Citi Perspectives Fall 2023: Transforming Treasury

Treasury teams must handle new digital payment acceptance flows effectively and efficiently to deliver the best experience for customers around the world. This means ensuring the fundamentals are in place and that the pitfalls of digital payment acceptance are avoided. Key treasury considerations around digital payment acceptance When it comes to digital payment acceptance, treasury teams must factor in their place in the business life cycle. For example, if a business is operating in a mature market, treasury may be focused on cost and counterparty risk. Considerations might include: Are relationships too concentrated? Has enough resiliency and redundancy been baked into planning in the event a provider fails to deliver? For those expanding into newer markets, treasury might take more of a “startup” approach, focusing on growth at all costs, thus relegating losses and counterparty risk to a more secondary concern. And in the case of traditional brick-and- mortar businesses that are just starting to embrace a direct- to-consumer model, treasury will likely be primarily focused on speed-to-market. Regardless of the approach, treasury clearly has an important role to play in helping the business grow, while helping keep the company safe from risk. Treasury should stay involved in how every dollar moves Treasury should be actively involved in how every dollar moves and where funds are at any given time. For businesses that operate in different markets with various legal entities, understanding where and how funds are settled, and if there are any trapped cash implications, is imperative. Payments or revenue teams will be focused on delivering the best customer experience, which means minimizing currency conversions, and achieving higher transaction approval rates that come from utilizing local acquiring. While there are advantages to going local at the start, there are downsides to consider, such as the greater length of time it takes to set up local bank accounts. This requires working with a new, local bank, which may be relatively small. The possibility of having cash trapped in a local market with a restricted currency creates foreign exchange (FX) volatility. The case for treasury being involved early includes the insights they will have into potential pitfalls and solutions that mitigate those issues, such as starting with cross- border processing that relies on an existing corporate entity and bank account. For multi-market, multi-region businesses, understanding counterparty exposure is critical. Treasury will want to know all third parties at each step of the payments process in order to monitor and adhere to counterparty limits. For obvious reasons, businesses will want to avoid disruptions from a payment processer in a local market that has shut down. At the same time, the complexity and costs of supporting multiple relationships with a myriad of providers creates an undue burden on treasury. In the past, it was all too common for a large e-commerce merchant to have upwards of 60 different payment processing relationships around the world. This was done with an eye toward delivering the best customer experience. Today, businesses are increasingly rationalizing their provider relationships by consolidating with trusted providers who are robust enough to withstand day-to-day market shocks. Another important aspect of treasury’s purview is reporting. To troubleshoot issues and ensure proper accounting, treasury needs to be able to accurately track settlement of funds. All too often, different stakeholders, such as accounting and card processing, have access to the same database, but utilize their own reporting infrastructure. This can sometimes lead to finger pointing between teams when funds don’t land in accounts when needed. Treasury has the cash forecasting responsibility, which means they need complete visibility into all flows to ensure funds are where they need to be when required. 42 | Treasury and Trade Solutions Citi Perspectives