Exploring the Current Technology Situation: 2023 Treasury Technology Survey Data

Announcer  00:04

Welcome to the Treasury Update Podcast presented by Strategic Treasurer, your source for interesting treasury news, analysis, and insights in your car, at the gym, or wherever you decide to tune in.

Craig Jeffery  00:18

Welcome to the Treasury Update Podcast. This is Craig Jeffery, I am here with Jonathan Paquette from TIS. Jonathan, welcome to the Treasury Update Podcast.

Jon Paquette  00:27

Thanks very much, Craig, happy to be here.

Craig Jeffery  00:29

Today, we’re going to be talking about the implications of the technology survey that we recently completed together. And just by way of background, you know, a general Maxim or, or truth is that technology is changing rapidly, no surprise there. And some of the recently completed research on this topic of treasury tech just wrapped up. And there are some a number of interesting data points, trends and implications. So I’m really excited to talk with John about the impact on treasure. What did these things mean, what’s changing? Maybe before we get into the survey, and some of the elements about what we’re learning, can you give us a quick run through of your responsibility at TIS.

Jon Paquette  01:08

Yeah, happy to do that. So Jon Paquette, I’m EVP for solutions and product strategy at TIS. I oversee our solutions architects team globally, and also a lot of our product strategy. So product market fit product partnerships, really just helping to inform the product team on the more strategic part of our product roadmap. So like I mentioned, happy to be here on the podcast and looking forward to to go into the results.

Craig Jeffery  01:30

I know, one of our previous podcasts, I think is the most downloaded podcast, John, so you’re a bit of a star here for us. So on the survey, you know, for those that are listening, you can find information about downloading the survey report, in the show notes, you can find them by going to strategic treasure looking at the research, you can download quite a bit of information. But just by way of some quick stats, well over 200 respondents, there were over 50 questions that ran for about four weeks. Really heavy participation in North America, Europe and Asia pass pack regions, other areas of the globe are quite a bit lighter than than those three primary areas. But, you know, in terms of narrowing in on what we talked about, because there’s so much, nobody’s gonna listen to a four hour podcast or a three hour podcast, there are over a dozen key findings that we thought were important. And we just highlighted 10 within the report. And so for our talk today, I wanted to pick your brain on just a few of the items and then talk about that. So I’ll just mention off quickly when asked the question. So tech use is really rising. The look, in the view for an asset or a technology asset, the increases of value seems to be quite emergent. What’s going on with AI and machine learning is this hype. And it’s not it’s not just hype, there are some changes going on. But calibration is an order, and then kind of a catch all category. John, as we look at Tech use, it’s clearly rising. But it’s, it’s a cent is happening at different rates. And so when you think about various spaces, or systems that treasury, AP, AR, etc, use, some are seeing really strong growth, and are expected to see strong growth. Others are seeing really, really rapid growth, and they’re happening at different rates of speed. Why? Why is this occurring at different rates of speed adoption and plans to adopt? And, you know, as part of that, how should Treasury professionals or finance professionals think about this? And feel free to start in any category you want?

Jon Paquette  03:33

Yeah, no, I think this is definitely a result that we’re seeing kind of throughout the survey results, you know, in terms of a category to start off on maybe payment Tech is one of the most interesting findings that we’ve seen throughout the results of the surf wave survey. So the rise and sort of point solutions, things like payment factories, or Treasury aggregators, those are specifically designed to sort of address payments and bank connectivity needs. There’s a lot of interesting trends about the evolving role of those and a lot of different organizations. So both categories are really shown just under 70% expected growth in the next few years, which is which I thought was really interesting. And you’re seeing some regional differences and some differences in the size of businesses that are taking advantage of the software. So treasury aggregators are actually expecting 100% growth in North America based on the survey responses, which I think is kind of telling us, you know, kind of a, I guess the quicker ascent to digitization within Europe that you saw, you know that a lot of corporates in Europe have been using separate payments and you know, bank connectivity to kind of streamline financial operations for quite a while now. We’re in North America, you’re still seeing a lot of paper check processes and sort of a lag in sort of the adoption of digital payment methods and things like that. But of course, that’s going to catch up over time. And I think that, you know, businesses are starting to see more so in North America, the opportunities there, and the need to have a solution in place that really kind of universally handles the bank connectivity and payments piece for them. Previously, maybe it was thought of in the context of more of a treasury management solution, but I think businesses recognize now that bank connectivity and payments are fundament To across the entire business, whether it be treasury, AP payroll, whatever it might be right. So.

