• Covid-19 sped up the digitisation of treasury processes, leading some businesses to overhaul their finance departments

• Open banking has the potential to increase efficiency, reduce costs, limit fraud, enhance sustainability and improve relations with customers and suppliers

• For SMEs selling overseas, application programming interfaces (APIs) could revolutionise trade, which has historically relied on paper-based processes

• The market for embedded finance or ‘banking as a service’ is predicted to swell to $7trn by 2030

• Artificial intelligence (AI) helps companies create a friendly customer experience, reduce error rates and even make better investments

For many companies, the shift to digital was accelerated by the Covid-19 pandemic, as staff, suppliers and customers demanded a better technology experience during the social isolation of lockdown.

Businesses that relied heavily on manual, office-based workflows found themselves practically paralysed when entire treasury and finance departments were confined to their homes. Reduced visibility over cash and inability to make payments online caused hold-ups, resulting in frustrated staff and upset customers and suppliers. 

For many SMEs, it became clear that adopting new, digital solutions would be a necessity in order to future-proof their businesses.

Conor Maher, Head of Transaction Banking Products at NatWest, says: “Pre-pandemic, a number of companies did not utilise online or mobile banking platforms to their full extent. Now, they’re leveraging additional capabilities, including self-service tracking of payments, for example, to give them greater visibility and control.

“It’s a case of better understanding what your existing technology – from both banks and vendors – can do for you and leveraging that to the full.” 

The shift to remote working as a result of Covid-19 has also shone a spotlight on inefficient manual processes and hidden costs, says Maher. 

“Think of something as trivial as a cheque,” he says. “Before the pandemic, many customers would come into the branch to deposit cheques. Now they use their mobile phone to scan the cheque and deposit it into their account. This saves paper, time and effort, and requires no implementation effort from the customer’s side.” 

Whether it’s expanding the use of online banking or embarking on a complete overhaul of a company’s treasury, the opportunities recent advances in technology have presented to SMEs are broad. And harnessing them can result in happier customers, provide a competitive advantage and result in an increase in the long-term value of a business.

So, what are the innovations that SMEs and their treasury departments should be aware of?

Open banking is already revolutionising banking for millions of individuals and businesses. It creates a digital infrastructure that enables financial information and payment instructions to be sent and received securely, using application programming interfaces (APIs.) 

This presents a broad set of opportunities for SMEs to build out digital ecosystems that bring them closer to their customers, suppliers and business partners.

A company’s treasury can achieve almost real-time control over its finances on a single platform and across multiple financial institutions. This includes multi-bank cash, trade and foreign exchange visibility. 

Open banking has the potential to increase efficiency, reduce costs, limit fraud, enhance sustainability credentials and improve relationships with customers, suppliers and financial partners.

APIs can be used to collect payments from customers in real time, straight from their bank accounts, without having to find out their account details or pay expensive fees. APIs can also be used to make instant payments – once again, without the need for bank account details. 

For retail businesses, open banking can be employed at point-of-sale terminals, where companies can combine payment initiation APIs with technologies such as QR codes, as an alternative to cash or payment cards.

For SMEs selling overseas, the potential of APIs could also revolutionise trade, which has historically relied on paper-based processes. This transformation involves many challenges, but a large number of digital platforms are being developed, many of which are collaborations between banks and fintechs (financial technology companies) to facilitate the digitisation of trade workflows and speed up transactions.

APIs can enable companies to manage global supply chains and can also improve customer relationships. For instance, a treasurer could receive a real-time alert about incoming funds from a customer through an API, and then authorise goods to be released, or even allow an additional order, simultaneously.

As well as providing greater transparency of the financial flows linked to trade, APIs offer scope for greater clarity and data sharing when it comes to ESG (environmental, social and governance) measures. Sustainability is becoming a fundamental part of business, and organisations need to understand the ESG impact of their supply chains. APIs are a great way of ensuring ESG transparency.

Embedded finance, or ‘banking as a service’ (BaaS), is where a financial service, like payments or insurance, is embedded into a non-financial brand to create a seamless customer experience. Although this tech is in its early stages, the market for these services is predicted to swell to $7trn by 2030, according to Bain Capital Ventures. 

Treasurers in consumer-facing sectors may wish to engage early with their banking partners around this industry shift. And there are strategic conversations to be had internally around the value of a seamless digital customer journey, in terms of making cash flows more predictable and visible.

The use of artificial intelligence (AI) and machine learning (ML) in financial services isn’t new – AI is already responsible for detecting suspicious credit card activity, for instance. But the potential for AI in a financial context goes much further.

AI provides an opportunity for companies to create a friendly customer experience, reduce error rates by employees and even make better investments. 

Digital innovations like these can help treasury departments run more efficiently and free up time for other functions, such strategic planning, constructing a carbon management plan or raising capital. 

However, it’s important to have an “If it ain’t broke, don’t fix it” mentality when considering them. If your old, manual processes still work well, think carefully before adopting new, untested ones.

And ensure that a proper internal evaluation takes place to assess whether the changes will benefit the company as a whole. This can be the hardest part of the transformation and shouldn’t be overlooked.