the cash position. With centralized reporting, the group does not only have better real-time visibility into the available cash, but decision-making becomes faster as the result of the available information. This is also beneficial for subsidiaries and business units as they will be able to receive funds a lot faster as a result of the automated cash pooling. This also ensures that there is adequate liquidity when and where it is needed instead of having excess amounts of cash on the accounts of subsidiaries that do not necessarily need the money at that point.
Of course, from time to time, organizations still need external funding for investments, but then it’s also easier to qualify for funding with better terms as a group than as a stand-alone subsidiary.
Getting started with an in-house bank will mean that the external banking cost will be reduced to the minimum so it’s a lot more cost-effective than using external banks globally. It’s also possible to save on bank transaction fees since the internal transactions do not need to go through external banking partners.
Centralizing the banking relationship management to group treasury can also increase negotiating power, so the enterprise can get better prices and improved services.
In-house bank users can auto-reconcile incoming payments and collections for higher efficiency. In a similar manner, inter-company cash flows can be also executed and posted. Balance reconciliation and reporting can be automated by fetching all account statements from the banks and allocating the transactions to the subsidiary’s in-house bank accounts. The rules of allocation can be set on a bank, company, or even an account level.
Using an in-house bank can remove the need for a separate netting solution. Instead, with an in-house bank, you can create the exact same process both for internal and external payments. When the internal payments remain internal and they do not require receivable-driven netting, you gain benefits such as always up-to-date bank account statements and fully automated reconciliation of internal transactions.
Subsidiaries also benefit from the harmonized payment processes. They won’t lose value dates and the month-end closing can be automated.
Payments-on-behalf-of (POBO) minimize the reliance on external bank accounts by subsidiaries. With POBO, subsidiaries continue to process payments in the same way as before while using the debtor’s in-house bank account number.
With Collections-on-behalf-of (COBO), it’s possible to define allocation rules based on transaction details to allocate cash to in-house bank accounts. With virtual bank accounts offered by external banks, it is easy to set up an automated COBO process.
Without a centralized control that an in-house bank offers, the group treasury has often had the challenge of the lack of visibility into the cash balances of the subsidiaries. With an in-house bank, it’s possible to manage multiple cash pools to gain full visibility on subsidiary balances.
It is more beneficial to pool all cash and credit balances instead of having cash lying idle on the accounts of the subsidiaries. Business units may run net credit or debit balances in the subaccounts and either earn or pay interest on the net debit/credit balances.
When the group needs to borrow money to the business units, they can set their own interest rates that can even vary based on the subsidiary’s size and profile.
There’s no simple answer to this question. It should be a strategic decision and should be aligned with your organization’s roadmap.
To identify whether the in-house bank is the right solution for you, carefully evaluate your current processes: what is working and what could be improved? Could some of the above-mentioned benefits make your operations more profitable by controlling the organization’s cash centrally?
Of course, you may already have a good solution for example for liquidity or bank fee management, but if you have business units and subsidiaries globally and you are going to invest heavily in development, you deal with local taxation, transfer pricing, you may want to consider the option of implementing an in-house bank in the near future.
Before you make a decision, you should also be aware of the regulations of all the countries you are operating in, whether POBO & COBO are allowed in those countries, and what paperwork you need to move forward with an in-house bank.
Implementing an in-house bank is a significant undertaking as it will require buy-in from many departments, however, in the long-term, you will be able to build better processes, improve visibility, and save money.
29-03-2022 | Philip Costa Hibberd | treasuryXL | LinkedIn |
What are 3 key do’s and don’ts to keep in mind in your RPA journey? Find out in this article I wrote, which was originally published in the Summer Edition of the Zanders Magazine.
This article was originally published in the Summer Edition of the Zanders Magazine. Are you interested in knowing more about Process Automation in the realms of Finance, Treasury and Risk Management? Feel free to reach out to me on LinkedIn.
