Earlier this year the Economist made a bold claim: data is now the most valuable business asset in the world.
Once, the most sought after asset was oil; energy to power business. What drives businesses and organisations now is the use of technology and access to data.
The importance of technology in the treasury world was highlighted recently when Insignis Cash Solutions was named winner in the FinTech category of the Cambridge Independent’s Entrepreneurial Science and Technology Awards.
Insignis, who counts Mike Jensen, returning investment director of Lancashire County Council, among its advisory panel, provides a web-based platform that enables council treasurers to see developments across 1,000 bank deposit accounts daily.
Treasurers can move their council’s cash around to get the best rates and distribute money easily into small enough pots that they are covered by the Financial Services Compensation Scheme. Insignis says it gives them “transparency, security, ease of use and most importantly income at a time when budgets are under pressure.”
The platform is the latest in a line of disruptive web-based initiatives that have sought to change the way council treasurers do business.
PSLive (Public Sector Live) is a CIPFA-approved platform for treasury investment and risk analysis designed to provide treasurers with the tools to enhance their risk management and reporting capabilities. There are a number of portals which have emerged since the boom in money market fund (MMF) investment, giving councils ease of access to a suite of cash funds. ICD and FIS (formerly Sungard) are the two best known platforms to council officers with NEX (formerly MyTreasury) knocking on the door following a rebrand and a deal with the Municipal Bond Agency. NEX plans to offer ready access through its platform to MMFs, term deposits, certificates of deposit and the council to council lending market.
But what are they all trying to achieve? How will they change treasury management?
There are a number of issues they all attempt to tackle. Firstly, ease of use. Can they make the processing of transactions easier and simpler with an automated service?
Next, can they take away some of the transaction risk by providing secure, joined-up systems that remove the potential for human error?
And can they also reduce the resources needed in a local authority to process transactions. For treasury heads with just a few souls in the department, this may be critical.
Those are some of the basics. Where the technology really starts to add value is allowing insight that might otherwise be prohibitively expensive to access. Some of this is by amassing vast quantities of data in a single database permitting fast and effective research. A recent report from IDC (International Data Corporation), the technology analysts, predicts that by 2025 the “datasphere” will amount to 163 zettabytes — 163 trillion gigabytes, a figure which underlines just how important data has become. More important for many treasurers will be whether the data can be used to provide pre-trade analytics before a treasurer presses the “send button”. Such functions allow treasurers to experiment with a multitude of variables including elements of their own treasury policies such as maturity and credit quality.
Perhaps another critical service the systems can provide is report generation ready to go straight from the printer to treasury committee members.
And this is where the tech is likely to develop. The future will probably mean portals that allow increasing levels of customisation so that treasurers can match their individual policy requirements with data on the servers. Adoption of HTML 5, the latest iteration of the language underpinning web sites, will almost certainly lead to more of that.
For Insignis and its banking platform the disruption factor comes from providing a means to overcome customer inertia: if treasury officers have an easy system to use, with sound information, they will move to improve returns. “Technology is going to revolutionise this,” says Sally Maclachlan of Insignis.
Inertia has been a concern for regulators supervising the banking sector. Indeed it’s the issue underlying the open banking rules coming into force in January next year after an investigation by the Competition and Markets Authority.
Overcoming inertia means getting at one of the big issues for treasury departments. Resolving it means treasury departments can actively manage their own affairs directly, seeking out the best regulatory protection while at the same time identifying the best returns.
The visibility portals provide means opaque markets are illuminated and become easier to monitor and access from the treasurer’s own desk. That means more ways to make a return and potentially savings.
That is one of the features of web portals. We have seen it take hold in other areas. moneysupermarket.com aims to aggregate information into a single place enabling consumers to view multiple options without the need for a time consuming and ultimately inefficient manual search. Web technology has also transformed day trading enabling stock pickers to buy and sell shares from their spare room, pitting themselves against professional investment managers. Small businesses are also starting to benefit from portals for funding such as alternativebusinessfunding.co.uk and fundingcircle.com where bank finance has proved elusive.
Technology tends to aim at big markets first and is then applied to niche areas once established. There’s no reason why state of the art technology shouldn’t transform the council treasury function too, sooner or later.