Why More Banks and Fintechs Are Turning to Treasury as a Service for their Card Issuing Programmes
The provision of effective Treasury management for the payment card components of Financial Institutions can be challenging. Effective Card Treasury Operations requires Banks & Fintechs to analyse and reconcile large data sets (often from multiple sources) and manage the ensuing payment flows in multiple currencies on differing schedules. These tasks need to be completed in the face of increasing consumer demand for access to international payments propositions (e.g. multi-currency wallets) and low cost international remittance networks. Fintechs often lack the internal resources and technological capabilities necessary to fully leverage Card Treasury Management, while Banks may not prioritise Card Treasury Management as part of their overall Treasury strategy.
This article will explore the benefits of Treasury-as-a-Service (TaaS) when applied to card payments operations and why more Banks & Fintechs are turning to TaaS to ensure they are managing this important part of the business effectively.
What is Treasury as a Service?
TaaS providers offer cloud-based solutions for treasury management, handling the technical and operational aspects of treasury management, such as payment processing and risk management, and offering real-time reporting and analytics. These services either provide a fully managed treasury service or support existing treasury functions with specialist data insights, payment operations or expanded access to 3rd party payment networks (e.g. cross-border remittance networks).
TaaS solutions are designed to offer both an effective alternative and/or an efficient support to traditional in-house treasury management solutions, using technology to automate processes, reduce errors, and improve speed and accuracy. Recent changes in how Visa & Mastercard manage exchange rates on card transactions have highlighted the increasing importance of TaaS to Card Issuers, but the benefits are not limited to cross-border transactions.
What does TaaS provide for Card Issuers?
Card Issuers face unique challenges in deploying effective Treasury Management. These challenges revolve around:
The scale and breadth of information to be processed:
One of the biggest challenges in treasury management for payment card products is ensuring that Treasury & Payment Operations teams are operating from accurate and reliable data sets. This is compounded by card data sets often coming from multiple sources, including different payment processors and card schemes. Integrating these data sets into a single, unified view can be challenging, especially when dealing with large volumes of data. TaaS providers specialise in digesting and analysing large card payments data sets from multiple sources in order to deliver actionable insights to Treasury & Payment Operations teams. Importantly, TaaS providers can deliver that information in the format and on the schedule as required by those teams
The requirement to connect to multiple payment networks in multiple currencies to provide a comprehensive product offering:
As global travel and commerce continues to outpace forecasts, Banks & Fintechs have been required to deliver improved cross-border payments functionality to meet consumer demand. This includes both multi-currency wallet functionality (preferred by >40% of consumers for international spend) and lower cost remittance payment networks. Delivering this functionality with an efficient Treasury & Operations function requires trading capabilities in new currencies and the ability to connect to payment rails other than SWIFT which can either be a distraction for larger banks or be a significant project for smaller Fintechs without the appropriate resources or compliance controls to deliver an effective product.
The need to build robust payments operations capabilities to meet increased requirements for T+0 Settlement of Card transactions:
In addition to changes in how Mastercard & Visa manage exchange rates, there have been some significant changes to the settlement timeframes required of Issuers & Acquirers. This move to increase settlement timeframes benefits the overall payments ecosystem by increasing the velocity of funds, but places pressures on Card Issuers to ensure that their internal payments operations are fit for purpose. This new environment typically requires Treasury & Payments Operations teams to streamline their activities and process the relevant files in a short time window. This becomes increasingly complicated where Issuers have combined Issuing & Acquiring functions or settle in multiple currencies to Visa & Mastercard to support their product range.
These challenges have made effective Treasury Management for Card Issuers an area of increasing specialisation, driving the growth of the TaaS sector. Partnering with a specialist provider of TaaS services for Card Issuers can drive a number of benefits:
Cost savings
One of the primary motivations behind Banks & Fintechs adopting TaaS is the potential cost savings. TaaS solutions can streamline processes, improve efficiency, reducing the need for manual labour and ultimately creating new sources of income.
Improved efficiency
TaaS solutions can significantly improve the efficiency of treasury management processes. By automating processes and reducing errors, TaaS solutions can process large volumes of data quickly and accurately.
Real-time reporting and analytics
TaaS solutions offer real-time reporting and analytics, which can help Banks & Fintechs make better-informed decisions. Real-time access to data can help Banks & Fintechs quickly identify trends and make adjustments as needed.
Better risk management
TaaS solutions offer solutions for managing risk, such as fraud detection and prevention, which can help companies protect themselves against potential losses. TaaS providers use advanced analytics and machine learning algorithms to identify potential risks and prevent fraud before it happens.
Scalability
TaaS solutions are designed to be scalable, which means that they can grow with a company's needs. TaaS providers offer solutions that can handle large volumes of data and can be easily customized to meet the specific needs of a company.
In summary, the emergence of Treasury-as-a-Service as an industry vertical is increasingly relevant to the Card Issuing industry. Issuers with presences in multiple currency areas, with operations in multiple currencies or with ambitions to drive cross-border transactions can drive significant cost savings and efficiencies, whilst ensuring that they get the most out of Visa & Mastercard data sets. The TaaS industry provides benefits to these Issuers whilst reducing risks to the overall payments ecosystem. As the world becomes more connected and cross-border payments continue to accelerate, this is an area where the Card Payments industry can expect to see more innovation.
About Cambrist
Cambrist is an award-winning technology company enabling Financial Operations and Product teams in banks and fintechs to gain more insight from their payment card programme data and create new, reliable sources of income. Our proprietary SaaS platform and advanced data analytics, combined with our team of industry veterans & experts, supports customers around the globe.
Learn more about Cambrist at cambrist.com