The Role of a Cash Management System Amid the Tech Trends of Banks

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Given the fact that some people are asking for an end to cash transfers and some companies are preferring to go cashless, cash transactions are still commonplace. Cash management systems are integrated tools designed to help businesses handle cash processing from end to end. Most cash management programs are created to help from the point of intake to reconciliation. They can streamline the process, which has numerous benefits for businesses.

Cash Management System

What is a cash management system?

A cash management system helps to manage cash inflows, outflows and cash flows within a company. It also encompasses the financing of the deficit and the investment of surplus cash to ensure an optimum cash balance. Cash management processes begin when the customer writes cheques to pay the company's receivable account. The function ends when the supplier, employee, or government receives money from the company on an account payable or accruals. The basic issue of cash management is to allow the company to retain adequate liquidity while at the same time enhance its profitability.

The adoption of the cash management system technology across the banking sector

Now that the banking landscape is transitioning to self-service models, banks are investing extensively in banking software that ensures ease of usability, is reliable and fortified with advanced security features. A larger focus is being oriented on the advancement of a cash management system, which includes high volume transfers between various accounts. It is expected that the Digital Transaction Banking market will generate an exponential level of revenues in the coming years. Since smaller banks and enterprises are growing in terms of strength, their increasing asset size is predicting a sharp rise in cash management.

Technology trends and the future of banking

Payments Infrastructure

Payments infrastructure will always be the most dynamic area of disruption in the banking sector. Driven by changing trends and technical developments, technological advancements in the payment industry will intensify. Acknowledging the continuous development of a cash management system, technology is projected to shift everything from a range of different products to part of all that users do. Data and innovations will be the driving force behind the differentiation and the dynamics of payments will change.

The increasing presence of digital banks

In recent years, neobanks such as Chime have started to target millennials. Furthermore, fintech such as Kabbage focuses on business liquidity, and big tech companies such as Apple and Google have entered the financial services landscape. In response to these disruptive measures, more banks and credit unions are planning to launch digital labels in 2020 to further attract new clients and members.

Digital is now the default contact point for most customers, making this approach an efficient way to attract deposits and extend the geographic footprint of an institution. For digital banks to be efficient, institutions must ensure that digital experience is convenient, intuitive, and provides a significant differentiator.

Digital transformation

The recent trend towards digital-first banking reflects a significant change in thinking. Traditionally, companies used to work in silos, creating challenges and additional costs in the back office, and inconsistent, disappointing customer service. Legacy technology hinders institutions' ability to easily evolve, rendering it impossible to keep pace with emerging rivals. New-age technologies like a cash management system now can "de-channel" fragmented processes within an organization. As the race for deposits and new account relationships escalate, customer or member experience will overtake channel supremacy.

Over the coming years, more institutions will automate and streamline channels by using tools such as API layers to connect customer and member profiles, thereby lowering costs and enabling more robust and seamless banking experience. This approach enables banks and credit unions to seamlessly unite digital and physical experiences, delivering customized, responsive experience independent of touchpoint.

Innovations in cash management systems that expand their industry-wide presence

Open Banking/APIs

From the era of proprietary applications, private APIs and close networks, banking has just become increasingly open to technologies such as open APIs, Fintech collaborations, cross-industry partnerships, regulatory changes such as PSD2, etc. These technologies affect all aspects of banking and corporate banking, too, needs to be digitally activated and API ready. Multi-bank cash management, which currently takes hours or days to handle, is set for a major transformation with APIs that will change the way a cash management system operates.

Artificial intelligence and advanced analytics

Getting the correct amount of knowledge is crucial to make informed decisions. The use of artificial intelligence and advanced analytics in the cash management system is on the rise because it helps ensure the availability of data and knowledge around the business to make informed liquidity decisions. Predictive and prescriptive analytics will allow companies to extract the vast volumes of data they need to further boost their sales output and financial performance. Predictive analytical techniques such as predictive analysis, rich data modeling, real-time analytics, and scoring can be used to predict patterns in forecasting.

Communication and commitment will play a central role

Top executives are realizing that committing themselves to the cause is incredibly necessary for effective cash management. The cash flow management system technology is expected to become a priority for senior staff in 2018, as this, in turn, would enable them to effectively manage the gap between their objectives and the overall performance of the company. More companies prefer a stripped-down approach to the cash flow control that eliminates both buffers and assumptions to accurately express the company's exact liquidity position. It also implies that an independent company and divisional heads understand the value of cash flow management and take effective action to work towards a common objective.

Industry insights

Aug-2018: Oracle added Transaction processing features to its Autonomous Database Cloud. With additional features, the database can be customized for transactions. Oracle Autonomous Transaction Processing offers a self-driving, self-securing, self-repairing database operation that can be instantly scaled to satisfy the requirements of mission-critical applications.

Oct-2018: Finastra, a UK-based financial services company, launched PAYplus, a premium cloud-based instant payment offering for small to medium-sized banks. The solution meets the rising needs for immediate payment processing. The Fusion Global PAYplus solution can support immediate payment processing, such as high throughput all day, every day and end-to-end transaction times in seconds.

Nov-2019: SAAS, a cloud-based, Sage Intacct accounting product, was launched by Sage Group in the UK market. The product offers a robust suite of applications for accounting and financial management. This company has marked its extension to the United Kingdom.

Nov-2019: Finastra launched Fusion Treasury Essential, a packaged solution. This solution has been developed for banks that do not have a dedicated treasury system but are thinking about automating and modernizing their treasury functions. This solution is ideally suited to banks with insufficient IT resources.

To conclude

The cash management system market is witnessing developments in technologies that lead to a range of revolutionary changes in the power and reach of corporate cash management through newly versatile business solutions. To better understand the future advantages, the implementation of industry standards for authentication, configuration, file/message format, and the content will be of significant importance in creating a new environment for corporate financial processes.

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