How Are Companies Adapting to the Evolution of Global Payments? Fintech Hotseat Panel Discussion – AFP 2023
In today’s episode, we’ll hear an insightful discussion on the Future of Treasury Payments. Recorded live at the AFP conference in San Diego, CA, our panelists delve into the world of global payment rails and the strategies companies must adopt to tackle security and operational challenges head-on.
- Paul Galloway, Senior Director, Advisory Services at Strategic Treasurer
- Philip Anklin, Chief Growth Officer at Fides
- Brian Anderson, Managing Director, Client Payment Solutions at JPMorgan
- Brooke DiNatale, SVP, Global Treasury Solutions at Mastercard
- Paul Margarites, Head of Commercial Digital Platforms at TD Bank
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Episode Transcription - Episode #280 - How Are Companies Adapting to the Evolution of Global Payments? Fintech Hotseat Panel Discussion – AFP 2023 transcript
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.
Jonathan Jeffery 00:18
New payment rails are popping up all over the globe at a rate that is far surpassing anything in the past. Many of these are of the immediate variety, often settling in under 10 seconds. But payments aren’t the only thing that are increasing in speed. Criminals are now finding new, more effective, more sophisticated attack methods that challenge companies to stay current on their security awareness and readiness. As many companies continue to grow globally, the risk factors and operational challenges can be addressed in a variety of ways. So what are those companies doing to solve those issues over time? Today we’ll hear exactly that in our annual FinTech HotSeat panel discussion covering the future of treasury payments. This discussion is hosted by Paul Galloway, Senior Director Advisory Services at Strategic Treasurer. And our four payments experts are Philip Anklin, Chief Growth Officer at Fides, Brian Anderson, Managing Director, Client Payment Solutions at JPMorgan, Brooke DiNatale, SVP, Global Treasury Solutions at Mastercard, and Paul Margarites, Head of Commercial Digital Platforms at TD Bank. And with that, I’ll hand the show over to Paul to kick us off with a speed round.
Paul Galloway 01:33
We’re gonna start out with speed round. So with the speed round is, I’m going to bring up a subject, you’re going to have a selection of something, you have to select something one thing can be two things, it has to be only one thing. And you have 30 seconds to state your rationale as to why you selected that. So the first area is payment growth, more or less than two times general economic growth rate. And we will start with Brian.
Brian Anderson 02:05
So I’m gonna go with two times economic growth, the growth rate. And the reason around that as as we look at how payments have just continued to emerge and become part of our everyday life, and we’re looking at how does it become part of embedded with us has become part of our conductivity tissue, and there’s so much out there to be able to drive through electronification is and if businesses are looking at it, you know, payments are another source of revenue for them.
Paul Galloway 02:30
Next is Brooke.
Brooke DiNatale 02:31
I’m going to go with more. But for the same reason, we’re definitely in a digitization move moving away from checks moving to embedded financial payments. But I think we’re gonna grow a lot faster than two times.
Paul Galloway 02:41
Paul, you’re up next.
Paul Margarites 02:43
jump on the bandwagon I guess I’m gonna go more to but just a slightly different twist. I think it’s it’s kind of an evolution of behaviors. Speed is important. And it’s not speed of getting paid necessarily, but speed of acting, transacting behaving, that’s been picking up and I think that’s going to drive that increased volume. Alright,
Paul Galloway 03:02
Philip, you’re rounding it up.
Philip Anklin 03:04
I would also go with two times more than two times economic growth, mainly, I guess, same opinion as Brooke that the payments are so digitized. The finance technology is rapidly evolving. So I would assume payments are outpacing the traditional growth.
Paul Galloway 03:22
All right, next one is fraud is the issue more with technology or human element? And we’ll go back to Brian on the end.
Brian Anderson 03:32
So, I’m gonna go with human element on this one. And while technology in my view offers the gateway and provide some of the accessibility for to happen, do you think a lot of fraud comes down to the human element to it from that standpoint?
Brooke DiNatale 03:47
Yeah, I agree. I think it’s mostly around the human element, but you’re going to use technology to mitigate that risk. And, you know, move away from having situations where humans can make those changes, the more it gets put into a workflow, the more it’s automated, the more we move away from that risk that’s built into the system.
Paul Margarites 04:03
And Paul, this just urge to take the flip side, and so I was gonna say human, I just want to be clear, but I’m gonna say technology. And I’m gonna say technology, because it still hasn’t been stitched together, across end to end on products and behaviors the way it could be, and the way it could protect against poor human behavior.
Paul Galloway 04:24
Philip Anklin 04:25
Yeah, I would also say human is the weak elements. And that’s chain, mainly because if you see how social engineering works are professional they are in the meantime, to steal your credentials to data. And I think the awareness is quite high for people working in that environment, but not that high that everyone would easily discover the potential fraud in terms of social engineering.
Paul Galloway 04:47
All right, I like the diversity and thoughts. Next area is API for embedded payments, when will it become dominant? Now? Two years, five years, 10 years? 10 to 15 years, or never? Brian, you’re up first.
Brian Anderson 05:04
As far as API’s with the embedded payments, I do think it’s now. And for those payments to work effectively real time messaging away from the batch, I really think the API is there now for embedded payments. Now, is everyone there for a minute payments? No, but I think API’s the therefore.
Paul Galloway 05:20
Brooke DiNatale 05:21
I wish it was now I don’t think it is, I was reading an article that was saying about 30% of banks are ready with API’s. 30%, might be ready in the next five years and 30% Barely thought about them. So I’m going to say five years, I think it’s gonna take time for companies to move away from, you know, legacy technology. And even if, you know, they move a lot of their volume and a lot of their business away from legacy programs into API’s, it’s gonna take a while to sweep up 100%.
Paul Margarites 05:48
I’m gonna agree with Brooke here. I think it’s five years. The question is, if it’s when it’s going to be dominant, and there’s a transition period, right? And it’s, it’s, I mean, looking at like checks and moving to electronic payments, right? Like, when were we thinking checks were going to be completely out, and they’re not, and it’s gonna take a long time. So I think it has quickened in terms of the pace of innovation. So I do think about five years is when we will be saying the API embedded payments are dominant.
