Realising the Real Time Benefits in Treasury

Access to data and transactions in 'real-time' has long been an aspiration for treasurers; however, the opportunity to communicate, transact and engage with information instantly and dynamically has quickly transitioned from aspiration to reality. But what does ‘real-time’ mean in a treasury context, and what are the benefits and implications?


With instant access to banking services, on-demand online subscriptions, and items we buy delivered almost immediately, treasurers are seeking, and expect, a comparable level of responsiveness and instant access to cash management and banking services in their professional domain. As a first step, many banks introduced mobile banking solutions for viewing account balances, initiating and approving transactions. While these solutions provide customers with a better experience and more convenient access to bank information and services, they represent a step towards ‘real-time’ treasury rather than reflecting its full potential. With the quest for ‘real-time’ high on the agenda both for banks and corporates, the focus should be on co-creating and delivering solutions that address real-life business needs, reduce friction and inspire new ways for our customers to support the needs of their own customers and wider supply chain more effectively.

Accelerated payments innovation

Faster or instant payments are key drivers of the ‘real-time’ treasury. Instant payment schemes are rapidly being introduced worldwide, with 44 domestic real-time payment schemes now live and a further 14 in development#. For example, Singapore’s FAST scheme was an early example, and Hong Kong’s Faster Payment Scheme (FPS) was introduced in September 2018.  Most countries in Asia Pacific will support real-time payments by 2020. Alongside these schemes, we have seen QR codes, including both static and dynamic codes, becoming ubiquitous in some locations, including China, Hong Kong and Singapore. These complement real-time payments by enabling a buyer to scan a code to purchase and pay instantly, whilst the seller can use the data linked to the QR code to reconcile the transaction automatically.

For consumers, the value proposition of instant or real-time payments is clear, but for many corporations, it has proven more difficult to quantify the benefits, particularly for outgoing payments. For outgoing payments, companies can support more dynamic, accelerated supply chains, such as cash on delivery, and accelerate B2C (business to consumer) flows such as refunds and claims. The value proposition for incoming flows can often be more obvious and immediate. Treasurers can gain immediate access to liquidity, reducing the need to maintain large working capital buffers. The supply chain can be accelerated, with the ability to release goods immediately on receipt of cash whilst credit risk is reduced. Companies can also free up customer credit limits more quickly, enabling them to more business without adding to their risk.

Momentum behind request to pay (RTP) schemes, in which payments are triggered directly from the bank account in real time, is building rapidly both for C2B (consumer to business) and B2B (business to business) payments. These schemes either leverage open banking initiatives, with banks opening up their data to third party processors through application programming interfaces, or APIs. In Europe, for example, this is a requirement under the second Payment Services Directive (PSD2). In other cases, RTPs and other forms of real-time payment are supported within a national infrastructure, such as the Unified Payment Interface (UPI) in India. Although there remain some practical issues to overcome, RTP schemes offer considerable time, cost, reach, risk and process advantages.

Payments beyond borders

It is not only domestic transfers where the speed of payments is accelerating. There is also an industry shift taking place towards faster cross-border payments. For example, SWIFT’s global payment innovation (gpi) now supports same-day cross-border payments, with 56 percent of payments on the SWIFT network now gpi payments. Nearly half of these are credited to beneficiaries within 30 minutes, and 40 percent in less than five minutes. 3,500 banks are signed up to the SWIFT gpi service level agreement globally, and all SWIFT-connected banks will be required to confirm when funds have been credited to the beneficiary account by the end of 2020.

For treasurers, the advantage of gpi payments is not just the speed but also its traceability. Each transaction has a unique end-to-end tracking number (UETR) which can be tracked in real-time throughout its lifecycle, including the payment status, fees and exchange costs. Just as significantly, remittance data that was frequently lost or truncated, is transmitted throughout its lifecycle.

From concept to reality

Just as the value proposition for real-time payments and collections is becoming more tangible, the solutions for addressing genuine business cases are also developing quickly. As a result, the conversation with treasurers is increasingly moving from ‘what’ real-time offers to ‘how’. For example, looking at receivables, there is growing demand for DBS’s enriched consolidated receivables ENCORE solution. This brings together incoming flows of different payment methods and multiple collection channels, and extracts invoice data to enrich information for process automation (such as reconciliation) and analysis purposes. This solution uses sophisticated technology, such as optical character recognition (OCR) to extract information from documents in formats such as pdf, allowing significant flexibility across different incoming payment methods.

Another example of a digital collection solution is DBS MAX., DBS MAX supports quick, seamless real-time collections for merchants using QR codes, offers merchants with instant access to funds and eases reconciliation, with real-time notifications and end-of-day reports.

The development of APIs, which allow customers to access data and embed banking services into their own services to an unprecedented degree, is becoming a ‘game changer’ in many industries. For example, companies such as AIG Singapore have leveraged RAPID, DBS’s API portal, for both incoming and outgoing flows. Policyholders can set up or renew policies in with immediate coverage, while AIG can also make direct, real-time payment of travel insurance claims. This includes capabilities through PayNow, a real-time payment rail in Singapore, allowing policyholders to make or receive payment using only a mobile or NRIC/ FIN number, greatly accelerating and streamlining the settlement of claims and providing a better experience to policyholders. A growing number of customers have used RAPID to integrate payment services directly into mobile apps, including using QR codes, creating a seamless in-app experience for customers, streamlined, automated refunds, and real-time settlement and complete remittance data for automatic reconciliation and liquidity planning in treasury. Other consumer-facing industries such as ride sharing, food delivery, short-term property rentals are also using APIs to create competitive advantage through greater operational efficiency, better use of data and improved market share through an enhanced user experience.

