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Refreshing Cash Management Applications to Address New Market Needs An Oracle White Paper December 2008

Refreshing Cash Management Applications to Address New Market Needs Page 2

Refreshing Cash Management Applications to Address New Market Needs

EXECUTIVE OVERVIEW The global cash management industry continues to evolve, and banks are adopting new strategies. These new strategies are being driven by new market conditions, intense competition and more demanding customers. Today’s cash management customers want consolidated balance information, real-time data, greater straight-through processing, and new tools—such as forecasting tools—to more effectively and efficiently manage their cash. Interestingly, as the industry becomes more global, the trends as well as the product offerings are becoming more similar, regardless of bank location.

This article, based on a research survey of 50 tier-one and tier-two banks around the globe, describes how banks around the globe are refreshing their cash management applications to better address new market needs.

CONSOLIDATED BALANCE INFORMATION The role of the corporate treasurer is expanding and moving beyond simple performing of transactions. Today, many corporate treasurers are finding that their roles are becoming more strategic and analytical, and they are now responsible for total liquidity management for their organizations. From receivables, to payables, to cash forecasting, corporate treasurers are becoming more involved within the organization and, as a result, need more information than ever before.

As they attempt to perform their new responsibilities, however, many are challenged by a lack of consolidated information from unintegrated solutions, manual processes, and a lack of forecasting tools. These treasurers now want and need to have better information to more closely analyze data and lower their company’s risk. In addition, many are now also demanding that their banks offer multibanking capabilities whereby corporate treasurers can now log in to a single online banking system and view balance information from multiple banks. This is often made possible through bilateral agreements among banks, and information is send via Society for Worldwide Interbank Financial Telecommunication (SWIFT) messaging.

While corporations are increasingly demanding consolidated global information, very few banks around the globe are currently able to offer it. However, a larger

From receivables, to payables, to cash forecasting, corporate treasurers are

becoming more involved within the organization and, as a result, need more

information than ever before.


percentage of banks plan to offer this capability over the next 24 months (see Figure 1).

Figure 1: Source: Aite Group

REAL-TIME INFORMATION While real-time information was once a “nice-to-have,” increasingly it has become something that cash management customers are demanding from their banks. Banks around the globe vary in their abilities to offer it, however. While all Canadian banks can offer real-time information, some U.S. and European banks struggle to do so because of their reliance on data feeds, batch processing, and often older, less integrated back-end systems (see Figure 2). While several banks can offer to real-time information for accounts at their own institutions, the shared information coming as a result of multibanking agreements and SWIFT is often batch information.


Q. On a scale of 1 (not at all likely) to 5 (extremely likely), how likely, over the next 24 months, is your institution to offer the ability to view consolidated global subsidiary balance information through a

single login?

33% 33% 36%29%

33%

43%

29%

U.S. Canada Europe Asia-Pac

Currently Offer Very Likely to Definitely Likely (4 or 5)

Percentage of banks currently offering real-time data

60%

100%

50%

86%



GREATER STRAIGHT-THROUGH PROCESSING Cash management customers, especially the largest ones, are trying to better automate their own systems and operations and are increasingly demanding greater straight-through processing from their banks. This requires tighter integration between bank systems and customer enterprise resource planning (ERP) systems, and improves accuracy and efficiency for customers. Still, providing the desired level of integration can be challenging for banks, because of the various formats in which the information comes. Different ERP solutions from global vendors also exist. In addition, companies also often make their own customization to the information and details, often creating the need for a company-by-company customization on the part of the banks. Offering greater straight-through processing is the goal of many banks, but it is not an easy one to achieve.

FORECASTING TOOLS Forecasting has become a key component in cash management in recent years and an important part of the corporate treasurer’s role. A company cannot optimize its use of cash and make excess liquidity available for use without determining how and when cash will move across an organization. Despite its importance, as well as the growing desire by corporate treasurers to improve their forecasting methods, most companies lack the right tools to do this efficiently. In fact, forecasting is currently one of their least efficient processes. Most companies today struggle to get accurate forecasts because they use primitive applications as well as multiple systems to manage their data. Many are challenged to bring together information from multiple systems, spreadsheets and e-mail. Some large global organizations have as many as 65 to 100 spreadsheets to manage their accounts around the world.

Research groups estimate that more than 50 percent of businesses rely primarily on Microsoft Excel spreadsheets for some aspect of their cash forecasting and cash positioning. While this software package is easy to use and can be sufficient for small businesses that operate domestically, Excel spreadsheets are not sufficient for larger corporations performing cross-border transactions. The question is whether offering a forecasting tool is the job of the bank. As shown in Figure 3, very few banks currently offer forecasting, and those that do offer very limited capabilities. Some banks feel very strongly that forecasting is not the responsibility of the bank, and believe most customers would prefer to find their own tools, or use tools incorporated into their treasury workstations. Others see it as a possible revenue generator and another added-value service they can offer to customers. They see it as an important tool as they strive to take on more of an advisory role to their customers, and as a way to differentiate themselves from competitors.

Some banks feel very strongly that forecasting is not the responsibility of the bank, and believe most customers would

prefer to find their own tools, or use tools incorporated into their treasury

workstations. Others see it as a possible revenue generator and another added-

value service they can offer to customers.



CONCLUSION New market demands are resulting in banks depending on technology more than ever before. Technology enables banks to quickly react to customer demands and better serve them. It also helps to level the playing field and enables smaller banks to better compete with the mega players. A greater dependence on technology is also leading to a greater willingness by banks to deploy vendor-built solutions. As the industry changes at a growing pace, it has become increasingly difficult for banks to keep up on their own in addition to focusing on their own core competencies.

Q. On a scale of 1 (not at all likely) to 5 (definitely likely), how likely is your organization, over the next 24

months, to offer cashflow forecasting tools?

13% 14%

43%

27%17%

29% 29%


Currently Offer Very Likely to Definitely Likely (4 or 5)

Refreshing Cash Management Applications to Address New Market Needs December 2008 Author: Christine Barry Oracle Corporation World Headquarters 500 Oracle Parkway Redwood Shores, CA 94065 U.S.A. Worldwide Inquiries: Phone: +1.650.506.7000 Fax: +1.650.506.7200 oracle.com Copyright © 2008, Oracle and/or its affiliates. All rights reserved. This document is provided for information purposes only and the contents hereof are subject to change without notice. This document is not warranted to be error-free, nor subject to any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose. We specifically disclaim any liability with respect to this document and no contractual obligations are formed either directly or indirectly by this document. This document may not be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without our prior written permission. Oracle is a registered trademark of Oracle Corporation and/or its affiliates. Other names may be trademarks of their respective owners. 1208