In this final instalment of our Europe Goes Real-Time series, we’re diving into how treasurers can level up their innovation by using the latest technology. What can treasurers do to get an accurate and live view of their liquidity, and how do they need to change their mindset for a world of instant payments? Read on to find out.
In case you missed it, parts one and two of our series detailed what the Single Euro Payments Area’s (SEPA) instant payments mandate covers, how this impacts treasury teams, and why PSPs need to get their payment strategies right.
New technology is offering PSPs an opportunity
Valuable data has always been there; it’s just been too difficult to access, forcing teams to make assumptions. But new technology is enabling treasury teams to evolve their processes and work in a data-driven way. Teams are utilising tools and methodologies to understand their payment flows at high volume. They’re employing a strategic mindset, using AI to find granular insights and patterns from large, complex datasets. This approach is especially compelling as it allows PSPs to respond in the best way to the market changes caused by the rise in instant payments.
This scale and speed of instant payments-driven change cannot be managed without planning, investment and the right technology. And treasurers need to act fast. If they don’t, their competitors will!
A key consideration is determining how to obtain a consistent, live view of the PSP’s intraday liquidity within the schemes in a way that is both sustainable and realistic for treasury teams. Fortunately, there are now technologies available that automate tasks, aggregate data, and raise flags before risks turn into issues that need to be fixed. And these technologies can consume the granular transactional data directly from the schemes as instant payments settle. This provides the information to both generate real-time liquidity views and to perform the analysis on what is driving liquidity usage, then what might happen next.
How AI fits in
Over time, historic data from real-time monitoring of instant payment activity will grow large enough to inform accurate and reliable predictions of future events. AI can play a crucial role in processing and aggregating this data, doing the heavy lifting. Treasurers can then make decisions to smartly allocate collateral and liquidity and even find instances of overfunding in accounts, which can be adjusted to optimise the PSP’s liquidity and save money.
There are solutions in the market that can help PSPs do this. But before going shopping, teams need to get their data management in order. The good news is that PSPs don’t need to look too far to begin. The source of instant payment data that PSPs are using to see when a client has paid or received money is the very same place where the liquidity management challenge can be tackled.
For treasury departments – and extended to risk, liquidity and payments teams, this data will enable proactive approaches to managing liquidity and open opportunities to optimise how accounts are funded, making smarter use of the assets at hand. All in real time.
Three ways technology can keep instant payments under control
- Providing a real-time view of intraday activity in the instant payments scheme: PSPs in Europe use the TIPS and/or RT1 infrastructures to deliver instant payments. With large and increasing sums flowing in and out of these accounts 24/7, getting a real-time view is essential in managing intraday liquidity. Technology is available that makes liquidity management and optimisation across these schemes possible, even extending outside of the Eurozone to schemes including UK FPS and FedNow.
- Using historical data and patterns to build a view of future usage: Here comes AI. With an accurate and live view of liquidity in place, PSPs can exploit the underlying data. AI can be implemented to delve into the data and assist treasury teams in their efforts to learn from patterns at a granular level and implement robust and data-driven plans to proactively manage their liquidity usage. Technology providers are increasingly promoting AI in their solutions. The best providers truly incorporate AI into their product offering to enhance it, instead of ‘spraying AI’ onto the surface.
- Linking the real-time view with the forecast: The relationship between historical data and having a real-time view is powerful. Bringing these two capabilities together gives an opportunity for treasurers to set up alerts if liquidity management isn’t going as expected. Good technology platforms have the functionality for teams to configure thresholds and implement ‘red flag raising’. When done right, this can significantly lower liquidity risk and assure treasurers, particularly in the instant payments era.
A small note of transparency…
It’s not a coincidence that we have an idea of what good liquidity management looks like for instant payments. As a technology vendor, we exist first and foremost for treasury teams to better manage their intraday liquidity. All the technology functions we discussed in the paragraphs above are available in our Realiti suite. Sales pitch over!
Treasurers: the opportunity is yours
The SEPA instant payments regime is setting the standard by creating truly unified instant, 24/7 payment rails across Europe. And the rest of the world is watching. This provides a big opportunity for PSPs, including their treasury functions. Data-driven, tech-enabled treasurers can:
- Work proactively and collaboratively with a view of real-time liquidity activity.
- Work more efficiently, investing surplus cash to return value.
- Use less funding out of their central bank accounts and reduce the risk of dipping into emergency funding.
- Satisfy regulatory requirements on liquidity management.
- Lower their overall liquidity risk by taking direction from real-time data.