“Many companies centre their innovation efforts on customer-facing activities. By staying close to their businesses, customer experience and wider digitalisation strategies, treasurers can play a valuable role in shaping frontline solutions, such as integrating instant payment services into apps for mobile channels, implementing digital collection solutions for real-time collection and ease of reconciliation etc.”
Mark Troutman, Global Head of Sales, DBS Global Transaction Services

The use of APIs to facilitate and embed the real-time exchange of transactions and data extends beyond B2C industries. For example, by using a combination of APIs with a blockchain-based solution, supply chain participants can enable all participants in a global supply chain to connect obtain real-time status information, track the flow of goods and integrate financing, therefore providing far greater supply chain traceability, reliability and predictability.

Towards real-time liquidity

The concept, value and implications of the real-time treasury extends beyond faster, and more transparent payment flows and remittance data. Increasingly, discussions are moving beyond cash management flows to explore the impact on liquidity.

“Forward-looking companies are now leveraging a growing range of instant payment and collection products and embedding these in new ways via APIs, creating new dynamics in their financial value chains and ecosystems. At the same time, they are eliminating friction from their payables and receivables processes through virtual payment addresses, such as national IDs or mobile numbers, rather than account numbers and bank details, for those counterparties for which the latter details are not available.
With the concept of cut-off times becoming obsolete as payments are increasingly processed on a continuous, 24/7 basis, managing liquidity also becomes a far more dynamic exercise than in the past, requiring both real-time information, and flexible investment and financing solutions to meet not just daily, but potentially hourly liquidity management demands.”
Jasmin Ng, Group Head of Cash Management Product, DBS Global Transaction Services

A vital pre-requisite for taking advantage of new liquidity management opportunities is visibility and accessibility of cash. For example, if cash can be received into a bank account at any time, does treasury have immediate visibility of this? Can it be reconciled and posted to the customer’s account straightaway? With liquidity positions and market and credit risk exposures constantly changing, does treasury have real-time visibility over these exposures, and the ability to take funding, investment or hedging decisions dynamically?

In many cases, treasurers will need to review and refine not only their use of bank solutions, but also their treasury technology infrastructure. Those still using spreadsheets or systems developed in-house will find it far more difficult to manage data dynamically than those using a modern treasury management systems (TMS) and treasury modules of enterprise resourcing planning (ERP) solutions that offer real-time access to data. However, currently, few banks offer electronic balance and reporting information on an intra-day basis, and current banking systems are rarely equipped to process instructions continuously, 24x7.

“This is changing rapidly, however, with the growing use of APIs. DBS’s open API solutions are a key example of this, providing bespoke integration to enable dynamic, real-time exchange of data and facilitate highly specific customer solutions.”
Raof Latiff, Head of Digital, DBS Institutional Banking Group

As cut-off times disappear, the ability to manage intra-day liquidity becomes a critical requirement to the real-time treasury, and treasurers need to consider how to optimise access to liquidity. Solutions such as multi-currency notional pooling address intra-day liquidity needs by making liquidity available in real-time across accounts. Treasury is able to make round-the-clock payments, utilising funds in other accounts whilst minimising the need for pre-funding, FX conversion and the associated administration.

“Becoming a real-time treasury, with access to information and transactions anytime, anywhere, will have a fundamental impact on processes, controls and access to data, and will require new solutions and techniques. Banks such as DBS are already proactive in introducing solutions for the real-time treasury, such as multi-currency accounts, dynamic FX management and highly flexible payment, collection and liquidity management solutions.”
Raof Latiff, Head of Digital, DBS Institutional Banking Group

This represents a radical change for many treasurers, and in some cases, treasurers will seek to review and potentially revise the liquidity management structures that they have in place. Solutions such as DBS’s Treasury Prism can help with this modelling exercise by illustrating the outcomes and benefits of alternative structures and solutions.

Realising a real-time vision

Payments innovation, banking and treasury digitisation and support from governments and regulators are amongst the factors driving the real-time treasury, but treasurers need to take active steps to realise the value, by embracing new business models, improving automation and enhancing cash and liquidity management.

“The potential extends not only within companies and industries but beyond, connecting ecosystems more closely. Pharmaceutical companies, device manufacturers, healthcare providers, hospitals and care homes are all part of an interconnected ecosystem, for example.  The closer these parties within an industry ecosystem can work together, connecting the physical and digital more closely and enabling real-time information exchange between them, the better the quality and timeliness of care. In ten years’ time, for example, the hearing aid of a person living in a care home could automatically alert a doctor or pharmacist to the failure and a new one is sent via drone straight to the patient. The care home would be able to bill the patient or his/ her family in real-time, and on receipt of the payment, automatically trigger payment to the doctor or pharmacist. An experience like this is entirely customer-centric, but all the participants are digitally and instantly connected, powered by a bank at the centre.”
Mark Troutman, Global Head of Sales, DBS Global Transaction Services

This is not an idle or speculative fantasy of how real-time will impact on lives and industries, it is a logical progression and coalescence of capabilities that are reaching fruition today. Treasurers that are most proactive in developing and progressing their digital treasury roadmap will be best-positioned to leverage these opportunities, creating new liquidity dynamics and supporting the business in driving the digital business models that will ultimately boost competitive advantage.


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