1097. Insights: When money moves 24/7, can treasury keep up? With J.P. Morgan

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1:14Welcome to Fintech Insider Insights. I'm Benjamin Ensor, Director of Research and Strategy at 11FS. On this week's episode of Fintech Insider, in partnership with JP Morgan, we're asking what happens when money moves 24 by 7, but Treasury doesn't. because money doesn't really respect business hours anymore or banking hours. Payments increasingly move in real time, businesses operate across borders around the clock, and financial institutions are expected to respond to market conditions almost instantly. But managing the liquidity behind all of that can be a very different story. Cash can sit across multiple accounts, multiple entities, multiple currencies.

1:52Information can arrive at different times, and decisions can still depend on processes designed for a financial system with traditional nine-to-five operating hours. So what would a real-time approach to liquidity look like, and how close are we to getting there? To help unpack these questions, I'm joined by a fabulous panel of three guests. First of all, I'm delighted to welcome Amy Ekhoff, Global Head Liquidity Product Solutions Specialists and Global Head Liquidity and Accounts Commercialization at JPMorgan. Amy, welcome to the show. Please could you tell our listeners a little bit about you and a little bit about your role at JPMorgan.

2:28Sure, Ben. Thank you very much. It's really great to be here. So as you know, my name's Amy Ekoff and I need co-head together with Ross, who's on here today, a global liquidity product solution specialist team and also the global liquidity and accounts commercialization teams at JPMorgan. We work very closely with our clients, both corporate and non-bank financial institution clients to really understand their liquidity challenges and design the right solutions for them and bring new capabilities to market. So I really sit very much at the intersection of clients, product and technology, including innovation, which really makes today's conversation particularly relevant and interesting for me.

3:09Fabulous. Welcome. So I'm also delighted to welcome, as Amy's just mentioned, Ross Webster, Amy's colleague, who is Global Co-Head Liquidity and Accounts Product Solutions Specialists Payments at JPMorgan. So welcome to you too, Ross. Could you also tell us a little bit about your role, what you do at JPMorgan and how your sort of work relates to what Amy does? Thanks, Ben. So again, thank you for having me. It's really great to be here. I co-head the function you mentioned with Amy globally. It's a bit of a mouthful, which is probably why my wife and my friends still don't know what I do. So if I was to put that into simple terms, I help the world's biggest companies figure out how to move their cash and how to make it work harder.

3:53I think of it as a bit of a financial Tetris, but across dozens of countries, currencies and time zones with pieces that never stop moving. So I've been JP Morgan since 2017, based in London. And before that, I held similar positions with a number of large financial institutions. So I've basically spent my entire career Obsessed over liquidity Which I promise is a little bit more interesting Than it sounds at dinner parties So I'm really looking forward to having this conversation today Fabulous, you're in the right place And I'm also delighted to welcome Heather O 'Gorman, Director of Treasury Cash Management and Safeguarding at Neum It's really great to have you here Heather, please can you remind Our listeners about Neum and Tell us a little bit about your role there please Yeah, absolutely, happy to whilst I think to your point this must be an industry renowned for having many words in your title that no one quite comprehends because I feel the pain so yeah Niamh is an e-money fintech we have a global footprint and our business model is moving money quickly we are across borders business supporting other payment firms and other financial institutions to move their money across borders and we work with the likes of JP Morgan etc and the banking providers to support us in being able to do that.

5:10So liquidity management for us isn't only paramount to ourselves as a business, but also to our clients. So we feel this almost as a double hitter, as it were, when it comes to ensuring we have the right liquidity frameworks, because it doesn't just affect us, it ultimately directly affects our customers too. Fantastic. Welcome. All right, well, let's dive in. And I think a good place to start is just sort of thinking about the sort of environment of sort of money movement as a whole. Amy, perhaps we can start with you. How have sort of changes over the past few years changed how sort of banks and non-bank financial institutions think about liquidity?

