COVID-19 is one of the biggest disruptions we've seen in recent times. It has impacted every corporate and every individual across the world. For transaction banking, it has proved especially challenging; banks have had to continue to provide all the essential services our clients expect. This has involved helping ensure that liquidity is well managed, while supporting activities such as cash deposits and payments, to ensure business continuity.
As a result of the pandemic, we have seen an increasing number of corporate clients transacting via digital channels. Whether it be online, mobile or web-based, digital channels have helped them to do business better. Companies have made that transition very quickly, and today between 80 to 90% of our transactions are online. It really is an area where we have seen a big change in the corporate mindset.
That change has been reflected in the way we ourselves operate. We have had to find ways of carrying out trade without physical documents, for example. Transaction banking has gone through a major change and we have adjusted to the new normal. We were ready for this increased drive to digitisation as we have invested in our infrastructure. This meant that with the onset of the pandemic, we were able to ensure a smooth transition for our clients, who quickly began to use the digital solutions that we had built.
Liquidity and working capital management remains the top concern for our corporate clients. Around the world, we see some countries that had opened up their businesses and services now going back into lockdown, meaning that the uncertainty around the pandemic has not gone away. Cash flow forecasting remains essential. Corporates are checking how they can ensure that their supply chain will not be disrupted and that they themselves will have enough cash reserves. Receiving timely payments, managing the cash flow, getting accurate data on time, and being nimble are essential attributes today.
Like many countries around the world, the UAE government helped support corporate and SME liquidity during the onset of COVID-19 through its Targeted Economic Support Scheme (TESS), which was backed by the Central Bank. One important consideration is that the programme currently runs until the end of the year. If it turns out that the scheme is not extended further, treasurers will need to be ready and have alternative arrangements in place. Now is a good time to speak to banking partners and have a liquidity line ready, or restructure existing loans, so that liquidity is not strained heading into 2021.
Corporates are not only using digital channels for payments, but are also opening accounts digitally, sending self service requests on trade documents and using digital channels for their trade products. This change in mindset has helped corporates increase their efficiencies as they leave more manual processes behind. Sophisticated treasuries have also looked to use tools such as APIs and artificial intelligence to enhance real-time decision making, liquidity management and reporting.
With the uncertainty we have all experienced this year, information and data flow has become very critical. Treasurers use a wide array of data to support their role in the organisation, as they need to guide senior management on a variety of topics. Enquiries about payment statuses, cash reserves, and what's happening in the supply chain, are common. A real-time online platform can help treasurers manage the pressures they face in this regard.
For treasurers at large corporates, the supply chain has been a major concern as a result of this crisis. This is their lifeblood and they can't afford too great a disruption. We have had to make sure that we had the right programme in place to finance supply chains, ensuring business continuity for clients during this disruptive time. While these programmes already existed, the pandemic has accelerated their take up.
The approach corporates take to digitisation depends upon where they are today in their digitisation journey, and also their size. SMEs and smaller entities, who can’t afford a ‘big bang’ approach, tend to take a mixed path, looking for quick digital wins paired with long-term strategy. This can be as simple as adopting a mobile app from a bank that is good enough to monitor all of their transactions. At the start of the journey, companies don't need too many sophisticated solutions all in one go. As they grow, they are more able to increase spend to enhance their digitisation journey.
Large corporates, on the other hand, are already quite advanced and invested in their digital journey. They might have an ERP system and/or a treasury management system (TMS) and aspire to integrate everything through an API, and employ artificial intelligence in certain processes. Large corporates are taking advantage of solutions such as SWIFT gpi, having their reports online, seeing liquidity in real-time, using blockchain to finance their trade. Digital transitions can vary based on the size of the organisation. The good news is that there are digitisation possibilities available at every level.
Digitisation is leading to more real-time treasury management, with quicker decision-making. This trend is accelerating, so treasurers need to make full use of technology and digital solutions that can really take advantage of the vast amount of data that flows to the treasury department. Automation and AI will help treasurers to take faster decisions.
Technology is also going to remove a lot of borders, and while some treasuries have centralised operations, this opens up an option for treasury functions to remain decentralised at their different locations and still manage their cash flows better. Treasurers need to continue to upskill themselves as the technology they use evolves and understand digital channels better in terms of how they can connect to, and work with, the banks that have these solutions.
Bhupesh Sharma is head transaction banking at Abu Dhabi Commercial Bank