Citi Perspectives Fall 2023: Transforming Treasury

16 | Treasury and Trade Solutions Citi Perspectives with nobody able to deposit them,” recalls Anupam Sinha, Citi’s Payments and Receivables Head for NAM. “And they quickly realized that if they did not act, it would create massive working capital challenges for them.” McNulty believes that three major trends are driving the evolution of payments. “The first is technology, which is clearly driving the transformation —whether that is what is nowmade possible by more dynamic connectivity models such as APIs, cloud computing, machine learning, and artificial intelligence. Other developments include how our customers’ business models are evolving with more decentralized infrastructures, as well as the evolution of virtual reality.” The second driver, in McNulty’s view, is the evolution of clients’ needs, including the adoption of new business models in which companies are looking to directly sell to, and service, consumers and counterparties that have much more sophisticated expectations of user interfaces and client experiences. “Lastly, regulation in the payments space is driving a huge amount of change,” surmises McNulty. “Governments are looking to digitalize their economies and create efficiencies, and often that can only be achieved at scale by upgrading the payments infrastructure. Financial inclusion is also a significant driver of regulatory change, especially across Africa, where we see more of a move toward interoperability between local closed loop ecosystems and the wider banking infrastructure.” In Latin America and APAC, likewise, financial inclusion has proved to be a significant driver of change. Developments like digital wallets can play a role in providing unbanked people with other payment options. “China for instance is dominated by Alipay and WeChat Pay,” says Jain. “But even in most of the emerging markets in APAC, wallet penetration has increased significantly over the years, whereas card penetration in many markets is still in single digits.” Implications for corporate treasurers So, what do these changes mean for corporate treasury teams? And how can businesses harness the latest innovations? “This change has huge implications for corporate treasurers —and for banks, who are supporting those treasurers,” comments Kirestian. “Treasury has evolved from a corporate function to an area that is supporting the core business of the company on a real-time basis.” As such, he says, treasurers have had to shift from the old model, in which vendor payments might be sent on a weekly or monthly basis for processing — “and if something went wrong, it just meant a vendor was paid one day late.” Today, in contrast, “when there is a Request to Pay transaction in a coffee shop, because someone is buying a coffee, that person cannot wait two minutes to complete the transaction. It must go through within seconds — and the whole reconciled process around that payment also needs to be completed in a matter of seconds.” Sometimes transformation is used as a bit of a buzzword — but you can’t look at the payments landscape at the moment and not articulate what’s happening as a transformation.