5:53I mean, obviously, we've been on a sort of 20, 30-year journey of sort of electronification, digitization, and so on, but money moves faster and faster. What are some of the biggest shifts we've seen? I think some of the biggest shifts or, you know, what we see, and particularly in the arena that I work in, which is really with some of the largest corporate clients and non-bank financial institutions around the world, is that money is moving very, very quickly. And what's really critical is how quickly the treasury teams can understand and really respond to those positions. and that creates a little bit of a disconnect.

6:30So money is now moving and really what we see is an always-on world, but many treasury operating models are still built around batch cycles and cut-off times and business hours. So what we're now seeing is that the payment happens first, but really the understanding of that position often comes later. So in practice, the constraint that we see now isn't really about liquidity. It's can we see it? Can we trust the position? and can we move the liquidity safely with the right controls to exactly where and when we need it. So look, as real-time payments scale, we're also really dealing with near instant irrevocable transfers and immediate confirmation.

7:12And that sort of raises expectations internally for our clients because the business sort of assumes that Treasury can answer in the moment, where's our cash and what do we do next? And that's not always the case. So I think you're saying the problem isn't so much the lack of liquidity, it's the lack of visibility, the lack of data, the lack of confidence about whether certain money is settled or not. Is that correct? It's as much a sort of data and visibility problem as it is an actual liquidity problem. Yeah, that's right. I think there are several points of friction today, actually. And I think the friction point is sort of maybe two or threefold.

7:51So I think the first point is really around fragmentation. So a lot of our clients end up with cash spread across, you know, multiple of accounts, systems. And this creates like real effort to sort of maintain a single reliable view of positions and forecast needs. And I think the second one is really around the funding mechanics in a 24-7 environment. So if the settlement layer is always on, but some traditional rails and processes aren't, treasurers end up pre-funding and carrying buffers. And those buffers are really sometimes over weekends and holidays. And what you see is that ends up with what this term that we call sort of in the industry called trapped, like trapped cash.

8:36And treasury teams keep this just-in-case buffer sort of sitting in local accounts from Friday through to Monday because they're really worried that something could hit over the weekend. And that cash is safe. but it's idle. And it's there because processes aren't confidently funding on demand always. And that's where we see a big shift in trend, actually a move towards, you know, how do you solve that problem statement? And I guess as we go through today's conversation, we can start touching on, you know, some of those solutions where automation really, really helps around threshold-based sweeping.

9:10Thank you. Heather, I'd love to bring you in. So building on those points Amy was just sort of making about, you know, the shift towards real-time 24 by 7 money movement. Is this sort of changing how you manage liquidity? Is it just sort of exposing weaknesses that were already there? Or is it creating, you know, genuinely new issues? It's an interesting one. I think the need for instant or near instant payments is becoming much more of a need for lots of entities. and as I say we work with a lot of financial institutions and other entities to help them move their money across border because what we tend to find is that the ability to pay in and out locally is fantastic you know the opportunity to be able to do 24 hour seven payments in a local jurisdiction is very easy to do now and actually you know there's been a lot of push towards that in recent years.

10:09However, it's still difficult to move money across borders. It's still difficult to get you money from one country to another. You know, we're still very reliant on a quite dated old process via Swift, et cetera, that can take days. And I think that's where the crux of the matter comes in. And I think although we're growing this amazing network of instant payment routes in local jurisdictions, the Treasury issue all comes down to making sure that, OK, it's been paid in instantly in the US, but how do we now make sure that that's instantly payable in Singapore. And that's where, to Amy's point, these buffers come in, right?

10:43We have to then be sitting there going, right, well, we've received all this in the US and we can receive that instantly, pay it out instantly. But if we need to make sure that we've then got enough in Singapore at the same time, we then have to have these, you know, liquidity forecasting processes and ensuring that we've got the money there to pay out. So I think there's always going to be this crux between the instanteness of the payments in their local jurisdictions versus what we can then do across borders and across banks as well. Yeah, and of course, lots of large businesses and lots of large financial institutions have got huge mismatches between sort of where cash is coming in, the currencies, the countries, the times that cash is coming in and where it's going out to suppliers, employees, et cetera, et cetera, et cetera.