Last year’s spring, we organized a ‘jargon-free’ breakfast session to explore what robotic process automation (RPA) is all about. We had a look under the hood of a complex, hard-working robot and shared experiences on how to make the journey of deploying a digital workforce as smooth as possible. Find a brief summary below, covering (briefly) what RPA is about, what are the 3 main stages of the RPA journey, and what are the key do’s and don’ts per each stage.
RPA stands for Robotic Process Automation and is software that performs rule-based work, interacting with systems, websites and applications in the same way a human would. It is a powerful tool that, when applied to the complex industries we work in, allows us to focus more on the valuable activities that make our jobs interesting and less on the boring and repetitive tasks that no one wants to do. You can think of it as macros on steroids.
You can find the key takeaways from the Breakfast Session, in the form of do’s and don’ts, summarized below for each of the following 3 stages of the RPA journey:
✔Do: Have fun!
Did you enjoy playing with Lego when you were a child? Then you will probably enjoy tinkering with RPA. Just like with Lego, spend some time discovering all the different components that you have available and finding out all the different ways you can get them together to craft something useful and tailor-made to your needs. Did you like playing with Barbies better than Lego? That’s also great, don’t worry. Deploying RPA in your team will give you plenty of opportunities to put your role-playing experience to use. Understanding roles, responsibilities, objectives and requirements of a process and effectively communicating the benefit of automating via RPA are the pillars of a successful implementation.
❌ Don’t: Don’t forget to explore slightly more advanced components, such as queues, credential management tools, log management tools, robot orchestration and control rooms.
You don’t want to have to bulldoze and rebuild your shiny proof-of-concept automation in a later stage, just because you weren’t aware of these components. They will become critical once you have more than a few processes at hand.
To stay in the Lego metaphor: make sure to explore the features of the full Lego range and don’t just idle on the baby-friendly Lego Duplo.
✔Do: Make sure processes and solutions are well documented.
I get it. You want to start building your bot as soon as possible. But make sure to first invest some time in drafting the following documents:
• A Process Design Document to capture at the very least the As-is process flow
• A Solution Design Document to capture how you intend to automate the process
You will be happy to have the former if (when?) you start having discussions on the scope of the work that the bot is expected to perform. It can prevent misunderstanding about what the process is all about and what the bot can do. You will be happy to have the latter if (when?) you have to do some maintenance on the bot that you are now developing. This blueprint will help you to quickly zoom in on the component that you need to tweak.
Good documentation will become even more important as your team grows. Imagine how much karma you will earn when someone in urgent need of fixing the bot finds and reads your clear blueprint!
❌ Don’t: Don’t automate sub-optimal processes.
Get everyone familiar with the concept of GIGO – Garbage In Garbage Out – and its less polite brother SISO. A bad manual process will become a terrible automated process, because robots can only act based on predefined rules. The rules can be as complex as you like but there can’t be any room for discretionary judgment. The untiring robots lack that.
Make it clear that a process needs to be streamlined and standardized before it can be a candidate for automation. If it’s not, someone will have to cross the jungle of “It has always been done this way”, which usually stands between a ‘Garbage Process’ and a ‘Good Process’. Who knows, it might turn out that many tasks and subtasks in the process weren’t needed after all.
✔Do: Set up a clear RPA Governance.
Once you hit the stage of growth, where your team is rolling out one bot after another, clearly defining the process of automating processes becomes even more important than clearly defining the process that you are automating.
Does the RPA team sit in IT or with the business? Who is responsible for what, in case of a malfunction? How are Audit, Compliance and Risk Management going to adjust policies to include the changes brought in by your new digital workforce?
❌ Don’t: Don’t forget Security.
While designing your RPA Governance framework, don’t forget the more practical side of Security.
You wouldn’t want to allow anyone the temptation of circumventing the four-eyes principle you already have in place. For example, you must make sure it is still impossible for anyone to input a payment to themselves and have it released by the unaware robot accomplice.
