Corporates To Banks: Help Us With Forecasting

Curinos research has consistently shown that companies are eager for broader strategic advice from their banks. We also believe that for banks to achieve breakout growth in treasury management, they must innovate to expand their value proposition beyond processing financial transactions to address a broader spectrum of company needs.

The experience of the pandemic has underscored this need. Companies were forced to adapt to remote work while simultaneously managing unprecedented volatility in cashflows that was driven both by market disruption and fiscal and monetary stimulus.

Business is getting back to normal, but companies still crave advice to help them optimize their business operations. Banks and fintechs are in a fierce competition to own this space. Those that prevail will win an outsized portion of the revenue share from lucrative existing payments business and find themselves in the pole position to monetize opportunities that leverage company data flow to provide insights.

Cash forecasting and working capital management top the list of areas where companies are looking for tools and insights and this is an area where banks are uniquely positioned to help.

Rank 2021 Rank 2020 Rank 2019
Cash forecasting improvements 1 1 2
Liquidity or working capital management 2 4 1
Bank services optimization or RFP 3 3 4
Optimization or replacement of TMS 4 11 9
Enhance fraud/cybersecurity controls 5 10 8

Next in line were:

Support for acquisition/divestiture, LIBOR replacement, debt issuance, improvements of payment process

Source: 2021 State of the Treasury Profession Survey

Although that urgency has eased, there is still clearly white space for banks to innovate solutions and integrate with clients. Liquidity and working capital management was the #2 priority for treasurers in 2021, up from the fourth position in 2020.

Cash forecasting and liquidity and working capital management are really part of the same process that starts with data aggregation, integrates decision intelligence and culminates with an action. The process is further enriched with the integration of third-party data to improve decision intelligence and “after the trade” AI to optimize future decisions.

The jury is still somewhat out on who will own this space. The big question for banks is what role they will play. After all, they have the most real-time insights into transactions and have the tools to execute an action such as a payment, cash placement or investment. Many banks would also assert that they have a greater degree of insight into market dynamics and are best positioned to develop and maintain the intellectual property behind the decision management engine.

Ultimately, for banks there are three potential paths. The first calls for banks to own the space, find a way to aggregate more real-time financial data from their customers and build best in class tools. Path two is to partner treasury management system (TMS) providers to provide value-added decisions and integrate with the bank’s execution capabilities. The third path is to become a commodity service provider.

The first two options can work well for banks, but they won’t happen by sitting idly. Banks need a proactive strategy to determine what role they want to play in this space, and a set of concrete plans to either develop the requisite capabilities themselves or establish strategic partnerships with TMS providers to meet the needs of their clients.

There is another important reason for banks to invest in this space. With banks flush with liquidity and structural factors that may support significantly elevated levels of commercial deposits for a long time, banks need to be increasingly judicious about allocating the liability side of their balance sheets. Enhanced capabilities to forecast customer cash will also help banks manage their own liquidity positions. And investing in the execution tools to facilitate off balance sheet investments helps corporates and banks alike.

Treasurers have clearly articulated the areas in which they need help. Banks have a unique capability to combine their data, expertise and technology to assist corporates. These are big and complicated challenges that continue to expand the value proposition that banks provide to their customers. Banks need to think strategically about what to target, when to go it alone and when to partner.

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