11:25Ross, I'd love to bring you in too. What are your clients starting to ask for as they're sort of trying to address some of these transitions and some of these challenges? The conversation has fundamentally shifted. A few years ago, the ask was simple. Move my money faster. Today, it's a completely different question. Clients are asking, help me understand where my money is across every entity, every currency, every time zone, and help me act on that information in real time, which is, I think, what Amy and Heather were articulating. And I think a good replicable example is when you look back at how we used to use maps now versus 20 years ago.

12:07The objective has always been the same. How do I get to my destination quicker? What we used to do was plan a route before we left the house, look at a map, maybe print it out, highlight the directions. Now, we expect real-time navigation that reroutes us dynamically based on traffic, accidents, and road closures. We didn't need a faster car. What we wanted was intelligence about the journey itself. And that's what's happening with Treasury. Clients don't just want faster payments. They want intelligent, dynamic control over where their liquidity sits and how it moves. For MBFIs in particular, the ask is increasingly about orchestration.

12:47They want a single view of their global cash position, the ability to sweep or concentrate liquidity dynamically, and the intelligence to anticipate funding needs before they become urgent. They want fewer manual interventions, fewer buffers, as Amy mentioned, sitting in idle location and more confidence that liquidity is going to work as hard as it can. And importantly, they want this across the full spectrum, not just domestic payments, but cross-border, cross-currency, different payment rails and different operating windows. The complexity of the ecosystems has grown enormously and they need partners who can bring payments, liquidity and FX together in a more connected way.

13:25So what you're saying is there's a sort of shift from wanting faster payments to wanting greater control over the liquidity and being able to move things around. We often hear the sort of phrase real-time treasury. What does that sort of mean? Is that what you're really talking about? I loved your analogy of moving from a map to a sort of digital route finder. What do we mean by sort of real-time treasury? Is that where we're going? There's two things here from my perspective. I think the first chapter, as we mentioned, was about speed. And now we're moving into the chapter of control. So this is how I often position this with clients when we have conversations around their treasury structure.

14:06Simplification is innovation. We have a tendency in financial services to think of innovation as adding something new, a new rail, a new API, a new platform. But for many treasurers, the most innovative thing you can do is actually take away complexity, reduce the number of accounts, eliminate manual reconciliation, remove the need for checks across six different systems to answer a single question. Faster payments solved one problem, i.e. getting money from A to B, but it created new questions. If money can leave my account instantly, do I have the visibility to know what that means for my position?

14:40If I'm receiving funds 24-7, am I actually capturing and deploying that liquidity? Or is it sitting in accounts I'm not looking at until the next business day or end of day reporting? When you frame the conversation in that context, obviously real-time payments and real-time liquidity lends itself to a discussion around, let's say, real-time treasury. And I think the real-time treasury is something that needs to be unpacked a little bit more from my perspective. So if you change the framing of that conversation slightly, there's a trap I see in our industry, which is where we put the technology before the problem statement.

15:20Someone says real-time treasury, and immediately the conversation jumps to API, Instant Rails, AI dashboard. The better question is, what problem are we actually solving for? For most treasurers, it's not I need everything in real time. It's I need to make better decisions faster with less manual effort. And sometimes that requires real time. Sometimes it requires better forecasting. Sometimes it requires fewer accounts and simpler structures. Russ, you've touched on a really important point here. And I think it's the concept that you can't sort of bolt on a faster rail onto an old operating model and expect a real-time outcome.

15:55And when you think of sort of real-time treasury, it's a combination of so many factors, which is like real-time visibility, plus decisioning rules, plus automated execution, plus the controls that hold up 24-7. It's really something that is a journey itself. And I don't think it's something that's sort of achievable in a one-file swoop. It's not something where, you know, you suddenly end up being real time on an overnight basis. It's sort of like a mixed speed journey where there is a clear progression step by step. It's integration. It's looking at the account structure. It's looking at controls.

16:32And I think you'll end up with structural realities whereby there are varying degrees of real time visibility and third party dependencies based on a market by market infrastructure. and what your underlying business operating model and needs are in each of those individual markets. But I think the destination is clear. Progress tends to be uneven and taken in stages. But I think the destination is clear that people are all moving towards a concept of real-time treasury and as real-time as it needs to be for them. Yeah, and a great way to summarize that is real-time treasury isn't a product that you buy.

