Every year we write a short blog on predictions for the upcoming year (because who doesn’t, really??). Before starting this year’s, I re-read our 2015 predictions so I wouldn’t repeat / accidentally plagiarize my ideas of 12 months ago. Yet, after a quick read, I realized that many of the pertinent topics for 2016 were also top of mind one year ago. Here’s a quick review:
Bitcoin
Prediction: Wouldn’t make the mainstream in 2015
Result: True! Bitcoin did not become a mainstream virtual currency, although the underlying technology supporting bitcoin (blockchain) certainly made some headlines. Bitcoin will likely never be “the” virtual currency, but virtual currencies will grow in popularity in coming years. As for blockchain – that will be as disruptive to payments and trading as anything we have seen in years.
Read more: Blockchain: is it time for treasury to care?
Local Payments
Prediction: Treasurers would seek ways to reduce payment costs and make more local payments via shared services and payment factories
Result: Yes for some, status quo for others. In 2015 we saw three to four times as many RFPs from companies looking to implement payment factories, as we had in prior years. However, the biggest impact that blockchain technology may have for corporate treasury is on peer to peer payments. So perhaps 2016 will see further emphasis on payments.
Read more: The business case for a payment hub
eBAM
Prediction: Effectively no movement at all
Result: Effectively no movement at all. We are still waiting…
Higher Interest Rates
Prediction: The US would raise interest rates, spurring changes in investment patterns
Result: The Fed raised rates at the very end of the year, although changes in investing behavior have yet to fully materialize. With possibly more rate changes on the horizon and MM Fund regulation changes coming into effect in October, it will be towards the end of 2016 that this convergence of better return on cash, changing appetite for money market funds, and more banks turning away non-operational cash as a result of their own Basel III compliance will be felt.
Read more: Retooling treasury for the impending interest rate hikes
Regulation
Prediction: Regulatory changes in 2014 will impact treasury behaviors in 2015
Result: We didn’t see colossal changes, but there were some impacts. EMIR reporting has been a headache for many treasurers with European-based hedging programs. SEPA has created payment efficiencies for many organizations, although the benefit has been arguably realized as much (if not more) by banks and treasury technology providers. 2016 has MM Fund rules such as floating net asset value and redemption fees/gates coming active in October, while banks continue to feel out how they want to do business with their customers within the “new” Basel III world. Fortunately there does not appear to be any ultra disruptive regulation on the horizon for treasurers to be concerned about, so from that perspective 2016 is probably not the year of regulation volatility.
Cybercrime
Prediction: We will see more cybercrime
Result: As expected, we read about sophisticated spear phishing schemes, increases in internal fraud, and continual reminders that security in treasury is more than just having a great password. My hope for 2016 is that treasury and finance implement standardized workflows for payments so that no matter what type of payment, whom it is requested by, or in what part of the world it is initiated, approved and transmitted – that there are the same controls and procedures implemented to eliminate exceptions, the scenarios that fraudsters prey upon. I also hope that everyone uses two-factor authentication for everything from their personal email to their treasury management system. Your password - while amazingly creative, I am sure - is not enough
Read more: Combating the ever-growing threat of payments fraud
China
Prediction: Deregulation of funds movement in/out of China will enable more business to be done in China in Renminbi
Result: China is “more” open for business, with more organizations taking advantage of opportunities to make China part of global cash pools. Documentation challenges have limited the number of organizations that automate onshore/offshore sweeps, but the impending rollout of the CIPS for international payments and the recent achievement of the RMB as a reserve currency will continue to remove barriers for foreign organizations to do business in China in local currency. The only downside, of course, is that the Yuan may lose some value to the USD and EUR in 2016 in part because of expected monetary policy changes in China. Minor details that can be managed through an effective hedging program, of course!
What else in 2016?
Information security and treasury: The CIO, the CTO, and the CISO (information security officer, by the way) are getting more involved in treasury system decisions. Why you ask? It’s because organizations are fully embracing the cloud but the CIO/CTO/CISO etc. are realizing that their treasury teams have been making rogue decisions, sometimes mistakenly thinking they chose a cloud treasury system when they actually bought a wolf in sheep’s clothing. 2016 will see greater influence by IT in treasury technology decisions. So, if you want to impress your CIO/CTO/CISO, I highly recommend knowing the difference between a SAS70, SSAE16, SOC1, SOC2, and a Type I vs. Type II report. And while that may seem like a lot of letters, there’s a great blog from Gartner that still applies today.
Best practices: While this may sound a bit obvious, in the past few years since 2009 we haven’t seen as much focus on best practices as we have on fire fighting in light of the gaps in visibility and counterparty risk that the credit crisis exposed. Interestingly though, the very organizations that we consider disruptive in their respective industries – the Ubers, Squares, Airbnbs, Spotifys, and Dropboxes of the world – have CFOs and treasurers who don’t care about how things were done but are instead focused completely on the best way to do treasury. They are constantly learning and adapting to lead rather than simply emulate cash forecasting, treasury structures, hedging, or cash mobility processes that other companies have implemented.
eBAM to flourish: Just kidding, we’re still not going to fully realize eBAM in 2016