Treasury and Trade Solutions

These trends are particularly significant in Latin America with rapid growth in smartphone usage, the rise of mobile wallets and digital payments, and huge domestic and international investment in financial technology. Digitalization, driven by corporations, banks and the public sector, as well as changing consumer demands, creates unprecedented potential to increase financial and economic inclusion and transform financial supply chains both across the region and beyond. The benefits could be far reaching by boosting the region’s economies, building trust and transparency, and driving prosperity.

Shaping the Treasury Agenda in a Digital AgeDigital transformation is shaping our world to an extent that we have not seen since the industrial revolution; arguably, however, the potential for change is even greater, ultimately across every industry and every region. Not only are new technologies being used to automate existing processes, but we are seeing fundamental changes in the way that businesses engage, transact and exchange value with customers and suppliers, how they use data to shape their value proposition and the emergence of entirely new industries.

Driss TemsamaniDigital Channels and Enterprise Banking Latin America Head, Treasury and Trade Solutions, Citi

2 Treasury and Trade Solutions

A digitalization spectrumThe nature, timing and drivers of digital transformation differ substantially across industries. For traditional industries such as metals and mining, oil and gas, chemicals, power and utilities, the potential for digital disruption is negligible, so treasury itself is more likely to shape its own digitalization agenda to meet its liquidity and risk objectives, rather than the impetus coming from the business. Other industries, not the least automotive, retail, travel, logistics and IT, are fighting growing competitive threats from industry disruptors, prompting the conversion of end-to-end processes to a fully networked digital customer-centric business model in which treasury plays a vital role. Finally, the newest industries are ‘digital natives,’ with digital technologies at the heart of their business proposition. Treasury is no exception to this digital culture, with a strong focus on automated processes and analytics as treasury functions emerge and grow in line with the expanding business.

A digital banking partnerHowever advanced the company’s digital agenda, treasurers have a distinct role to play in its realization. This could include boosting capacity and scalability to manage and reconcile higher volumes of lower value payments, developing new financing models to support emerging distribution models, or building up sophisticated analytics to model new liquidity and risk scenarios. Key to all of these initiatives is the need for a trusted banking partner to support treasury’s digital agenda and therefore the wider digital transformation of the business. At Citi, digitalization has been critical to our value proposition for the past 20 years, operating at the intersection between finance and technology. As technology innovation has accelerated over the past two decades, we have continued to harness new technologies to maximize efficiency of our own operations and optimize the client experience, however advanced the digital agenda.

Embarking on the digitalization journeyThe difficulty for many treasurers is knowing where to start when formulating their digital roadmap, and how quickly to progress it. Digitalization takes time, particularly for industries that have well-established processes and infrastructure developed over many years. The first step is to establish a digital ‘baseline,’ which is typically bank connectivity, whether Citi’s web- and mobile-based electronic banking solution CitiDirect BE®, or host-to-host connectivity, CitiConnect®. The ability to exchange information and transactions seamlessly with partner banks is fundamental to achieving visibility and control over liquidity and risk and optimizing operational efficiency. Over the past 12 months alone, we have seen a huge jump in the number of organizations establishing host-to-host connections between Citi and an enterprise resource planning (ERP) platform or treasury management system (TMS), creating the basis for future digitalization of processes and flows.

Beyond connectivityThe opportunities for treasury digitalization are evolving rapidly, with benefits across the full spectrum of treasury functions and industries. One such example is the shift towards the real-time treasury. With the emergence of open banking and the use of application programming interfaces (APIs), treasurers have the opportunity to trace transactions in real time. By integrating this information directly into the ERP or TMS, treasurers can gain complete visibility over the status of transactions, leading in turn to a more dynamic approach to managing liquidity and assessing risk.

A second key major area of opportunity for treasury digitalization is in data analytics, which can extend to machine learning and artificial intelligence. As with other digitally advanced industries, banks such as Citi are increasingly able to harness data to understand customers, suppliers and other supply chain participants, including behaviors, preferences, satisfaction levels, payment habits, etc., and flex their proposition accordingly. Treasurers can be beneficiaries of this by using this data to analyze their financial supply chains, model liquidity and risk scenarios and leverage sophisticated machine learning to derive new insights.

Digitalization takes time, particularly for industries that have well-established processes and infrastructure developed over many years.

3Shaping the Treasury Agenda in a Digital Age

A transformation of trustWe are only at the start of the digital revolution in treasury and banking. Many of today’s innovative solutions leverage existing technologies in new ways, but these technologies cannot necessarily resolve emerging challenges resulting from today’s digital business models. New technologies, such as blockchain or distributed ledger technology (DLT), could change this. DLT has the potential not only to transform the way that we exchange information and conclude transactions, but more fundamentally, how we trust in both the data and the counterparty. Trust in the identity and integrity of a counterparty underpins every transaction, but traditional mechanisms for validating counterparties are becoming less valid given the rise of open account transactions, the sharing economy and peer-to-peer platform providers, amongst many other trends. The challenge, and opportunity, for DLT technology is therefore to create an environment of trust. With a number of initiatives now at an advanced stage in areas such as securities, smart contracts, digital currencies and record storage, emerging DLT-based solutions developed by banks, third parties and industry consortia will play a growing role in this transformation of trust, fueling the next generation of digitalization.

Treasurers should consider their own digitalization roadmap, and their progress through it in comparison with both their ‘traditional’ peers and industry disruptors. Not every treasurer needs to be an early adopter or fast follower of new digital opportunities, but a degree of digitalization, such as in bank connectivity and supporting payments and collections, is essential to a cost-effective, efficient and controlled treasury function. This is particularly relevant in Latin America given the will and potential to harness digital financial solutions to create prosperity, increase financial and economic inclusion, and streamline the flow of goods, services and information to businesses and citizens.

As with other digitally advanced industries, banks such as Citi are increasingly able to harness data to understand customers, suppliers and other supply chain participants, including behaviors, preferences, satisfaction levels, payment habits, etc., and flex their proposition accordingly.

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