Treasury In Transition: What’s Next As Businesses Recreate Their Payment Flows

It’s been a big year for direct-to-consumer (D2C) plays by big brands. Coke, Pepsi, Nike, Heinz and Mars are just some of the brands that consumers are used to seeing on store shelves that have, in the last 18 months, made big moves to open new sales channels that cut out the middleman and sell merchandise directly to their customers.

Looking at the data, the reason why is clear, since over a third of consumers (37 percent) report being interested in direct-to-consumer sales while also, statistically speaking, being younger, more educated and wealthier consumers than those with less interest in the concept. The draw is obvious.

Less obvious, but equally critical, J.P. Morgan Managing Director and EMEA Head of Payments Sara Castelhano told Karen Webster in a recent On The Agenda conversation, is the new world of challenges organizations open up for their treasury departments as they make this expansion away from the traditional B2B processes they know and into the far less familiar realm of D2C transactions.

Innovation in payments, she said, obviously has a knock-on impact on treasury, given that they have to do the funding and manage the whole process that happens around it.

“What we are starting to see is these go-to-market strategies taking place at an organizational level. Bringing treasury in to have the conversations, to help with the end-to-end process flow is critical. Organizations that aren’t bringing treasury to the table are those that end up having delays in the longer run,” Castelhano said.

Transforming Treasury 

The good news, Castelhano said, is that the importance of tying treasury to these D2C shifts is increasingly the trend in the industry — meaning treasury is very much in the driver’s seat. The trouble, however, is knowing what to do in the driver’s seat once they’re there.

As they expand their models, it means designing a new consensus about how they are going to collect payments from individuals, which is absolutely different from their traditional business process for doing so via ACH or wire transfer. Many firms, she noted, are wading into things like handling cash for the first time, not to mention the entire ecosystem of alternative payment methods that is springing up all around in real time.

And it’s more than just the methods of payments — the size and schedule of payments change rapidly. Instead of being built to manage low-volume, high-value transactions with 10 to 100 counterparties that are stretched out over extended payment term windows of 30 to 90 days, she said, they have to learn to manage low-value transactions coming in constantly from an “infinite number of counterparties.”

“Treasury has to have automated reconciling processes because the sheer volume of what’s coming in requires a straight-through processing method,” she said. “But also having that high volume and new business potentially will lead you to think about how to segregate my cash and my businesss in a different way, because I now have my direct-to-store or my direct-to-consumer marketplace alongside my normal distribution from treasury funding model. And that can become quite complex.”

How Treasurers Can Take On The Challenge 

Treasury departments are dealing with a lot that is new, in a space that is moving extremely quickly and driven by changes in the underlying consumer economy. New payment methods like BNPL are already growing quickly, meaning treasurers have to start thinking very differently and be much more agile than they ever have before.

Leveraging application programming interfaces (APIs) helps because they are highly flexible and usually easy to implement, she said. That means they are well-designed to help navigate the speed of change and drive the changes and improvements businesses need to reconstruct their payments processes as they step out of the predictable world of B2B payments and enter the much more dynamic — and much less predictable — consumer space.

“My advice to treasurers is they need to think about building agility and thinking longer term,” she said, “because what I think I value today, in 12 months the vibe in the industry could be completely different with the way we’ve seen new payment schemes pop up faster now than they’ve ever done in the past.”