Paul Galloway 06:13
Philip Anklin 06:14
Yeah, but also minimum five years, and from the experience we have made in terms of bank connectivity, that’s a huge buzzword, so everyone wants to jump on that train. But if you realize how nonstandardized that whole environment is, it’s still difficult that really, the adoption rate is so high. So I would say minimum five years if not longer.
Paul Galloway 06:31
Alrighty, we got one left hand speed round, it’s payment efficiencies, which matters more speed or information.
Paul Margarites 06:39
I think it matters if you’re talking about from a consumer or from a business perspective. So I’m going to take it a little bit from a business perspective, and I’m gonna go with information matters.
Paul Galloway 06:47
Brooke DiNatale 06:48
I’m gonna go with speed.
Paul Galloway 06:49
Brian Anderson 06:50
Philip Anklin 06:52
Paul Galloway 06:53
All right, we’ve got a couple more to answer in this area. Information or cost? Brian?
Brian Anderson 06:59
Paul Galloway 07:00
Brooke DiNatale 07:01
Paul Margarites 07:02
Paul Galloway 07:03
Oh, that was unanimous. Cost or visibility? Brian?
Philip Anklin 07:03
Brian Anderson 07:09
Brooke DiNatale 07:11
Paul Margarites 07:12
Which is also information. Visibility, you’re right.
Philip Anklin 07:17
I agree, visibility.
Paul Galloway 07:19
Last one. Flexibility or cost?
Brian Anderson 07:22
I’m gonna go with cost, because eventually that’s going to come into the equation.
Brooke DiNatale 07:27
I’m still gonna go with flexibility, because it began leverage to drive down the costs.
Brian Anderson 07:31
Flexibility as well.
Philip Anklin 07:32
Also flexibility, because if you’re not flexible, and it might cost too much higher at the end.
Paul Galloway 07:37
Well, that’s the end of the first speed round. We will have more. We’re gonna now go into a little bit more in depth discussion. The area we’re going to focus on now is foreign currency and globalization. The ongoing activity as accompanies with FX global payments and regulatory requirements is increasing and complexity. So when we think about foreign currency exposures, what are the key considerations that treasurer should take into account when deciding how to manage foreign currency and cross border transactions? And this one, we’re going to start with Brooke.
Brooke DiNatale 08:12
And I will impart to you the wisdom from MasterCard’s own Treasury team who I talked to for this answer. So if it’s very long, I will try to summarize, there’s a lot to say. They said there are three things that when you want to manage the effects that you need to take into account, so the types of products offered, the portfolio of the currency that you maintain, and the FX risk that they carry. So if you’re looking at your daily treasury, p&l screening, you got to make sure you’re adjusting that in a timely manner and avoiding overpricing or under estimating the risk. Should probably some of this is very intuitive. But you know, I think it’s still things that are important to be said to be refreshed on an ongoing basis, the FX remeasurement risk, so you want to target limited exposure, it’s almost impossible to target no exposure whatsoever. So you want to find the way to moderate and make that exposure as limited as possible. As payments move towards instant delivery, it’s imperative for treasures to have a robust forecasting process. I think we’re looking at you know, everything we talked about around speed and transparency and visibility is going to really lend itself to having that really intense robust forecasting process, and be able to move that into more of a real time situation rather than a time bound, forecasting. And then the potential to net off exposures as much as possible. So the larger the volume of inflows and outflows that you have in a particular currency that provides you a larger competitive advantage, not just in FX risk management, but it also will help you with liquidity and cash management clearly need up to date Treasury system. So I think this is always the challenge, right is how do you as treasurer is convinced the company that it’s worth the time and the effort and the money to update all the Treasury systems and move into the API, the API, the cloud native platforms, but really, it’s important in the long run, and you know, there’s a upfront cost to it clearly, but in the long run, it leads to lower costs faster just decision making and more actionable forecasting.
Paul Galloway 10:03
Paul Margarites 10:05
How much more can you add to that? It’s like the textbook answer, right?
Paul Galloway 10:09
That was pretty robust.
Paul Margarites 10:10
I think you opened Treasury 101. And then like, that’s the full example. I mean, the only thing I’ll add to that, and it’s really not adding much, because you basically said everything is you do that through data, right, and had data availability, and to investment which is hard for a treasury team. I mean, every think about your organization’s you’re all fighting for technology resources, right? Everyone, every type of organization banks, everybody, technology resources are, are just the resources, you need to do things. And Treasury has to make the case to say, here’s the business case, for me investing in some sort of API connection, and having a couple of developers code to their API’s. So they have to make that case before they can even have table stakes information to get to exactly what Brooke was saying, and being able to manage your business with the appropriate data.
Philip Anklin 10:55
The ethics area is mainly also what we also need to consider is the data analytics. So what you can do with historic information to make profound key decisions to really hatch correctly, etc. I think that’s, that’s crucial. And this is also something that TMS or the Treasury teams need to think about, how do they get the right information so that they can take the right decisions? So this is goes my answer is more a bit into the data analytics, and how to make sure that the data is there to really take the right decision.
Paul Galloway 11:24
Brian Anderson 11:25
I think they’ve said it all very well. I think it’s looking at, you know, how do you have that visibility? How are you able to minimize is trying to cache how you’re able to speed up your cash application. When you’re thinking about the countries that you’re going in? Right? How are you billing? How are you invoicing as a local currency USD? Do you have the analytics below side? Which way you want to want to do that? Do you have that right structure to be able to pull things up? Can you pull things up based on the country regulations? So I think ditto to everything they said here, so no shortage of things to think about and work through, particularly whether you’re already international or looking to expand international?
Paul Galloway 11:58
Well, that leads us right into the regulatory requirements, expanding regulatory requirements. KYC, OFAC, Fbar, PCI DSS, introduction of BOI, which is coming up here real soon, increased demands on resources and costs to organizations, what best practices do you recommend companies deployed to efficiently manage compliance of regulatory requirements. And Brooke?
