A Fintech Embedded in Treasury: On the Path to the Future State

By October 28, 2021December 29th, 2021No Comments

How a mega-cap tech company’s treasury is using its dedicated fintech team to push transformation.

Treasury teams at large, multinational companies committed to creating a cohesive, global road map for digital transformation, automation and straight-through processing should consider lobbying the C-suite for a dedicated technology team that sits within treasury.

  • That takeaway emerged at the fall meeting of NeuGroup for Mega-Cap Treasurers during a session titled “Fintech as a Powerful Force for Treasury” featuring the experience of one NeuGroup member company.
  • “I wanted to share the journey of what it’s like to have a fintech built into your organization,” the treasurer who won approval from the company’s senior leadership to create a treasury tech team about two years ago said.
  • The assistant treasurer (AT) who leads the 30-member fintech team joined the session and said that while it’s still a start-up, “We’re already seeing ROI from an FTE efficiency perspective that justifies the investment.”
  • But the benefits of a dedicated fintech team and the automation of manual processes go beyond saving time and cutting costs. “It’s not just capacity that you’re creating; it’s controllership that you’re raising the bar on. It’s the employee and job satisfaction,” he said.
  • On the question of building technology or buying solutions from third parties—”build vs. buy”—the AT said, “I actually look at it as build and buy. I don’t see them as always mutually exclusive.”

Motivation for dedicated fintech. The treasurer told peers that although the tech company already had a corporate fintech group, treasury found it difficult to get its proposed initiatives completed. The AT added that “having accountability and ownership embedded in the business was a big priority” of establishing a fintech within treasury.

  • The AT’s presentation detailed many data-driven reasons treasury wanted to build its own fintech, starting with the legacy treasury management system (TMS) in use for about seven years. It had technical issues involving performance, capability, support, adoption and “massive core data issues,” he said.
    • One treasury team member in an overseas office didn’t use the TMS because she didn’t trust the data and therefore continued to use banking portals for cash positioning and payments, the AT said. “So there were some inconsistencies in terms of global processes,” he added.
  • There were too many independent, uncoordinated decisions on buying technology by multiple groups within treasury, including cash management, trading and investments, middle office and risk management.
  • “There needs to be a cohesive strategy around how all these systems work together and how they talk to each other and you can’t have straight-through processing if you don’t do that,” the AT said.
  • The company’s high growth rate and new initiatives within treasury to keep pace with expansion necessitated a coordinated approach to technology, the AT said. Some of the numbers used to make the case:
    • Thousands of bank accounts at dozens of banks; more than 1,500 banking access requests a month; more than 50% growth in insurance claims; a doubling of FX trades, topping $50 billion this year.
    • New initiatives include an in-house bank, regional treasury centers and a push to digitize and automate captive insurance programs.
  • “Controllership is another big item here,” the AT said. He cited too many journal entries that are not automated as just one example of where compliance will be improved by employing technology that removes risks presented by manual processes and the use of banking portals, among others.

Start with a road map and people. The first steps included creating a needs assessment and a road map. The member brought in PwC to help examine every third-party technology and all the manual processes used in treasury. The goal was figuring out “what are the big items we’re going to tackle and how are we going to tackle them?” the AT said.

  • The review established that a multiyear reimplementation of the existing TMS or implementation of a new one needed to be combined with filling in gaps with a data lake, emerging technology like RPA and building proprietary software for a treasury request system, among other steps.
  • Hiring is a major undertaking when building a fintech team and the AT said he always starts with product management. “With a new organization, investing in product management was a priority—like Marines on the beachhead,” he said, describing the need for people who can translate business process pain points experienced by treasury customers into a technical road map.
    • The fintech employs application engineers who understand treasury workstations and can configure and troubleshoot. “We’re trying to bring as many subject matter experts in-house as possible,” the AT said. Recruiting people who know both treasury and tech isn’t easy. “It’s almost like a unicorn,” he said.
    • The team includes technical program managers who understand how interfaces work and the dataflows between multiple systems via APIs and other technology.
    • Other positions include software development engineers and business intelligence engineers (BIEs). The BIEs use programs including Tableau, which sits on top of the company’s data lake. They’re working closely with the cash team to automate a weekly cash report, the AT said, among other projects.
  • The fintech team now reports KPIs to its customers in treasury, including the percentage of processes that are straight-through processing, payment failure rates and user adoptions, among other metrics.

Build and buy. To illustrate his point that “it’s not a binary world of build or buy, it’s not either or—sometimes it’s an ‘and’,” the AT first gave an example of the fintech team building its own tool to solve a problem—a treasury request system (TRS) that started as an automated FX trade request system and will expand to other uses including requests to open bank accounts.

  • He then described cases where the company decided to pay for third-party solutions—a new TMS and risk management software. His advice for other mega-caps: use your buying power to get a seat at the table and influence the vendor’s product road map.
  • The decision to build or buy is both a business judgment call and one informed by a framework that incorporates cost, the time to hire and the time to build it yourself, among other factors, he said. It starts with the customer who has the pain point and works backwards to determine how long it will take to implement a solution and which approach will be faster.
  • That said, the company’s preference is build, one reason the fintech is building its own bank fee analysis tool rather than rely on the module from a TMS vendor. “This is part of the framework,” the AT said. “We go through and we’re looking at does it make sense to buy bank fee analysis, and it really isn’t that complicated [to build].”
  • When the company decides to buy a third-party solution, it does so with the idea of learning how it might build the tool in the future.
    • A slide in the presentation read: “We recognize that we can’t build our way out of every problem. When we do ‘buy,’ we still want to employ a BUILD approach (BUy, Implement, Learn, Develop).”
    • The AT said, “It’s complex, it takes time, but when we do approach a buy, it’s doing so with a strategic lens of learning and then asking ourselves what can we develop ourselves.”
  • The company’s TRS road map includes adding letters of credit and inner-company funding to its TRS system, among other items. As that system scales up, the AT said, “It’s going to start cannibalizing what we’re doing from a treasury workstation perspective. And eventually our vision is to have multiple treasury workstation capabilities built in-house. But that’s more of a longer-term play.”
Justin Jones

Author Justin Jones

More posts by Justin Jones