17:06It's an operating model that you built. And that's where banks and clients need to work together to put the correct ecosystem in place. You're saying there isn't a magic package you can buy that's going to perfectly solve all of these issues. Surprise. But I love what you're saying. It's very much about a sort of evolution, a journey, isn't it? Heather, one of the things we haven't touched on here yet is the differences between sort of national markets and the differences in sort of national payment systems and so on. Because it's one thing to sort of think about the principles about how to sort of gradually create sort of real-time treasury and faster decision-making and so on, as Ross is talking about.

17:48But some of this comes down to the countries you operate in and understanding the differences in the payment systems and all of the differences in sort of clearing systems and currency restrictions and so on. How much of a sort of challenge is that? And how much does that inhibit you from sort of getting to this idea of a sort of global real-time view of all of your liquidity. Yeah, I think every entity that we are providing our services to, whereby we're providing pay-in and pay-outs for our clients, we're working with banking providers and other PSPs that are ultimately after the same aim we are, and that is to provide instant pay-outs on their end.

18:34And I think that that is becoming the norm now. I think that 24-7, seven days a week is almost an expectation at this point for the majority of jurisdictions that entities will be paying out or paying in through. I think it all comes down to really the knowledge and experience of the Treasury team that are working within those entities and within those different jurisdictional restrictions. and ultimately creating those control frameworks that really consider what needs to take place from a liquidity management point of view to counteract any existing cutoffs. I think one of the things that's really notable from working in different jurisdictions is, for us at least, being a regulated entity as a financial services firm, is the safeguarding obligations and the client money obligations, because that can really have quite a drastic effect on how we then view liquidity.

19:32Lots of different jurisdictions we're finding at the moment are really upping their game when it comes to safeguarding obligations. We've seen recently that Canada have created a new license for payments firms. We've seen Australia are going to be doing the same. And ultimately here in the UK, we've had the CAS 15 rules brought in. For us, looking after our clients' money is paramount and ensuring that we're able to do that within the constraints of cut-off times and liquidity constraints and also obliging to our customers to have quick paying and payouts, I think that's where it can really draw on some interesting liquidity constraints because it's our most important consideration.

20:10It's the first part of my title, not the second. It is definitely our biggest priority when we're looking at our safeguarding and that is what will probably be the driver as a financial services firm creating any complications. Can you just give listeners an example of how those sort of safeguarding requirements can limit or affect what you can and can't do with liquidity? Presumably you're saying you can't co-mingle client funds, obviously, but what exactly is the barrier or the challenge? So we have to safeguard our funds in the jurisdictions where we have customers. and that tends to be for e-money firms it's a one-on-one basis right to the penny for most jurisdictions there's very little buffer allowed it's not you're not allowed to go down a little bit up a little bit we are expected to be able to say at the end of every day this is how much we're holding for our clients and this is how much we then have in our safeguarded bank accounts so that then means that whenever we're talking about instant payouts across borders that we're talking pre-funding we're talking liquidity management with our own operational funds to ensure that we're able to then make those payouts.

21:21It creates this very interesting complexity around how we ensure that we're moving funds from one place to another, whilst also ensuring that we have encapsulated the safeguarding requirements. You know, it's quite different to a bank, I suppose, where, you know, the reserve concept and the accepting deposits is a very different ideal in comparison to an e-money firm where we are obliged to always keep the same amount of liability to assets within our accounts, which really does create this sort of interesting constraint on our liquidity management. Really, really interesting. I think listeners to the podcast don't need any reminder because we've talked a lot about various issues that have happened elsewhere in the world or in different places in the world where companies have not done that safeguarding properly.

