AI takes unpredictable route to treasury for 2024

Treasury And Cash Management

Dec 18, 2023

Our 2024 Business Payments Outlook comes to a close with this piece authored by Guillaume Jouvencel, co-founder of Corporate Treasury 101. As an expert in the field of artificial intelligence as well as treasury, Jouvencel believes AI will find a home among CFOs next year, with cash flow forecasting emerging as the killer app. 

AI comes to treasury management: Now that the ChatGPT hype has largely subsided, will AI actually prove suitable for Treasury operations? We don't believe that treasury departments are going to be the first in companies to adopt AI chatbots and build futuristic virtual assistants. Treasurers are just simply too risk adverse, as they should be. We do believe that AI will still penetrate the treasury department, but it will embed into existing tools in treasury departments. Multiple companies and third-party providers are utilizing AI to enhance treasury functions and improve their services. We already see in areas such as cash flow forecasting where AI models are outperforming rule-based ones. We expect AI to assume a more significant role in 2024, with major banks and system vendors incorporating AI into their offerings, either by developing in-house solutions or through acquisitions.

Fintech enables sophisticated treasury operations in SMBs: As we look into the future of Treasury Management in 2024, one trend seems particularly promising: the democratization of advanced treasury functions for small and medium-sized businesses through fintech innovation. Traditionally, the integration of sophisticated Treasury Management Systems (TMS) has been a complex, costly endeavor, dominated by cumbersome implementations and a one-size-fits-all approach. This often left SMEs grappling with systems that were either too broad in scope or too rigid for their specific needs. By consequence, Excel spreadsheets rule their treasury management.

The fintech revolution is turning this old paradigm on its head. With the rise of agile fintech startups and innovative financial services companies, the treasury system landscape is experiencing an influx of highly specialized solutions. These solutions are tailored to address specific solutions, meaning you don't need to implement a full TMS to get cash flow management automation. Fintechs are developing streamlined tools which cut the bloat and complexity of traditional TMS's. Instead, they offer lightweight, modular applications that can be easily integrated and customized.

For an SMB, this means the ability to selectively adopt tools that align with their business processes and scale with their growth. Be it cash flow forecasting, liquidity management, or digital payments, there is now a specialized fintech solution available that can be deployed rapidly and without the need for extensive IT resources. This empowers SMBs to leverage cutting-edge treasury functions that were once the exclusive domain of larger corporations, thus elevating their financial strategy and operational efficiency.

Where is the Cash? The rise of money market funds:  In the evolving landscape of treasury management for 2024, our third prediction centers on the ever-critical question: "Where is the cash?" In an environment where interest rates are anticipated to remain elevated, the focus on cash allocation and return on investment (ROI) intensifies. Treasurers are challenged with the dual mandate of maximizing returns while simultaneously ensuring capital safety and liquidity. This delicate balance is where Money Market Funds (MMFs) shine as the quintessential tool for treasurers.

MMFs are designed to offer a secure place for short-term investments, typically delivering returns that outpace those of traditional savings accounts, especially in a high-interest-rate environment. As rates continue to hold steady or even rise, the appeal of MMFs grows. They offer the ideal solution for treasurers looking to optimize their cash reserves; MMFs not only provide competitive yields but also maintain the high level of liquidity that businesses require for operational and strategic flexibility.

In 2024, we foresee a significant uptick in the adoption of MMFs as treasurers increasingly recognize their value in protecting capital while still earning a return that can keep pace with or exceed inflation. The utilization of these funds is set to accelerate, as treasurers seek to navigate the complexities of a high-rate economy. This will enable organizations to maintain liquid, safe, and productive cash positions, ensuring that their liquidity reserves are working as efficiently as possible within the confines of their risk tolerance and investment policies.


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Artificial Intelligence
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