Define as soon as possible how you are going to create, assign and manage the credentials that your bots will need to interact with your existing IT infrastructure. Particularly in the case of unattended bots, it would be best to create specific users for your digital colleagues, with clearly distinguishable usernames. You might even consider going as far as letting your robot change all its passwords to ones of its secret liking as soon as it gets in production.
28-03-2022 | treasuryXL | Gtreasury | LinkedIn |
Modernization is quickly coming to cash forecasting. Corporate treasury teams are accelerating their embrace of new technology strategies and are refining existing methods to introduce greater automation, efficiency, and accuracy. The trend has undoubtedly been spurred by the pandemic, during which treasurers have sought greater access to data in order to optimize cash management – as best they could – during periods of relative uncertainty.
In the recently released Cash Forecasting & Visibility Survey undertaken by treasury analysis firm Strategic Treasurer, nearly 250 professionals from across the global treasury ecosystem weighed in on their current and future state of cash forecasting. The results paint a picture of an industry with an acute demand for faster forecasting and real-time global cash positioning, a growing appetite for emerging AI/ML technology, and plans for heavy spending to realize more rapid and accurate forecasting processes.
The report is worth a read in full, but here are four of the biggest takeaways for treasurers:
The vast majority of treasury teams still use traditional (and very manual) forecasting tools. Ninety-one percent of respondents report using Excel as one of their forecasting tools. In comparison, one-quarter have a treasury management system (TMS) in place, and 28% use ERP systems. Fifteen percent use financial reporting and analysis (FR&A) or budgeting tools to assist in their forecasts, and just 5% use a dedicated forecasting platform.
While Excel is the leading forecasting tool by usage, it clearly lags in making treasurers happy. Fifty-seven percent of those utilizing a TMS or ERP are satisfied with their tooling, while just 42% of Excel users say the same.
Variance analysis is another task requiring heavy manual effort from treasury teams. Fifty-seven percent of respondents say that their variance analysis activities are fully manual, and another 19% report significant manual activities. One-fifth of companies only avoid this manual effort by performing no variance analysis whatsoever. The remaining 5% of respondents utilize variance analysis that’s backed by fully-automated processes.
Fifty-nine percent of treasurers believe that the importance of cash forecasting will increase in 2022, with 27% saying it will become significantly more important. At the same time, nearly half of respondents say they currently have an “extremely difficult” time generating forecasts.
As a result of this unfulfilled need, 35% of treasury and finance departments report plans for extremely heavy spending on technology for treasury systems and cash forecasting capabilities. Forty-one percent plan to focus significant spending on treasury systems in the next year, while 40% plan similarly significant spending on cash forecasting. Additionally, respondents reported heavy technology spending plans that specifically focus on bank account management (33%), reconciliation (28%), payments (28%), and cash reporting (27%).
While just 6% of respondents currently use AI/ML technology to power cash forecasting, their reported plans indicate that within two years that number will reach 27%. Further out than two years, that jumps to 51%.
Respondents also indicate a similarly bright trajectory for regression analysis: 12% use it currently, projected usage will grow to 29% in two years, and 43% use or expect to use it in the future.
Respondents report increasing the frequency of their cash forecasting: 55% now forecast either weekly or daily. Forecasts extend to a more distant time horizon as well, with a plurality of 39% of respondents now looking ahead six months or more, and another 35% forecasting between two and five months out.
Respondents also expressed a greater appetite for cash forecasting than what their current tools and time requirements can feed. If available, 64% of respondents would invest more time to improve the accuracy of their forecasting. Forty-six percent would use extra time to perform variance analysis. One-quarter would increase both the frequency and outlook of their forecasts.
The survey’s findings are beads strung along a common thread: treasury teams recognize and demand the benefits of more efficient and effective cash forecasting. With investments in TMS, ERP, AI/ML, regression analysis tools and more, many treasurers are already pursuing new strategies and spending what it takes to place the strategies and technologies they require at their command.
24-03-2022 | treasuryXL | TIS | LinkedIn |
Outsource the technical challenge of bank connectivity to a payments expert.
