Taking the pulse of treasury: The future of corporate cash management

The Tietoevry Banking 2024 Cash Management Survey Report, now in its third edition, provides insights into the market trends and challenges facing corporate cash management.

One of the results illustrated a trend towards stable banking relationships, with 55% of respondents in 2024 maintaining established relationships compared to 45% in 2022. Yet banking group diversification is also a common theme, with 90% of respondents taking a multi-bank approach.

Nearly a third of respondents have increased the number of banking relationships in the past year

said Sathish Padmanathan, Head of Payments & Cash Management, Tietoevry Banking. He also highlighted a positive correlation between company size and the number of bank relationships: large corporates tend to maintain a more diverse banking portfolio, focusing on managing their foreign exchange risk and ensuring that they have access to credit lines, while small and mid-tier corporates are sticking with existing banking partners.

Royston Da Costa, Assistant Treasurer at Ferguson plc, a US-based specialist distributor of plumbing and heating products, agreed that diversification is common among large corporates, particularly those with broad geographical footprints that require local banking expertise.

It’s no surprise that corporates are looking to diversify their risk, not just following the Covid-19 pandemic, but also because of high-profile bank failures, such as Silicon Valley Bank. 

Having a multi-bank strategy provides optionality and choice, especially with regards to technology. Hopefully, soon enough banks will be looking ahead three to five years and adopting emerging technologies to address treasury pain points.

He added that many banks also prefer diversification due to the changing regulations, especially in Europe, which potentially limits their risk appetite.

However, achieving real-time cash visibility remains a challenge in a multi-bank environment. Unsurprisingly, oversight of cash positions is among the top three challenges corporate treasuries face when working with their banks, despite some improvement since the 2022 survey. Almost two-thirds (63%) of respondents reported having real-time visibility of their cash positions, versus 43% in 2022, but only 38% achieve this visibility via their bank.

The key to improving real-time cash visibility, especially for multi-country operations, is to use effective cash pooling mechanisms, according to Padmanathan.

The most popular solution is zero/target balancing, which pools a group’s total net liquidity by currency. In comparison, other techniques, such as notion pooling and in-house banking structures, saw a slight decline in the 2024 survey.

Sathish also pointed to virtual account management, which helps to reduce complexity and provide an aggregated view of cash positions. Recently, Tietoevry Banking launched a virtual branch solution, which provides corporates and banks access to domestic payment infrastructures without requiring a branch network in that country.

According to Rachael Kennedy, Head of Content at Contentive, one of the surprising survey results was the rise in the number of respondents not using any pooling mechanisms, which increased from 26% in 2022 to 30% in 2024.

This may indicate that there are a growing number of organisations struggling to implement these mechanisms, or perhaps they are exploring different cash management strategies,

she said. Cash visibility is not an issue for Ferguson, which has 100% visibility primarily through a cash pooling structure, reported Da Costa. Instead, he identified cash flow forecasting, payments visibility and Know Your Customer checks as treasury’s biggest challenges.

Future gazing

Da Costa believes that 2025 is going to be a tipping point for banks and fintechs. As such, he hopes banks will up their game and invest more in innovative solutions and fintech partners.

In addition, he predicts that digital currencies and blockchain solutions will be more widely used by corporates in the next two to three years.

“There are many solutions out there, which just need a bit more effort from the various stakeholders involved to make them a reality,”

he said. Da Costa also pointed to artificial intelligence (AI), which is “permeating everything we do whether in treasury or the wider world”. He reported that many banks are looking at deploying AI for predictive analytics, auto reconciliation and fraud detection. “These are low-hanging fruit in my mind,” he said.

Sathish focused on the move from high-value to high-volume payments, following the introduction of instant payments in many countries across the globe.

“Both banks and the corporates need to modernise their systems, so they are ready for real-time accounting. Conversations with bank customers indicate that they’re struggling with legacy cash management systems.”

Like Da Costa, Padmanathan has his eye on AI developments.

“AI should not be just limited to fraud prevention or more real-time reconciliation. We have a vision around make the treasurer’s life even more productive and a bit cooler by developing a virtual assistant like Alexa to answer cash position queries.”

Kennedy also highlighted a technology trend around digital transformation.

“If corporates can use digital transformation to simplify tasks and reduce their manual work, they’ll be able to elevate themselves as to a more strategic partner within the finance function,”

she said. Da Costa agreed.

“For treasurers, this will be a year when we are appraised as to how we’re adding value. The technologies that exist today will enable us to quantify those KPIs and demonstrate to our boards the value that treasury is adding.”

Download the full Corporate Cash Management Report 2024