Specialist Treasury Technology: A Breed Apart?

By Tom Alford, Deputy Editor, TMI

The idea that best-of-breed selection, as opposed to a traditional ‘full stack’ TMS, is the way forward gets the TIS ‘Executive Briefing’ treatment in its latest paper. But are treasurers ready to abandon their love of TMSs and migrate to best-of-breed solutions instead?

When research by HSBC demonstrated in late 2019 that 69% of treasury functions currently have, or are in the process of deploying, a TMS, it helped demonstrate two things. Firstly, that businesses are now accepting the value that core treasury software offers. And secondly, that the Software-as-a-Service (SaaS) delivery model is enabling many more organisations to leverage these benefit.

However, a recent TIS executive briefing, entitled ‘The Next Gen Architecture for a Digital Treasury’, argues that not all TMS offerings are equal. Citing PwC’s 2019 Global Treasury Benchmarking Survey, the vendor says satisfaction levels with TMS providers is significantly lower than with specialised system providers.

The TIS briefing also argues that cloud and API technology is redefining corporate application architecture, and that as this shift is a welcome overspill from the consumer and retail worlds, the levels of service and satisfaction in the corporate space will increase commensurately.

With cloud computing and APIs delivering real-time secure data exchange in the mobile environment, consumers can customise applications according to their individual needs, and can data-share seamlessly with other applications. The slick user experience and interface expected by consumers has arrived in the corporate world, says TIS. This is part of the experience that it refers to as ‘Best-of-Breed’, a phenomenon it believes is “the next step in the evolution of treasury technology”.

Specialist vs generalist

The traditional “generalist” approach to TMS design hinges on the concept of the one-stop-shop. Although beneficial in many respects, TIS says this model can come at the cost of user choice, flexibility and a capacity to meet specialised or dynamic needs.

The briefing then argues that cloud-based solution providers overcome these limitations, with the vast library of APIs enabling corporates to combine their specialist services in new ways, “to leverage the interconnection of data from these applications for better business decisions”.

As an example, it says a specialised FX provider can make use of banking data as well as information from the cashflow forecasting vendor to tailor an FX hedging strategy. Data exchanges of this nature can, it notes, “be standardised, real-time and seamless from a user perspective”.

What’s more, suggests the paper, the simplified connectivity offered by these providers allows the corporate to select the best solution provider for each specific need, without compromise nor lengthy and costly IT projects.

With the inherent flexibility to switch providers as required, companies can grow their technology ecosystem in-line with their needs. This, TIS thinks, “is what strategic agility looks like”. The enabler, it continues, is a new type of treasury technology architecture which it dubs “the Best-of-Breed solution ecosystem”.

The paper then deals with practical implications of this model for corporate treasury.

Practical matters

Best-of-breed requires multiple contracts and multiple touch points, compared to the one-stop-shop TMS experience. Therefore ‘complexity versus benefits’ need to be weighed-up, the paper accepts. Alternatively, it says treasurers could opt for specialist advisory services, where broad knowledge and industry connections could provide the best outcome.

The advisor would also be best placed to offer guidance on the different contractual frameworks likely to be encountered in a multi-vendor treasury architecture. In exploring single contract versus multiple individual contract approaches, TIS suggests a ‘master contract’ model, where ‘subordinate’ Best-of-Breed providers align themselves to a structure, with a lead contractor assuming overall responsibility.

This model could be applied on the customer service side, with clear service SLAs being defined and legal frameworks structured to enable easy collaboration. This trend “is well under way”, aided no doubt by the fact that onboarding of multiple cloud-based systems is “reasonably straightforward”, with parallel implementations both possible and typically requiring little or no customer IT resources.

Think again

The technical integration of a Best-of-Breed approach is enabled by cloud and APIs. Vendors of these solutions will, says TIS, be naturally open to treasurers who embrace collaboration as best practice, in part because it will help take this new ecosystem model “to the next level”.

TIS accepts that organisational readiness, technological piloting and multi-vendor partnerships may require a “change of mindset” going forward. That said, with the benefits “foreseeable” and leading to “strategic agility for the organisation”, it is nonetheless a future “that can be shaped by decision-makers of today”, the paper concludes.