Craig Jeffery  05:06

Yeah, one quick question on that, Jon. So is, is what you’re saying is North America is going to experience faster growth, it’s not that they’re moving ahead of, let’s say, Europe, it’s that they’re playing catch up in some regards.

Jon Paquette  05:19

And the other one that I thought was interesting, too, is payments factories expecting 100% growth in the market of sort of more small to medium sized businesses. So this is a category. So a lot of upper mid market enterprise level companies, big global companies, big complex payment needs, adopting a lot earlier, just because they had the sophistication, the complexity, where they really saw the value of the solutions. But even some of the smaller businesses are starting to see the benefit of even if they have Europe, they’re operating in a handful of markets, they have five to 10 Bank relationships, there’s still enough payment complexity there. And still enough, you know, opportunity for standardization and security, for adopting these technologies is starting to make a whole lot of sense as well for that for that market segment. So I thought that was an interesting finding as well.

Craig Jeffery  06:01

You know, the issue too, is some of the smaller companies have become as global as much larger companies without the the level of resources. So it certainly seems like now it’s a the democratization of technology to support the, the complexity. Yeah, and that’s, and that makes that makes a lot of sense to see the the growth and change over time. So good news, for those of you who don’t have the same resources, there’s help on the way I guess you’re in your peers are seeing that?

Jon Paquette  06:28

Yeah, that’s exactly it. I mean, these technologies are becoming easier to adopt as they sort of adopt cloud based models and SAS based models, right, and that you don’t have the same level of IT resources, these things are more plug and play. And that just opens up the door for small and medium businesses to take advantage of software that might have been reserved for just the enterprise level business segment, you know, previous.

Craig Jeffery  06:48

Any other tech areas you wanted to highlight?

Jon Paquette  06:51

Yeah, that’s the other one. I mean, it’s not it’s not a new area necessarily. But in terms of, you know, capabilities, organizations still have really in focus here. Cash Management, Cash Forecasting is another one that you’re seeing sort of permeate throughout the survey results as well. It’s been in the forefront for a while now, where organizations have really been focusing on their cash management strategy. But you can see based on a lot of the economic variables kind of coming into play this year, they’re putting an even bigger focus on it. There’s a lot of concern about interest rate risk, we saw that, you know, throughout the survey results as well, when we kind of asked the the respondents what were the areas, you know, primary that they were focused on focusing on from a risk management standpoint, I think also, people are keeping an eye on bank counterparty risk. And that’s playing into a lot of the sort of the cash management, the visibility, the exposure type attention as well, though, that actually didn’t show up in the survey results, which was interesting. People didn’t seem to actually really have a strong sort of, you know, I guess, weren’t gravitating towards counterparty risk management quite as much as we thought that they would be. So.

Craig Jeffery  07:47

You know, it’s we’re seeing that with across several different domains, people talk about it. But it’s about, you know, depending on what you’re looking at, maybe it’s only a third are paying attention to the counterparty risk given, you know, that we’ve seen quite a few banks globally, you know, succumb become insolvent or be taken over. That, that seems odd to me, like why wouldn’t that be? Why wouldn’t that be picking up at a greater a greater pace? Maybe it’s because there haven’t been the losses they’ve been covered. But that certainly seems to be a bit of a gap. I liked your comment about the interest rate risk, you know, this idea that even if even if rates taper off and decline, you have on the debt side, you have so many people whose debt is maturing, and when they go to refinance, it’s going to be kicking up, even if rates, you know, tail down slightly. There’s expectations there. So this risk is pretty, pretty heavy on the risk area, I think you’re really hitting a good point there that the future look for counterparties. And interest rates is a concern. All right, John, you know, the second area was on an asset that increases in value. Historically, when people invested in technology, as you invest in something, maybe you don’t get all the value out of it you want initially. But typically, the value of the system would decrease or diminish over time, for a number of reasons, right, development was slowed down, their base development lifecycle would stop. And that’s really changed quite a bit with what’s available. I guess everyone wants a system or an asset that grows in value over time, rather than one that declines. And one of the measurements here is what’s driving expectations? And are those expectations being realized? How are people thinking about that? You probably have way more content in your head from experience than we have from the survey. But how should a buyer of technology how should this idea that an asset that increases in value, how should that inform our technology purchases plans and strategies?

