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Blockchain opens up endless possibilities, but what are its practical applications for corporate treasurers to turn global financial management challenges into scalable opportunities?
While the speed and cost of cross-border payments for consumers have improved significantly over the past few years, corporate treasurers are still faced with manual, slow and often costly processes. Because operations span multiple countries, global treasury teams must juggle different payment systems and regulations, contend with exchange rate fluctuations, and coordinate between multiple internal and external parties, meaning inefficiencies can arise to achieve efficiency.
“Corporate treasurers are constantly faced with challenges to transparency, access and control of funds deployed around the world,” says Philip Panaino, global head of cash at Standard Chartered. “The common model of global and regional treasury centers is a direct result of information delays and lengthy settlement processes, as well as the lack of a clear workflow for totaling available working capital and then triggering, releasing and tracking payments. In today’s increasingly digital world, corporations now expect the same immediate, 24/7, seamless delivery of payment technology to their business that they experience in their personal accounts.”
Recent advances have brought this expectation closer to reality. Real-time payment (RTP) systems, which allow money to move almost instantly, are being adopted in a growing number of markets through cross-border connections such as the PromptPay-PayNow Singapore-Thailand link. Meanwhile, moving to ISO 20022 will allow more complete data to be transferred along with payments, solving problems with fragmented information.
However, the real transformation will come from blockchain-based solutions, Panaino explains.
Philip Panaino, Head of Cash, Standard Chartered
“Programmability via smart contracts is a key differentiator for blockchain payments compared to traditional and even more modern fast payment services,” he says.
Using distributed ledger technology (DLT), treasurers will gain unprecedented control over working capital, liquidity and payment flows based on business rules and conditions, allowing automation and execution of the entire end-to-end process – from payments to suppliers to receipt of payments from customers. seamlessly in real time across borders.
For example, a manufacturer could program payments to suppliers to be automatically paid when a certain performance threshold is reached, or a retailer could instantly distribute loyalty rewards based on real-time streaming of purchase data to their blockchain application. This automation eliminates the need for treasury staff to manually review documents, verify metrics, and manually release transactions, saving significant time and processing costs, but also, perhaps more effectively, avoiding “parking idle working capital” while awaiting treasury needs.
This programmability also futureproofs treasury systems. Business conditions can change quickly, but with blockchain, payment logic can be easily updated by adjusting the underlying code—no costly upgrades to a legacy system required. This could mean that a commodity trader who takes advantage of market prices can execute a just-in-time (JIT) capital transaction where and when needed, in real time and at scale.
With the entire treasury function, including cash, trading and risk management, consolidated on a single, integrated blockchain-based platform using, for example, an API-based treasury management system (TMS), funding processes that currently take months to complete can be reduced to seconds. “And this is just the beginning. The potential could extend to capital market activities such as fundraising, where the entire lifecycle could be generated automatically: via ERP and TMS connected to the on-chain corporate borrower’s credit information, and debt profile via an asset exchange clearing protocol. This provides institutional money (asset managers, banks, real money funds) with real debt terms for immediate execution online, replacing lengthy roadshows, lengthy paperwork and multiple intermediaries such as law firms, paying agents and escrow agents. – adds Panaino.
While this may all sound too good to be true, banks like Standard Chartered are working right now to make it a reality.
One example is the Bank’s investment in Partior, a blockchain-based interbank clearing and settlement network. As a founding shareholder, Standard Chartered is the first settlement bank in Europe to operate on the platform, and the bank will leverage its global payments capabilities and clearing presence to expand Partior’s international presence.
“We are accelerating the adoption of blockchain technology with Partior across our global wholesale payments and settlement network, preparing to evolve payments and cash management products into a universe of faster, better and more cost-effective opportunities,” says Panaino.
“We’re building products for a world where enterprise customers’ ERP and TMS are networked,” he adds. “In this world, our clients will significantly reduce their dependence on third parties and will be better able to exploit immediate opportunities with minimal delays in their respective markets, with inherent flexibility in acquiring, deploying and holding working capital.”
As technology evolves, those who get on board early will be best positioned to ensure solutions align with treasury’s strategic needs, and the time for pilots and experimentation is now. Corporate treasurers have a unique opportunity to actively engage their banking partners and see the technology in action through their own payment data and processes—whether it’s vendor payments, currency hedging, or capital markets access.
Panaino encourages treasurers to talk to their banking partners about the potential of blockchain in cross-border payments, and to participate in pilots and proof-of-concept projects to witness how the technology can benefit their unique business environment. Ongoing treasurer involvement and feedback will guide the development of production-ready solutions, as well as the potential benefits of streamlined operations, cost savings and new opportunities to change the capital landscape.
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