Brooke DiNatale 12:26
I think we need to approach regulatory compliance the same way you approach any other project within a company. So making sure you’re out ahead of it, you know, what’s coming down the pipe. And not only is the Treasury team prepared for it, but the company as a whole is prepared for it, that they’re aware of what’s happening, they’re aware of the effects that might have, and they’re aware of what is needed to put the compliance in place, spend time assessing the effect of it, partnering with your IT team early, that I cannot stress enough, I think some of our IT teams have limitations on, you know, resources, what they can do, how far they can do it. And then you know, it’s always fighting for space in a release. And so ensuring that they are aware ahead of time as much as possible, and can plan for it with you as a partner. And then having a great project manager, I can’t stress this enough. At MasterCard, we spend a lot of time working with our bank partners, as well as and corporates and having project managers for any kind of significant activity. They’re worth their weight in gold, right. So they keep everybody on track on time on schedule, and link all the parties together. So bringing those things together and treating it as any other major project, though, with a little bit more urgency, I think, is the way you want to manage it.
Paul Galloway 13:35
Paul Margarites 13:36
Yeah, I mean, I’ll add, you know, start early, start as early as possible, don’t delay, you know, it’s it’s easy to look at some increased regulatory requirements that have been delayed and say, I expect everything to be delayed. So I’m going to hedge, you know, take that bet. But don’t do that. And lean on the experts. You know, bring the experts into the room, have conversations with them, look across who are the other experts, you know, from a banking perspective, you know, we act as your advisor. So use your banks use the wealth of information they have on regulatory changes to advise you and understand what you have to do and what you need to change in your organization to make sure you’re compliant with the continuing heightened expectations across the world.
Paul Galloway 14:18
Philip Anklin 14:20
If you look at it from a corporate perspective, I think you need to think of whether you want to do all these regulatory requirements if you want to feel fulfilled them by your own, or if you want to work together with the third party. I’m talking mainly about the sanction screening, for example, if you do payments, I mean, we see what happens in the world, the OFAC list and all the other lists that are available on the markets in the world. They’re updating very frequently, and you need to make sure that you are up to date as well as a corporate. So I think overall, it’s a kind of a consideration whether you want to do this by rolling as a corporate or work with a I don’t know Treasury aggregator or something like that, which can help you to overcome that complexity just to make sure that you’re really up to date with all the regulatory requirements. And Brian.
Paul Margarites 15:04
And just that in around with, you know, the starting early and understanding all the different environments. So one of the things I want to mention around is your supply chain, you know, or where you have, you know, different operations where you’re sourcing and companies can hedge against many things they can hedge against FX interest rate, you know, commodity, many different risks, they can hedge against the one thing they can’t hedge against his political risks. So as your companies are looking at, hey, we’re in our supply chain, where do we want to source this Romanism maybe looking at a different jurisdiction, different country, you got to have that seat at the table early to be that influencer. So you understand all the different aspects that we talked about, when it comes to managing your cash managing your capital from that perspective.
Paul Galloway 15:41
These are valuable comments, especially around regulatory requirements. You know, it’s something that you can avoid, you can ignore. So getting on top of it right away is really important. The next area I want to talk about is security systems, AI networks, etc. Fraud around payments grows and sophistication and treasures are at the front lines as a superintendent of payments security. When you think about the criminal playbook, the criminals playbook continues to expand with system level fraud, social engineering, cyber theft, and ransomware. in their toolbox, what can treasurers do to effectively combat fraud over time? And I’m gonna start with Brian on this one.
Brian Anderson 16:28
Okay, great. And we’ve talked a little bit of in the speed around with with fraud as a technology is the human element. And we all recognize there’s a whole big piece of the human element and there, you’re really only as strong as your weakest employee, you have to be right on a percent of the time the criminal and needs to be right once from from that standpoint. And so as you look at what are you doing within your, you know, systems within your staff, if you if you’re a small company, so you only have maybe one or two people or your larger company where you have multiple hands in the pot, it is critically important to have an ongoing training, education awareness plan, if you’re not testing your employees, find out and figure out how do you test them on that sample and do it reoccurring. And one of the things I want to mention, and we saw this happen a lot earlier this year with the market disruption back in March. And when we’re sitting down, we’re taking a test or someone’s asking this question like, oh, I would never do that, oh, I know the right answer. But when you think about where the fraudster and where they’re looking at, they’re looking for you not be thinking clear, you know, thinking that they know us, as humans want to naturally do the right thing. And so there’s an urgency and there’s a pressure, and we were getting calls from clients saying, hey, our vendors are calling us and saying, don’t send my money here, send it here. And like, How can I quickly change? How can I and we had to talk to him say no step back. Do you know that? Was your supplier? calling you? Did you call back to your trusted contact? Do you know who your trusted contacts are? And it was just eye open? They’re like, Oh my gosh, I didn’t even think that could have been me or fraudster trying to step in and redirect me my payments. So you know, as you think about not only the training and education of your of your staff and of your employees, thinking about, you know, that master vendor list, do you have strong robust procedures around creating that and keeping that it’s a very paper disparate process, you could have procurement involved, you could have AP involved, you get legal involved, you get tax involved, you have all these different hands, it’s all paper process. And when there’s a change to be made, do you have a true authentic source of record and knowing who your vendors are? And whether that’s a super strategic vendor, or tailpiece? Vendor? Do you have consistencies around policies and practices to be able to onboard and vet that vendor, because you think about where fraud is going to happen most if you’ve been paying Anderson manufacturing for the last 10 years, one, thank you, but to you, and nothing’s gone wrong in the payment, you know, things are fine. So fraud is going to come in when you’re setting up a new vendor, so you don’t have a relationship with that person or any of that company. And when there’s a change to those payment instructions from that standpoint. And so as you think about your policies, your procedures, your controls, and how are you going to manage that and overcome that to help reduce or minimize the risk for fraud from it. So certainly education, your staff, looking at your policies and procedures, are you able to hear to them, and then you need to certainly test test test.
