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The Future of Cash Management These are interesting times for cash management. Traditional business models are evolving at a time when macroeconomic factors, including the effects of the continuously evolving COVID-19 pandemic, as well as the systemic low and even negative rate environment are putting a further strain on businesses. So what does the future hold?

The Future of Cash Management

The Future of Cash Management

By Eleanor Hill, Editor


These are interesting times for cash management. Traditional business models, for clients and their partner banks, are evolving, with digitalisation a core driver. This is occurring at a time when macroeconomic factors, including the effects of the continuously evolving COVID-19 pandemic, as well as the systemic low and even negative rate environment are putting a further strain on businesses. So what does the future hold for cash management, and how is Deutsche Bank meeting these needs? TMI speaks to Ole Matthiessen, Head of Cash Management, Corporate Bank, Deutsche Bank to find out more. 


Eleanor Hill (EH): Which macroeconomic factors would you say are having the most significant impact on cash management today?

Ole Matthiessen (OM): Liquidity is one of our clients’ most precious assets. However, cross-border transactions, different time zones, varying local banking practices and regulatory environments can make it difficult to utilise liquidity effectively. Macroeconomic factors throw an extra spanner in the works.

The euro interest rate environment represents a severe cost pressure for all our clients. The decision to boost the European economy by taking interest rates below zero in 2014, followed by further cuts in recent years, primarily affected the financial institutional client base, to begin with, at least.

Given the dramatic change in outlook for the euro interest environment over the past 12 months, however, it’s fair to say that negative interest rates are here to stay – and this has made it necessary for banks to reconsider their euro strategy across all client segments, impacting treasurers in the process. We have been very open and transparent around this and have begun to pay our clients market rates – as have our competitors. While this means our clients now face negative rates, we have provisions in place to help offset this.

And while the euro has become a ‘known’ challenge for corporate treasurers, with an increasingly interconnected treasury space and continuous growth of cross-border payment flows, there are also ‘unknown’ macroeconomic challenges driven by one-off events worldwide.

The COVID-19 pandemic is a clear example of this. The wide-reaching impact is such that we have not only seen central banks and governments around the world swiftly assembling many stimulus packages to support the economy, but so too even the brief closure of an interbank FX market in Asia; just some examples of the domino effect that unpredicted events pose on the global economy and the challenges this poses to today’s treasurer. This emphasises the importance of corporate treasurers in helping their businesses operate in uncertain times.

 

Ole Matthiessen

Ole Matthiessen
Head of Cash Management, Corporate Bank, Deutsche Bank 


EH: So, how are your clients reacting to these challenges? Is it impacting their approach to cash management?

OM: Treasurers are increasingly focused on optimising liquidity, especially in times of crisis. If they have cash reserves in various jurisdictions around the world, and partner banks in each, it is difficult for any bank to provide a complete solution. As such, we are definitely seeing a trend towards clients requesting our services on a regional, or even global, basis, as opposed to country-by-country.

This plays well into our overall cash management strategy: a global bank, with European roots, serving clients worldwide. We currently have people on the ground for our clients in 34 locations and, over the next 18 months, we are opening three new branches for our Cash Management business in Australia, Ireland and Luxembourg.


EH: Busy times for all! What other demanding situations are today’s treasurers facing?

OM: Beyond macroeconomic factors, treasurers are dealing with more fundamental challenges. Many traditional business models, for both banks and clients, are changing. When we talk to treasury departments, as well as our clients’ innovation and digital officers, it’s clear that they are under increasing pressure to perform cash management processes more efficiently and in a more automated manner. What’s more, they must do so with much smaller budgets.

 

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