Jon Paquette  09:55

Yeah, I think the I think you’re right, this is a big sort of area and the survey results that that was really interesting as well. And I think that the way that respondents kind of, you know, provided their input on these particular questions was directly in line with what we’re actually seeing in the market, as well as we talk to customers and prospects on a day over day basis. So, as they’re choosing new technologies, they’re really considering, you know, the providers commitment to that product, are they going to keep it best in class long term, that’s a huge consideration. They’re considering whether or not those providers are adopting modern technologies, things like, you know, API’s or artificial intelligence, machine learning, and really what their what their sort of strategy is for folding those into their product. And they’re asking a lot of questions about the future roadmap, where is the product going in the future? Where is the company going in the future as well. So I think it kind of reflects that treasury is at an interesting spot right now in technology adoption, where there’s a lot of these technologies coming to market, open banking, API’s, AI, machine learning, embedded finance, all these different capabilities that are kind of in flight to reaching full maturity, I think where the treasure is sitting today is they don’t want to make the wrong decision. Even if it’s, you know, maybe these technologies are going to be adopted immediately upon selection of the software, maybe they don’t have the use cases internally for them. Maybe they don’t feel like the technology has reached full maturity to really support what they need them to do. But they don’t want to make the wrong decision sort of prevent themselves from being able to move to those more modern technologies in the future. So everybody’s very, very cognizant of that, I think, in the way that they’re evaluating tech investments, we see a lot of companies steering away from, you know, providers who are considered legacy technology or even like proactively upgrading their tech stacks and kind of removing some of those, those older technology providers out there and making way for for newer, modernized type software solutions.

Craig Jeffery  11:36

You know, Jon, a couple of those things, you talked about the roadmap, you know, there’s this store whole roadmap, what, what is a company put out in terms of their plans for development? And how have they met those? Right? You know, I remember that, quote, I’m changing it slightly, but it was you can’t, you can’t build a reputation on what you’re going to do. You have to have a reputation on what you did. But there’s also an aspect of what’s the future roadmap look like? So you’re delivering on a roadmap, you have a credible and compelling future roadmap in terms of how that will solve issues, reduce threats. So that’s, that’s your comments there. really highlight the attention, people are paying to that. So all our peers are paying more attention. They’re on the tech side, this idea of using some of the modern tech. Why is that? So important? I know that’s a at base level? That’s like a question that everyone knows the answer to right? It’s tech is changing. The maybe you could describe why you see the need to use current tech. Why is why is that important?

Jon Paquette  12:40

Yeah, I think a lot of it’s driven just by the fact that the expectations on the treasurer are changing a little bit, right. Like we saw this happening a lot during the pandemic, I think it’s the most easy use case, I guess, to really point to where, you know, the cash forecast, for example, became much more than just a report that treasury created and just published out and didn’t really look at all that closely. As you saw a lot of unpredictability and predictability kind of coming into the front with, you know, receivables, cash collections, even accounts payable and things like that, that were impacting liquidity at companies, the CFO started asking a lot of questions as it pertains to the cash flow forecasts, Hey, why are receipts off, you know, 40%, in comparison to what they were last week, and a lot of those questions kind of, you know, stuck as things sort of got back to normal. And then obviously, a lot of new different variables, you know, came into came into play the treasury’s treasurer’s also have to manage so I think the expectations really change in terms of what treasury does on a day to day basis. And they just need these technologies to be able to facilitate it, you know, you need if you want to manage cash in real time, you need to be able to be able to leverage open banking API’s or you know, more more frequent feeds of bank information into your tools, AI and machine learning also help treasures to kind of more proactively picked up pick out some of those variables that might throw forecasts off, or at least, you know, draw different insights, their their attention that might not have been, you know, accessible before. So I think it’s really a lot of that mentality is driving treasures to want to utilize this technology, you know, more and more in their, in their day to day.