Paul Galloway 19:12
Brooke DiNatale 19:14
I think that’s exactly right. You really need a layered strategy that starts with training, starts with employee awareness, that has checks and balances on the system, but then start to move into the technology layer, right? So how can I use the more sophisticated solutions that are coming out to better understand my supply chain? What are the changes? Where’s the system of record that keeps track of all those vendors and then using AI that’s I think, where AI starts to really come into its own is to go through and understand what’s going on in the system and be able to flag anything that looks out of the ordinary.
Paul Galloway 19:44
Paul Margarites 19:45
It’s good to look at it holistically. Right. I mean, Brian, you made a lot of points, that it’s the human element and training and getting folks to behave in certain ways to make sure you’re capturing fraud or you have the right policies and procedures in place. But you got to look at it a holistic gleaned think, you know, there’s only certain time or hours during the day. So it’d be great to call every single vendor every time. But the The truth is you might not have that time. So you have to look across and see where can I automate in other spots? And that’s the purpose of automation, you know? And that’s the purpose of things like embedded payments, for instance, where can I find time saves, so that I could actually spend the time where I should be spending time and a lot of cases that’s picking up the phone to someone, you know, calling them and confirming that their payment instructions are, in fact, correct. These are truly the high value things that Treasury professionals should be working on to protect their own companies and protect their own money.
Philip Anklin 20:39
Fraud is actually everywhere, I would say, I mean, there’s this human element, which I was talking about, there’s this, this infrastructure part is technical part, I think, also something that needs to be considered is the user management. So who has access to which bank accounts? If you’re a global company, then you have multiple accounts, you work with multiple banks, you might not even have to control? Who is accessing what what can this person do in this specific bank account. You might even have still banks where there’s like, single signatory, so only one person can release a payment or initiate a payment, for example, that’s a huge risk, I would say. So as a treasurer, you also need to consider that you have like some kind of a control structure in place some kind of a governance to make sure that you know exactly which person has access to which bank accounts. And also what are like the measures in so if someone is leaving the company, for example, how quickly can we deactivate this access to that account, just to make sure that really nothing happens. So that’s a lot of awareness, and phishing awareness as well. Of course, this is another part of it. I just recently got an email from my CEO asking me to initiate the payment for a million, right? I mean, we all know this case, and no one really having to trap of course, it’s obvious, but there’s still plenty of people which are not really 100% sure if this is really a fraud case, or if it’s really if it’s real. So awareness, awareness, training. That’s that’s crucial.
Paul Galloway 21:58
As the old saying goes, trust, but verify. And that verification process, you have to do that. No doubt. All right, I want to move on to security training, what security training do you recommend companies provide to employees? And should it be mandatory? And, Brian, we’ll start with you.
Paul Margarites 22:17
Sure, I mentioned this a little bit. And you know, how do you have that right ongoing training? Is it a required training, and from my view, it should be required training from from that standpoint. Also, when you think about, alright, you do simulation testing, you talk to your financial partners, they most likely will be able to offer some way for you to come in and be able to do a simulation testing as far as our fraud happened, what do we do? Our ERP system has been hacked and frozen. What do we do? How do we act? Do you have anything about business continuity planning, and we think about, okay, I can’t get into the office, here’s my plan to go through, but also from a cyber perspective. So if you’ve had an issue where someone clicked on a link, and then you leave your office, and then subject to that cyber, do you have those trainings to go through, have you gone through those simulations? Is it a part of your business continuity plan? Personally, on our side, at our firm training is required, you go through it all time, but then they constantly test us. And if you fail, it becomes a compensation impact. And if you repeatedly fail, it can become an employment impact from that standpoint. And so it is not out of the realm to think, and that’s in help send the message of, hey, this is how serious we are. Yeah, and you know, to go through, and we got, you know, Cyber Monday coming up here and, you know, five weeks and you know, all the links and every wants to kick to get this right sale, but there’s a lot of opportunity to you know, open yourself up and expose yourself to cyber through it. So that your training, tying it to time tying it to performance and making a requirement is extremely important.
Paul Galloway 23:45
Brooke DiNatale 23:46
Yeah, training needs to be mandatory for everybody and ongoing. So, same as JP Morgan, we have constant training, we have phishing simulations all the time. And if you do fail too many of them first you have to have a discussion with some very senior people at MasterCard, and you don’t want that. And then after a certain, after you fail a certain number within a period of time, it is an employment issue. Being able to be aware of that, companies do a lot as well to be able to help employees recognize a legitimate email. So for example, every email that we get that’s external has a bright yellow banner on the very top of it, it is ugly, but you notice it. And so, you know, being able to just at a glance, say okay, well, the message of this seems like it’s internal. They’re asking me to do something internal. But that banner tells me it’s external. So without even the training, like you get to be in the zone of like, understanding what you should be looking at what you shouldn’t but I think that is absolutely key for everybody at the company.
Paul Galloway 24:42
Paul Margarites 24:42
I mean, this is an easy yes. Make it mandatory. It’s, it’s helpful. It’ll protect the business, we do the same. We do all the external emails with a really annoying big capital letters for us. And yep, you have a strongly worded conversation if you fail too many. So it’s, it’s a good practice and it works. And Philip?
Philip Anklin 25:00
If you work for a bank, then it’s obvious that you need to take these, these trainings on a daily on a daily basis, but almost it feels like at least on a daily basis, but it’s a little database. But if you’re like a smaller company or a midsize company, then you might need to consider of course, it’s a yes, it’s it must be mandatory. Absolutely. But sometimes smaller and midsize companies don’t have the knowledge how to do that, right. So they also hear that you need to think about third party providers, there are many third party providers out there where you can customize the training for your employees, you can simulate phishing attacks, etc. So definitely worth to look into that if you don’t have such something like this. already available. So a clear yes, definitely.
