Treasury Automation: How Fintechs offer competitive FX rates

Ensuring cross-border payments to 126+ countries run as fast and smoothly as local money transfers is a complex job. Like the race engineer in an F1 team, Treasury plays a crucial role behind the scenes, constantly analysing data and recalibrating the mechanics to achieve optimum performance in the safest, most compliant way.

Treasury’s core functions are managing foreign exchange risk and liquidity and generating revenues through efficient capital management. And in today’s rapidly evolving geopolitical and regulatory landscape, it must be more agile than ever, constantly evolving and optimising core functions to remain competitive.

This article looks at how treasury automation powers a winning outcome, replacing labour-intensive and inefficient manual processes, and providing data-driven insights while supporting instant transactions and greater transparency.

Let’s look at a typical scenario featuring Jane, manager of the finance department for a major e-wallet provider. The e-wallet users are located in multiple countries worldwide, and often need to “cash out” – move money from their wallet balance to a local bank account, or another local wallet. This activity requires Jane’s team to deal with various currencies and have a local presence where customers reside, adding complexity.

And, just to up the stakes, Jane’s customers now expect this cash-out process to happen in real-time, so there’s no time to “wait and see” the transactions occurring before doing the FX conversions required to move funds. To remain competitive as an e-wallet provider, Jane must deliver this enhanced customer experience.

Jane’s story is not uncommon. The cross-border payments space has become increasingly sophisticated, and customers (mainly in remittance) insist on instant fund movement from their service providers. While APIs have enhanced the messaging component of real-time payments, the emphasis now shifts to the actual movements of funds to drive scalability in a payments organisation. Treasury teams have the core and “mission-critical” responsibility to ensure sufficient funds are available in the receiving currency when money movement is requested. While simple in nature, this is a tricky and delicate process.

Treasury teams require local market expertise, minute-by-minute tracking, and seamlessly coordinated operations. These three needs can’t be solved through manual processes and great people alone. The digital tools to support Treasury teams in facilitating global money movement are increasingly becoming the next evolution of payments innovation.

So, how do we build innovative capabilities to support Treasury teams? First, we start with recognising the interconnected practices of the modern-day Treasurer.

Treasury is a cyclical process, occurring minute-by-minute when dealing in multiple currencies and “real-time” environments. Once a process node becomes undone, the rest are significantly impacted.

Treasury Management Systems (TMS) must capture the interconnectedness and intricacies of these processes to drive valuable insights for the team.

Treasury processes in brief:

Forecasting: Cash flow predictions are core daily practices – This is a difficult endeavour, especially in the unpredictable realm of payments. Statistical modelling and more intricate predictive capabilities (Machine Learning) are becoming valuable tools to determine funds that must be available given future traffic.

Reconciliation: As money flows rapidly in the cross-border payments space, reconciling accounts to the traffic becomes a second-by-second tracking rather than a monthly exercise. API integrations with transaction partners only go so far to solve this problem, especially given transaction mismatches or partner institutions that may not support APIs at all. In these cases, structured data and metadata become increasingly pivotal explorations.

FX: In a highly competitive payments environment, margin is an ever-important and ever-complex factor in winning traffic flow. Achieving favourable rates, especially in local markets, and passing these rates to customers accomplishes improves margins and increases cash flows.

Cash Management and Funding: The process of managing accounts and funding is delicate, requiring a great deal of attention and precision. Tools to automate transaction flows, monitor account balances, and view real-time analytics are imperative to success.  Technical efficiencies are crucial – a seamless and proactive UX can drive rapid decision-making and discovery of gaps throughout the Treasurer’s day. Treasury teams sit in the control room. The tools they use and the alerts they receive will either enhance or detract from the imperative and intricate processes within cash management.

So, back to Jane, it’s clear that her finance team at the e-wallet provider would benefit from a partner to manage the significant complexities occurring within the Treasury space.

At Thunes, we’re constantly innovating around the modern-day Treasurer, operating in a real-time and cross-border payments environment. We’re creating solutions that go beyond the standard automation of manual processes. Instead, we are developing mechanisms to use data and digital efficiencies to drive innovation for the Treasurer in all areas of operation.

Reach out to us to learn more!