Craig Jeffery  14:07

Interesting, you know, Jon, one of the other elements that I wasn’t sure if you’re gonna mention or not at the rate of the rate of change and the rate of development, like as people move on to newer technology, every time there’s a shift in technology, the rate of development moves more rapidly, from two times to five to eight times as you as you move, and you shift on the technology. So that also plays a factor too, right? You move on to new tech, it’s, it’s tends to be better. But it also can develop more rapidly. And that’s, that creates very disruptive activities, because you’re no longer saying this will be three years before it’s developed in production. If I’m working with a tech partner, they’re able to do that they can integrate more fat more rapidly leverage some of this other technology now, you had mentioned AI and machine learning a bit in this answer and I have some questions there too. So it’s um, let me ask the question, and then you can just add to what you said before, you know is, is AI and machine learning more hype or more reality? If it’s more hype? When will it become more reality? And how so? And the next question says that there’s there’s certainly some reality to because it’s like, where are treasury teams focusing their attention on AI and machine learning? And how should that inform how we think how we plan everything from staffing to technology partners, to maybe our back end technology or so? Maybe you could just do a little riff on AI and machine learning?

Jon Paquette  15:37

Yeah, sure. I mean, I think it I think you kind of mentioned this, but as you introduce the topic, as well, that, you know, it’s not hype, it’s gonna be coming into play more and more in technology. And there’s obviously really a lot of value that treasures can derive from this technology, just helping to, you know, help them gain deeper levels of insights or, you know, see around corners and manage risk a whole lot better. But I think there are three things that are kind of hindering its it right now, I guess, first is the probably the easiest one to address the specific use cases around it, right? How exactly do treasurers want this incorporated into their technology? Where the benefits that can be derived? You know, is there a way to do that universally, it’s a little bit tricky, because obviously, every business is a little bit different from a treasury management perspective. So the way that you know, retail versus manufacturing versus services industries might use those technologies for something like forecasting cash or even what access to data, those those technologies, those technologies would have it those different business lines is going to is going to differ a little bit. So there’s a little bit of that, I think, coming into play right now, where we’re, you know, the providers are still kind of flushing out those use cases, and the ones that are really going to help drive a lot of value. The other kind of thing hindering I think is the data. So in order to use these technologies need a lot of data, and you need that data to be very, very clean. So obviously, the whole point of these technologies is to leverage that data to learn autonomously to make decisions on behalf of the treasurer, right. So and now a lot of businesses have maybe historically done a phenomenal job collecting two, three years of really, really clean data, that’s going to create a little bit of a natural lag. So that we see, you know, data management strategy has also been one of those technology topics, it’s really coming into the forefront for treasurers for a number of reasons, but this is definitely one of them. And I think the third one is just the sort of the unknowns around the regulations. You know, right now, these technologies are kinda, you know, not not fully regulated at Yeah, in a way, that’s really, I think it’s consistent, right? So and then you think about technology, that you’re basically giving access to all your most critical financial data, it’s gonna be able to use that data learn autonomously and make decisions. And that gives some treasures who are naturally pretty risk averse people a little bit of pause about fully adopting this, these technologies until they fully kind of it’s some of these topics are fully fleshed out. But that being said, I mean, I think that you will, this will be a trend, and we will definitely see these technologies making their way more and more into software over time. And it’s clear from the respondents in the in this particular survey survey and just general industry conversations that there are two key areas where people see a lot of benefits of these technologies. And that’s Cash Forecasting and fraud detection. So those are the two real areas where you’d see, I think, some of the most interesting use cases starting to be a starting starting to come out a little bit too. But you know, we also saw some trends and in terms of just what types of companies would see value in these in these solutions, as well. So, you know, in terms of forecasting, 80% of large businesses saw the benefit there versus only 60% of small businesses, which makes a lot of sense, because you know, large businesses have more complex variables to forecast, they’re probably a little bit further along on the technology adoption curve as well, where they might have an automated forecast process in place, they’re looking to take that to the next level, where small business might still be trying to move off Excel or some very basic sort of more cash positioning driven forecasting. And then, you know, the other one I thought was interesting and interesting results from the survey with a regional differences in the role of AI and machine learning and fraud detection. See had the treasures in Europe about 95% of responding that they saw significant benefits to adopting these technologies for fraud detection, where in North America that was only about 70%. So that was one that kind of made me scratch my head for a moment. But you know, if you think about it, you know, we really would like to call attention to before in North America, there’s still a high percentage of payments being made through cheque. So that’s easily sort of combated through positive pay and some of the bank products out there for fraud detection, and the USASF things like early warning Account Validation services that are able to leverage a data set of information reported by banks to actually validate beneficiary account information. And Europe, you don’t have stuff like that quite as broadly because of GDPR and data privacy regulations and things like that. So makes sense that the European treasurer’s would see, hey, we really need you know, a really intelligent solution here to kind of help us help us detect fraud.