Paul Galloway 25:41
Certainly those headers on the outside emails, they are annoying, but they are valuable, and they do work. And people start paying attention to it. After they’ve seen it enough. That’s like, Okay, I’ve seen this. This is not legit. It’s from outside company. It’s not my CFO, it’s not my treasurer is somebody else, it’s important to take those kinds of steps, even if it’s annoying. Alrighty, I’d like to move on to embedded payments, Treasury payments, continue to evolve, open Treasury open payments, how will embedded Treasury payments unfold over time, and over what timeframes and this time, we’re going to start with Paul.
Paul Margarites 26:23
Great. So, um, fair warning, I’m a little bit of an embedded payments geek. So I love this topic. So I think what’s going to unfold is, you know, we’ve started to see it kind of work its way into a lot of companies and a lot of processes, which is great. But I think the next step now is maturity, we’re seeing some great solutions out there that have kind of run ahead of the industry, we’ve seen some good adoption, but now it’s time to kind of take a step back with the solutions, button them up from a security perspective, when they need to be buttoned up from a security perspective, button them up from a process and efficiency perspective, and then start to kind of build out that scale and integration, you know, across all the various systems. For us, it’s, it’s, I’d say, from a banking perspective, and I’ve got this experience at other banks is, it’s been a really incredible learning experience for us over the last five to 10 years or so let’s say, to work our way back into your processes and procedures and where you start your day. I think for a lot of bankers, it was kind of a wake up call years ago to say, Wait, when you come in in the morning, you don’t necessarily log into the banking portal as your first step. You do other things. So now it’s taking that learnings and taking all the solutions, we’ve been rolling out into the market, maturing them building out adoption, and as we see that further scale and embedded payments, then it’s about kind of what can you innovate further? And what can you kind of do to make them just that much better? And that much more contextual, to help you run your businesses?
Philip Anklin 27:49
No, it’s all about adoption. Actually. I mean, there’s this is this buzzword embedded payments or API especially, which is of course, in some kind of combination with embedded payments is here for a while, I think in Europe, and probably you hear them from Europe, from Switzerland. So apologies for my accent, we have a regulation PSD to which is like forcing the banks to open up their data. So they open banking, as we call it. And so banks are they need to offer API services to everyone to fintechs. And to the to the end clients as well. So the adoption rate is a bit higher there. But we are still missing is the standardization. So as before, we also see when we try to do bank connectivity via API, it’s not so easy. It’s still I mean, they offer it, it’s here, but normally for limited services for certain number of services, and most probably also for a limitation of the value for payments. So if we talk in terms of timeline, then adoption rates, I think two to five years, it’s kind of the banks, of course. And the fast forward, the fast the forward thinking companies that are there’s a higher adoption rate, and then five to 10 years are probably we see a wider adoption. And then as the question, the speed round number one, I was highlighting it’s probably five to 10 years where we then see a wider adoption and the real, the real use cases where everyone thinks this is now the new normal. And this is what we should, we should use.
Paul Margarites 29:11
And Brian, and I think we’re seeing that growth, and particularly the early adopters, and where API’s come in. And embedded banking is where you have those non bank payment intermediaries or third party payment processors, and it’s all part of their their services companies are looking at, right? How do we make this become a recurring revenue model as well. So you’ll look at different things around subscription models, and it’s not the subscription model of when I was a kid and get my dirt rider magazine where I’d pay you know, 1095 a year and get my 12 descriptions it’s Hey, how can we have that recurring revenue recurring subscription, keep that engagement with my end, buyer and consumer from from that standpoint and to grow through agree with the points you made here as well as just as you look at that adoption? How do you bring it in? How do you open it up? Have the right of regulatory have the right visibility to be able to drive that through and essentially You know, payments disappear. And you’re able to do it without having to think much. If you can have that payment embedded into your processes and go through, you are much more likely for that sale to be, you know, that transaction be completed, as opposed to, you know, the shopping cart rate abandonment. All right, I got everything in my car, Oh, I gotta go get my wallet, I gotta get my credit card, I gotta do this, I got it. And it’s like, oh, this is too much, I really don’t need those things. And we’ve seen it in our everyday lives. Now you can one click buy, boom, and it’s at your door, the next day or sooner.
Brooke DiNatale 30:27
That’s exactly the point I was gonna get to, there’s so much we can learn from what we’ve seen on the consumer space. So in the consumer space, you’re able to pay how you want to pay embedded directly into the sales channel. And so it’s, it’s not just do I want to pay, you know, with this card? Now you have more sophisticated ways to pay, especially with open banking to say, Do I use my bank account? Would I like to use a debit card? Do I want to use a credit card? So if you start to look at that, and how that would affect the commercial space? And saying, Okay, well, this procurement system is now a procure to pay solution. And this procure to pay solution gives me an opportunity to pay with a bank transfer, it gives me an opportunity as a card embeds virtual card in there, maybe a working capital solution. So how do I embed supply chain financing, or some other kind of working capital into that exact procurement process? And same on the receivable side, that I don’t think I’m gonna get paid in time. So I’m going to sell this receivable right in the process. I think that’s really where we want to go. And I think that that’s, you know, very much what we can learn from the consumer model, and just determine how do we apply that into the commercial model?
Paul Galloway 31:26
Thank you. Next area within embedded payments, I want to talk about API’s. What is happening with API adoption? Do you consider this to be vaporware progress? Is it a step in the right direction? Or will as soon take over the space fully? And we’ll go back to Paul.
Paul Margarites 31:46
Is it vaporware? No, that’s been clear. I mean, API’s is just it’s just computers talking to computers. This has been going on for decades. It’s the fact that we’ve externalized our API’s and allowed our API’s to talk to your systems to talk to this, you know, other kinds of areas across the kind of value chain of capabilities in treasury management, the earlier point you made actually was around standardization. That’s that’s the challenge, right? Every bank has launched its API’s, we put it into the market fintechs have launched their API’s, standardization does not necessarily exist within financial institutions around API’s, which is going to challenge adoption via three banks, they have three wildly different specs to get me my balance information, but it’s achievable. It’s over, you can overcome that. And I think the way a lot of us are progressing is kind of the system to system integration to doing it for you. So banks that are working to integrate to your ERP API, so that you don’t have to, or working to integrate into TMS solutions so that you don’t have to. That’s where we’re going to see that wide adoption. And that’s where we’re going to see the scale. Because when we remove the painful technology implementation piece from the treasury management professionals lives, that’s when adoption of API’s and embedded banking solutions are going to be just that much quicker.
