Why treasury innovation is helping drive the digital economy

In the digital economy, businesses offer innovative data-enabled services to their customers that enhance engagement and help them stand out from their rivals. As these companies unlock new value from digital technology, their treasury functions are playing a vital role in enabling the business models that are key to success. 

According to new research by DBS, ‘digital economy businesses’ (DEBs), which provide solutions entirely through online platforms, are more likely than those in ‘traditional’ industries – which typically predate the digital economy – to say that their finance and treasury teams are influencing early-stage discussions about commercial initiatives. Six in 10 believe that treasury has an opportunity to take on a more prominent role in the strategic direction of digital transformation.

Transactions have moved beyond the parallel transfer 

One reason for this trend is that the success of service-based business models relies on their reimagining of the traditional buying process, and finance and treasury are essential to this. 

Customers already assume that they will have the agency to manage digital transactions at their convenience and expect their payment details and buying history to be available at point of sale, while businesses increasingly buy digital services directly from other businesses through the internet of things (IoT) — without the need for any human intervention. 

Treasury, in particular, enables this exchange of services and payments within an IoT-powered economy, as traditional industrial companies shift to providing ‘everything-as-a-service’ business models.

“When we offer everything-as-a-service, we are selling not only to customers but increasingly also to machines,” says Peter Rathgeb, Group Treasurer at Siemens. “This leads to different requirements for treasury, because running a manual treasury process in parallel, using traditional fiat money, would be inefficient. Instead, we are looking into programmable money, carried out through blockchain-based technology where payments can be transferred non-stop — whether the amount of money is one cent or millions of dollars.” 

This is the era of a new kind of treasurer

For treasury teams at DEBs, initiatives like these are exciting because they are an opportunity to help shape the business’s future. These innovations also call for new skills and competencies. 

However, the DBS research suggests that many treasury teams have work to do to do here: 

• 53 per cent of DEBs worry that they have an urgent need to update the skills profile in treasury so that it can play a wider role in growth and transformation
• 44 per cent say that gaps in talent have stopped their organisation from making more progress on digital transformation
• Many DEBs say that increasing the proficiency of their treasury teams’ digital technology skills is an important priority.

Culture attracts the brightest talent

As treasury teams develop these capabilities, they may also need to change their culture. For example, this typically risk-averse function could become less conservative. In DBS’s research, 45 per cent of DEBs warn that their digital transformation activity will be at a disadvantage unless finance and treasury can become more accepting of risk in their organisations’ investment strategies.

Bringing new people into the team may help to change this. But although retaining and developing in-house talent will be a priority for many DEBs, they also need to think about what the company can do to attract new people. 

“Talent has a choice about which company it works for,” says a head of digital transformation at a European energy business. “And while salary and remuneration are always important, there has to be something beyond that.”

In the DBS research, DEBs are more likely than traditional companies to say that their treasury teams are exploring distributed ledger technologies and embedded finance. For these companies, new recruits may be attracted by the opportunity to experiment with technologies like these, while the increasing strategic importance of treasury promises more engaging and purposeful work.

The other benefit of working in treasury at DEBs is that these organisations tend to give their people more agency, with many priding themselves on their culture of empowerment: 

• 44 per cent of DEBs say that delegation and empowerment of teams is a key element, from a corporate culture perspective, of supporting digital transformation
• Just 35 per cent of traditional organisations agree that delegation and empowerment Is essential to culture

DEBs recognise that their treasury teams are an important part of the transformation process, and they are determined to recruit and retain people who have crucial digital competencies. Businesses in traditional industries that are exploring the opportunities of digital technology should learn from this and ask how their treasury functions can play a deeper role in transformation.