Craig Jeffery  19:46

So that’s some really good calibration and color on that, Jon.  You know, and either way, whether it’s 70% or 95%. And what are all the exact reasons it’s anybody listening know so that your peers are looking at this heavily, the lightest, we have a 70%, the maximum is 95%. So those are those are all significant majorities. One, one quick follow up on your, your forecasting common two. And a question. You know, you said 80%, for the large companies see the value there and 60% of small companies. So, one general common is both of those are majorities. And here’s the question, using the term the democratization of technology, the ability for smaller companies to get into newer technology, will they have an advantage very soon? Because they don’t have 40 systems are working within finance, they may have eight or six, will that flip over time? Will the ability to be more nimble, because they’re smaller change, change the tech adoption? They don’t have the resources, but they can they can swap things out more quickly? Do you think that’s going to flip? And if so, when? When do you think that’ll flip?

Jon Paquette  20:59

Yeah, I think it will. I mean, I think it’s a little bit of an advantage. Obviously, like you mentioned before, you know, smaller companies might not have adopted technology, because it didn’t have the IT resources, it might have been too much of an administrative burden. Or they might have thought they were complex enough to, you know, this, this hesitated system that was going to drive a lot of costs. But obviously systems are cheap. Now they’re modular, they’re, you know, the cloud based they require less than it lifts. I think that does benefit the small organizations from both respects, like you said, from a dataset standpoint, there are a lot simpler from a from a systems integration standpoint, they likely, you know, categorically have fewer systems to really integrate to get that data really comprehensive and complete. And in some cases, you know, having not adopted technology before might help you giving some of the changing dynamics of the role of the treasurer as well, where you can really adopt technology, and drive that more at, you know, making the treasurer a better decision maker and driving better actions within the organizations versus a lot of the legacy tech adoption that was really focused on Process automation and reporting, right? So you can almost like bypass some of those mistakes from the past or not even mistakes, just the way the sort of the expectations change over time, and adopt these technologies, you know, pretty cleanly using best practices. So.

Craig Jeffery  22:16

One of the last things I wanted to ask you about was, you know, other areas that you found interesting. I know, we spoke about this idea of an expanding ecosystem. And this is this really, I think ties into some of your comments about, you know, the value of working with partners that have a that that their asset increases in value, the system adds more function, I’m part of that is you’re either doing it solely within, let’s say, vendor A, vendor B, vendor C doing that on their own. But there’s also this more openness, the connectivity and the ecosystem where parts collaborate, work together, what stood out to you in that area?

Jon Paquette  22:52

Yeah, that was interesting. If you looked at, you know, the emphasis on expanding partner ecosystem building and more partner integrations into a software, it’s kind of how I took it, it was, you know, maybe a category that wasn’t looked at super closely as a key category at present time. But almost 40% said that it would become important within the near future. So you can see that definitely businesses are thinking about that. And to me, this is that embedded finance topic, and it goes into, you know, like kind of what I said about the the changing role of the treasurer, expected to be managing things in more real time sort of better able to address risks as they come up within the business. And if you think about that, if you’re going to do that you need a provider that can also integrate with the partners that you leverage from that respect to actually perform those services. So whether it be sort of a hedging solution or short term cash investing, supply chain, finance, whatever it might be, right, there’s a lot of tools at the treasurer’s disposal these days to manage, manage cash and manage risk. And I definitely think there’s gonna be a bigger expectation from the, from the market to better integrate with those partners and provide a more comprehensive solution within whatever the treasurer is using to manage cash on a day to day basis.

Craig Jeffery  23:56

Yeah, thank you, Jon, and Jen Knutel, and others at TIS for underwriting this year’s treasury technology research. I also want to thank you for speaking on the webinar, and on the Treasury Update Podcast. It’s always enjoyable, Jon.

Jon Paquette  24:10

Yeah, I’m always happy to be here too. Thanks a lot, Craig.

Announcer  24:15

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