Paul Galloway 33:03
Philip Anklin 33:05
Computer talking to each other by API, that’s a no brainer that exists since DK. So that’s nothing nothing new. It’s just like the concept how it works and how you apply it to your specific business case, as a corporate is needs, needs to become more mature. So the business case at the moment is rather simple. I mean, it’s collecting account statement, for example, especially in the cash management areas, sending sending payments, but there’s much more actually you could provide via API’s. And as long as I think a corporate treasurer doesn’t see a huge benefit of having these API’s all over the place, and also in terms of standardization, if there is not standardized at the moment, then it gets difficult. But once we are there, and it’s definitely something which will be there in a few years definitely makes our lives easier. But I think it’s just a question, what are the use cases behind API? If it’s just the connectivity, similar to what we have as a host to host exchanging files? Of course, more real time, then, okay, that’s one use case. But what can be delivered on top from banks? And that needs to be that needs to, to become more mature over time?
Paul Galloway 34:09
And no doubt, right.
Brian Anderson 34:12
And so think about API’s and and Paul mentioned, as they’ve been around for decades, now, while as banks, we’ve been learning how to spell API the last few years, it has been around and it’s been pretty common as you look at those micro services, and how do they have that and just another way of connecting things, some of the challenges and as we look at the growth, and where we need to really overcome as we look at the next five to 10 years is how many of us are still on with on premise systems are using an AAS 400 For our AR System. And that’s going to make it difficult to connect or you’re built around batch processes and everything’s built around batch and it’s so that’s going to be some of the barriers of like, alright, well, I can do house the house. I know this works. I’m in a manual process. But as you move into cloud, you move off that on premise as you get more into how can I leverage this full end to end transaction tracing Hang in monitoring in real time, you know, cash application, a reconciliation, API’s will continue to grow and help serve in that space.
Paul Galloway 35:08
Thank you, Brooke.
Brooke DiNatale 35:10
I totally agree with everything everybody said. And also, you know, it’s going to take time, right? It’s not an overnight process, there are a lot of legacy systems. So, you know, it will, you know, he may be able to move 50 or 75% over quickly, and then he’s gonna take some while to sweep up the rest. But if we want to move into a situation where we have, you know, this real time access to data to make faster decision making, then this is the direction that we need to move in.
Paul Margarites 35:33
And can I just just to give you a little context, in terms of our thought process around API’s, I mean, I think most of the banks would agree, if you could wave a wand and make everything available via API’s, we all would, it’d be a no brainer for us. But there’s a few things that go into the equation just to think about, there’s first the granularity in terms of the API’s you have within your internal systems and the documentation to make sure that if someone wants to connect to it, they actually know what they’re trying to do. And then their security, you need an external gateway, a secure external gateway authentication process. And you need a robust implementation procedure to make sure if you’re going to connect to that API, that you are, who you are, and that it is a secure connection. And then you layer in one more piece that every bank is doing the whole prioritization and discussion around these API’s around. What do my clients want the most? I think we can all agree that information balance and reporting is number one, that’s easy. Everyone gets that that’s should be our first API. But then what Brian might think it’s entitlements, I might think it’s payment, someone else might think it’s something else, depending on their clients. And because we don’t have a true standardization, everyone is taking different approaches to what API’s they’re externalizing and delivering to clients. Sorry, I just wanted to add that little.
Paul Galloway 36:48
No, thanks, Paul.
Paul Margarites 36:49
I told you, I was passionate about this topic.
Paul Galloway 36:50
You definitely are. And it shows. Thank you very much for the comments, we are going to move into the second speed round. Again, you have to pick one, you’ve got 30 seconds to state as to why you selected the selection you made. And we are going to talk about FedNow FedNow. launched in July, it’s up and running. And so the first area here is, will they launch a request for payment function, and when and we will start with Brian.
Brian Anderson 37:24
So they will launch a request for payment. And my rationale reasoning for that is the Clearinghouse with the real time payment platform is has done the same as well, when that will happen. I worked for a bank, we can give a quarter I’ll never give you a year as you look at our roadmap. It’s on the roadmap for from that same point, but I would say in the near future.
Paul Galloway 37:46
Brooke DiNatale 37:48
MasterCard’s not commenting on FedNow.
Paul Galloway 37:51
Thank you. Paul?
Paul Margarites 37:52
I think they have to. Yes. And I honestly, I couldn’t tell you when.
Paul Galloway 37:58
Philip Anklin 37:59
I think so too. I think there’s a growing demand for for such real time payments as well. And that just need to meet the user’s expectation.
Paul Galloway 38:06
Alrighty. Next area is by 2025, volume leader: number and value.
Brian Anderson 38:13
I think they’ll still be in second place to RTP by 2025. How much or what’s the what’s the guess is as good as mine from from that standpoint, my rationale and thinking behind that is the clearing houses had real time payments out since 2017. So they got a five, six year headstart on them. And there still is while it’s intended for the smaller local banks, regional banks fail to connect through the Fed and have that kind of activity. There are still system updates that have to happen. Many banks are built around a batch processes. And I think about when we build real time payments, you know, six years ago, there was like 70 downstream systems that we had to update to be able to work on a 24 by seven by 365. Year from from that same point. I know there’s intermediaries and other players, but it’s a long winded answer to say I think those are in second place by 2025.
Paul Galloway 39:02
Paul Margarites 39:04
Second place 2025. Easy.
Paul Galloway 39:06
Philip Anklin 39:08
Agreed second place.
Paul Galloway 39:10
All right, we’re all talking about second place. Okay. FedNow, or same day ACH?