For many SAP clients, bank connectivity is a technical challenge. Find out, how integrating SAP with TIS can help you:
23-03-2022 | treasuryXL | Kyriba | LinkedIn |
By Andrew Deichler, Content Manager, Strategic Marketing
Application programming interfaces (APIs) have the potential to revolutionize the treasury and finance function. But when is the time to move to APIs, and when is file transfer protocol (FTP) still sufficient?
Let’s explore the use cases for APIs and when it is appropriate to begin using them. We’ll also look at areas where FTP is still sufficient.
Largely viewed as conduits for faster bank connections, APIs allow systems to exchange data faster. Unlike FTP, APIs do not require any kind of file download to transmit information; users have instant access to the data they need.
Major ERP providers are working with API developers to embed APIs into their workflows so users don’t need to take any action outside the ERP. For example, Kyriba is working with SAP, Oracle, Microsoft Dynamics and others on API connectors. And Kyriba users can also integrate APIs into their ERPs on their own with our plug-and-play solutions.
APIs have nearly limitless potential. They can facilitate an open ecosystem that enables third-party developers to build applications on top of the API provider’s platform. Through such a platform, corporate treasury and finance departments can expedite the flow of data. Kyriba’s Open API hub, launched in 2021, is an online marketplace of real-time connections to apps, data, and new products and services that inject data-driven decision-making into every financial operation.
APIs offer treasury and finance many capabilities that they haven’t had before, such as the power to “un-batch” payments. Rather than relying on batch processes that transmit at several pre-determined times each day, APIs allow payments to be initiated from treasury management systems and ERP systems as needed—even in real time. In fact, real-time payments require the use of an API because payments can’t be transmitted instantly if a file needs to be downloaded.
Furthermore, APIs can also un-batch reporting, allowing organizations to manage cash continuously and in real-time. Just like batch payments, batch reporting is constrained to set times each day. APIs allow treasury and finance teams to receive intraday liquidity updates as needed, improving the ability to position, reconcile and invest cash. And immediate visibility into cash also allows companies to vastly improve forecasting.
All that said, FTP isn’t dying out just yet. Banks and technology solutions providers that are managing open platforms are not replacing legacy formats with APIs; rather, they are offering them as a complement to these formats.
Furthermore, the rollout has been slow; most banks are not using APIs in live production yet. And the ones that do mostly offer them for certain real-time services—meaning that multiple connectivity options are needed to fully support a treasury and finance team.
But even if you have full API capabilities, they may not be appropriate for every type of data transfer yet. Generally speaking, FTP is better for large bulk transfers of data, while APIs are preferable for smaller, more specific transfer needs. And even though APIs can virtually eliminate the need for batching, some organizations may not see a need to end the practice—and they’ll need FTP to do that.
Lastly, FTP has been around for many years, making it compatible with legacy systems. Unlike API connections, which require that systems on both ends support the technology, FTP only requires that the appropriate file format be used. So, FTP won’t require any major conversions for your software. In other words, if the status quo is working for your organization, you may not see the need to make any changes right now.
In many ways, APIs bring key advantages over a file-based approach, such as an immediate response from banks and the ability to receive new data and notifications in real-time. But for the time being, flat-file technology is still very much in use.
Fortunately, Kyriba users don’t have to choose one or the other. Kyriba connects to 600 global banks on behalf of our nearly 2,500 clients using a variety of connection protocols, including APIs and FTP. So regardless of whether your bank and ERP are set up for APIs or not, Kyriba can ensure that you’ll have the right connectivity for your organization.
For more information on APIs, view our API Whitepaper, Fact Sheet and Infographic.
Join treasuryXL as a partner!
The treasuryXL Partner Program is designed for organizations offering products or services in treasury, cash and risk management.
Newsletter & eBook
Subscribe to our free weekly newsletter and receive your 41 pages ‘easy-to-read’ eBook, What is Treasury?