22:06Sorry, Amy, did you want to comment on that? Maybe just from a discussion point, from a banking perspective, we have a number of e-money or licensee money move is exactly that with that safeguarding, you know, the safeguarding obligation as it happens around the world is also currency specified as well. That's where you start seeing an intersect of quite sophisticated tooling to help manage those safeguarding obligations in their real time or with the timeliness that's required by the market 24 hours or same day. And that's where you start to see an intersect of products like notional pooling, which allow clients to sort of have the client money accounts, you know, on the side that allow them to, you know, leverage their operating cash that they have and safeguard in their appropriate currency without an applied FX in the middle of that and meet the kind of safeguarding obligations in the right currency.

22:53So I think, you know, banks are really helping the e-money movers at this point in time to meet those obligations and how they can do that in a real time, whilst also kind of managing their cost and cross-border nature of that safeguarding obligation. Amy, it's actually interesting because it comes back to the point around the convergence of payments liquidity and and data it's not good enough just to have fast rails or to have data what you actually need is the account structures whether physical or virtual that gives clients granular visibility and then you need the all-in and sweeping mechanisms that allow them to concentrate and deploy and then you obviously need the data layer on top that turns transaction flows into actionable intelligence yeah i think to your point ross it really pulls into that We have to choose our banking partners primarily from a safeguarding perspective.

23:46We have some obligations to ensure that we do our due diligence on our banking partners. And that ultimately will often come down to how can we ensure we're getting the data we need frequently enough through the relevant ways for us to ingest that data, for us to be able to know our safeguarding position at any time. and that could be quite a challenge ultimately. It's a challenge for the banks to be able to provide that data. If we said it can be, you know, we're talking instant real-time information here that has to go alongside the payments that we're expecting to be real-time and for us to be able to ingest and then be able to manipulate and use that data for our purposes to ensure we're then calculating our reconciliations correctly.

24:29So there's a lot of reliance, I suppose, on ensuring that that data and that data sharing is being done not only accurately, but as efficiently and effectively as possible as well. I was just going to say, it's funny that Heather mentioned data. And Amy, I was going to lose a bit of an analogy. I know you're kind of a Formula One fan. But when you think of F1, the cars generate thousands of data points during a race. Tire temperature, fuel loads, wind speed, hundreds of sensors. but it's not the team with the most data that wins the race. It's those that can translate that data into actionable outcomes, whether it's to pit now, switch to soft tires, change with the wing angle, whatever that may be.

25:14And I think that comes back into your liquidity structures and how treasury utilised data to elevate that into actionable outcomes. Real-time visibility alone is not always helpful. You know, if I gave Heather a list of every real-time transaction that was made across 200 accounts in 30 currencies, it's probably overwhelming. What matters is how does she create that, turn that into intelligent visibility, and then use that action, meet her safe garden obligations, and move cash around the world dynamically to make them as efficient as possible. I think, just to anchor that, I think visibility, like it's seeing to doing, right?

25:55So it's seeing to doing, I think, put simply invisibility, you know, without the right real-time infrastructure to drive automation. It's just a faster-looking problem. You can see your problem quickly, but you need to be able to act on that quickly as well. Love it. All right. I'm loving these analogies that you're deploying, Ross, to simplify this. Like I mentioned, my family don't know what I do. So I'm trying to use other analogies to my resume. I think it's a problem to quite a lot of people who listen to the podcast, isn't it? So we've explored why an always-on financial system is putting traditional approaches to liquidity under pressure, and why operating globally doesn't necessarily mean institutions can approach each market the same way.

26:43So what we're going to come on to in a minute is looking at how a more connected, more intelligent approach to treasury, what that requires, and whether better liquidity management can become a neighbor of growth rather than just an operational function. So we'll take a quick break here and we will be back very shortly.

27:02This episode is brought to you by Palmolive. Family time isn't just the big moments, it's weeknight dinners, sitting around the table, everyone talking all at once. So when the plates are empty and the sink is full, use Palmolive Ultra. Palmolive's most powerful formula removes up to 99.9 % of grease, leaving your dishes sparkling clean. And the new convenient pump makes cleaning even easier so you can spend less time tackling dishes and more time together. Shop now at palmolive.com. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more.

27:44Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at indeed.com slash podcast. That's indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed-sponsored jobs.