Brian Anderson 39:17
I think same day ACH for majority of our clients and for maybe many of you in corporates or if you’re in government municipality, same day, ACH provides of the speed that you need to be able to get it out and get it through. I think you have three different windows now to be able to hit and happen. And so as you’re thinking about a majority of our use cases, I still think same day. Ach is an effective faster payment rail for many of our clients. The other aspect when you come over to FedNow, or real time payments and thinking about all right, you know, if you’re in a heavy consumer industry, you know, maybe you’re doing some digital payouts, things of that nature. It’s certainly important. But I think same day, ACH is still an effective option out there for clients who need to get money out today, just not right now.
Paul Margarites 40:01
Paul for now, same day ACH you have a process it works you use same day ACH there until there’s a real reason to move off of it. I same day ACH does the trick.
Paul Galloway 40:13
Philip Anklin 40:14
Also agree here. I think it needs a bit more time until FedNow takes over leads.
Paul Galloway 40:19
Alright, we’re gonna move on to efficiency, automation, E2E2E2E, API’s, payment efficiency matters and the demands on Treasury teams have increased. First area will be around Treasury automation is automation payments, access to bank accounts and consolidated reporting through a TMS enough what other steps towards automation should a treasurer tick and we’re gonna start with Philip on this one.
Philip Anklin 40:51
Yeah, it’s definitely the right step into the right direction. The only thing is I mean at the end, TMS is a system and it needs data. So it cannot be isolated. So, what you need to consider when implementing or evaluating a TMS is how does the TMS connect with each other systems you have for example, in ERP or other back end system for example. And how does the TMS talking to the banks for example, I mean bank on activities mainly not something which is a core competence of a TMS, apologies for everyone providing TMS in this room. So it’s of course a nice as a must have or otherwise you need you don’t get the information your TMS said you must have information your TMS, whether this is coming from banks account statements, whether you send the payments to the banks, whether this is coming from an ERP or any other backend system. And I think TMS also, what is also important to consider is how do you set up connectivity between the TMS and the bank, there are plenty of options available in the market. Whether this is a wholesale house, whether this is an API in the future. When we go into the Europe, for example, we have epics in place. So if your company working globally, then this is an additional way of connecting to a bank, or whether it’s a swift, for example. So all these kinds of different combinations is a certain complexity. So also here, I need to think of is my TMS doing everything I want, does it offer the full functionality? Or do I need to work with other third party providers on top of my TMS to make sure that I have a an efficient Treasury automation in place?
Brian Anderson 42:22
And I think it’s important that we actually have a TMS or have an ERP, how are they all connected through, you don’t want to be building in a silo and saying, Oh, we do everything over here. And then it needs to be pulled out. And then you’re over in another system going through? So how do you have that information connected between the two? As you think about what are you doing with that information? Okay, I’m getting all this information in but how is that helping driving your decisions? How is it helping you influence across your it your procurement, your sales, and finance organization with that information as you think about forecasting, and when are we going to need cash? how long we’re gonna need to borrow? How long can we invest? And to be able to have that kind of activity? And as you’re taking in that it’s one thing to be great? All right, awesome. We’re getting API’s, we’re getting real time treasury, we’re getting things as soon as they happen. But what are you doing with it? And then how are you able to drive efficiencies and as you look at time that has been freed up by your staff, it’s not always a, you know, employee reduction type thing, when you bring in efficiencies, it’s like, oh, we now have time for them to focus on and do this other part of their job that they’re not able to get to. And as you think about the analytics, and how are you going to really leverage and utilize that data within your business and organization?
Paul Galloway 43:29
Brooke DiNatale 43:30
Yeah, I totally agree with Brian and Phillip, I think that, you know, the TMS system is only one element of this, we need to make sure that all the pieces are talking together, that they’re looking at you going to real time data, and that you have the ability to analyze that data to forecast off of it and then deliver actionable insights.
Paul Galloway 43:46
Paul Margarites 43:47
So another thing I’m a geek about is product management and you’re product managers, your product is treasury, right? So like good product managers, the approach is to go end to end to understand your end to end process. And I think that point was made earlier several times, and where you can automate and then prioritization, where you should spend your time on building that automation. It’s a good product management exercise, it’s a good product management approach. You have a roadmap, you have items you want to automate across your processes to build a more effective product, which is your treasury product, you should also look to those third parties like TMS like your bank, like your ERP to say, what are you doing to automate for me, because you use those systems or those institutions, they should be delivering automation on your behalf to help improve your processes. And you can make that into your roadmap, and you’re expected improvements in your processes.
Paul Galloway 44:38
Well, thanks for those comments. Certainly, you know, the automation drives you towards the efficiencies, which is where you want to get to and when we think about another area in this arena, about efficacy, data, information, visibility, reconciliation, we’ve got payment data, being able to add Access to payment data is vital to Treasury teams, does having a TMS automatically solve the Treasury’s ability to access payment data and what else should be considered and we will go back to Phillip.
Philip Anklin 45:16
The TMS alone cannot solve all the challenges in that regards. But of course, it’s a piece of a puzzle that matches up. So as well here, I think the interaction is crucial between all the systems because there’s only the TMS that is generating payments, I guess they also have AP payments from ERP, for example. Or you have other urgent payments that you I don’t know initiated via bank portals directly or via TMS or an ERP. So at the end, it’s just important that you have all these information together in one place. So make sure you think about the data warehouse, for example, make sure that you unify the data, so to speak all the same language, you can place that information into a data warehouse, data mapping is crucial data governance, so make sure that you have the Stata placed in a folder where everyone knows exactly what what is the content of this data and control that so make quality checks that the data is there. Because once you have the spaces and you have all the data that you need from a payment perspective, that you can work with this data you can put up like data analytics, some kind of a forecasting, so that that really is helping the whole organization out of treasury if you if you can predict what is going to happen, or if you can make better predictions or forecasting, etc. So I think here it’s it’s really not only the payment, but it’s the data within the payment and how do you work? And where do you save that data? In which format? That’s a crucial part, I would say.
Paul Galloway 46:38
Yeah, it definitely is. Brian?
Brian Anderson 46:41
And so certainly, it’s a tool in your toolkit. And but how are you going to use it and develop made some great points as you think about you know, the data? And are you setting the right business rules? Do you have the right parameters? And how is, you know, when you’re looking to connect in to maybe your invoicing system, or your your vendor system or your client policy systems, or have you if you need to have standardized standardization around your data, how you’re classifying what’s critical, what’s traveling, are you able to get that information and so that way, you can then go through and apply the right Analytics, you have the right ways to be able to data, mine the data, you’re able to have faster cash, applications, reconciliations, all those different aspects coming through. But it comes down with having a team, the TMS is certainly a tool that allows you to help do it, but you got to have the right data structures around it. And Brooke?
Brooke DiNatale 47:28
Yeah, I think that once you have the data, being able to have it in a platform that allows you to analyze the data to develop insights off of it. So that’s probably maybe not your TMS it might be other solutions out there that you might want to look into that we’ll we’ll do a better job of analyzing that data and pulling out okay, well, in this kind of module, I’m looking at Supply Chain Finance, I’m looking at ESG, I’m really looking from end to end across all my types of data to come up with what you should be doing and you know, real actionable insights that you can then pursue and pull.
Paul Margarites 48:02
The only thing I’ll add to that is that there’s always remember the human element. And we can’t forget that any system or any process that automates everything, it’s great. And it helps, absolutely absolutely helps. But there’s a human element to it too. I might have the best cashflow forecasting, but if the data within my TMS does not know that I’m buying a giant piece of equipment in three months, it doesn’t do anything. So whatever processor system you have, you need to make sure it layers in the ability for the human to manipulate it, and to change it based on reality based on what they know, based on their experience, because you were still the experts. So as great as the data could be as great as the algorithm might be. Gen AI is not quite there. And you are still the experts who are going to drive what what is the right decision and what might actually happen.
Paul Galloway 48:50
Well, thank these are great comments, you know, you have the ability to get access today to provide visibility. Certainly when you’re forecasting the old adage I used to use back in the day when I was a young analysts garbage in, garbage out. So you want to make sure the quality of the data is there. And the ability to access it so gives you that visibility that you need. So when we think about strategy around as a tool, a differentiator, something to leverage, think about your company strategy, you know, the payment strategy, the things that you can do to position yourself as a treasure around this arena. You know, what are the you know, the one thing that stood out for each of you in terms of what we either talked about here as a panel or something that you know, is not being covered, but you want to make sure the audience has a chance to hear and we’re going to start with Brian on this one.
Brian Anderson 49:52
Okay, and it’s going to be the thing that you’ve been hearing about all morning that they embedded payments. And from that same point, I really think you know, the last decade We’ve been focused around building the platforms connecting people to each other. And this next decade is alright, how are we going to be connecting those platforms, and we view payments as really that connectivity tissue between those platforms, and it’s just going to become further and further, you know, an everyday part of our life embedded in there, we’re gonna see tremendous growth, you know, over the next, you know, five to 10 years on that on that front. So, looking forward to seeing it’s a little bit scary as well. How easy it can be to do some things, but I do think, what are the themes we’re probably hearing, you know, throughout the conference, what we’ve been talking about through, you know, here today, just the future and where we’re driving to have those payments essentially disappear and become embedded, are going to be a big thing.
Paul Galloway 50:40
Brooke DiNatale 50:42
Yeah, I think, you know, what we need to do as a payments industry is help the treasures in the CFOs make the case of why, you know, why? Why you need these tools, why you need AI, why you need API’s, why you need these types of connections. So they can see that it’s, it drives ergonomics drives economics, right. It’s a, it’s a value to the entire company. And as we’re moving in that direction, and we’re helping you make that case, I think that will go a long way into, you know, them seeing the need to invest in the space. I think AI as it comes up is going to be a key element of what we’re going to see in terms of sophistication and solutions. But you know, it’s going to take a while to get there.
Paul Galloway 51:21
Paul Margarites 51:22
Sure. So from an API, embedded banking, embedded payments perspective, I think it’s a really exciting time, because it’s not, so it’s not nascent anymore. It’s not what ifs, it’s starting to happen. But there’s still the ability to define where it’s gonna go. And from that perspective, it’s fun, because you don’t necessarily have to be the first anymore. But you can still be an early adopter that drives where solutions are headed, you can still talk to your bank, and inform what are they going to prioritize in terms of their API’s and their connectivity. So it’s a great opportunity to really drive where the space is going. And I think what’s what’s exciting when we see things like AI and merging and everything, it’s, it’s what we could do is learn from the API, embedded banking space embedded payment space, that’s now starting to mature a bit, and start apply those lessons to now the newer technology, which is AI, because we just went through the process of something new happening, starting to mature, it’s starting to get adoption. So it’s a really, it’s kind of a fun time for best of both worlds of maturing solutions. And now very, very new solutions.
Paul Galloway 52:25
Philip Anklin 52:26
I think it’s fully agree, I think it’s an interesting time in Treasury, I think there’s like the starting point of next level treasury, when we talk about also technology and technology is a big part of treasuries world, right, with all the AIS and GPS and all this kind of stuff. And all these API’s, of course, coming up, I think, also something that needs to be considered as the central bank digital currencies. And we will not get there, of course, that this is going to be introduced very quickly. But there’s so many countries already looking at that concept of a cbdc. It will be some kind of a mindset change, because the technology behind the central bank, digital currency, something else, its blockchain and distributed ledger technology. And I think very soon, very soon, in a few years, of course, we will see first countries launching its CBDCs. And then we just need to think about what is the impact of those to a treasurer. And there’s many impacts, I would assume I mean, you can sum count disruptive to the traditional banking, you can reduce intermediaries, apologies, there’s so many bank representatives in the pilots body, there’s so many things to consider here as well. And I think we just need to our treasurer is on the side know that the moment you need to focus a little baits to be to keep up to date on the information on CBDCs.
Paul Galloway 53:41
Well, I want to thank our panel today for spending the time to answer all these questions. They sat in the hot seat, they survived. And I really appreciate them being here, as well as the audience members who came. Hopefully, you enjoyed what we had to say and have a great day.
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