Cash, Cheques and Liquidity; What happens after the lock down?

With much of Europe and North America now taking the first tentative steps towards releasing the lock down measures, there’s been a fair amount of discussion about what this means and how financial technology can help. Here at Fennech we’ve been looking at some of these trends.

Some of the online comment has focused on the declining use of cash generally in the economy, and specifically in the lock down. However notes and coins are an important payment medium for specific groups in society that have also been disproportionately impacted by the covid-19 crisis; for example casual workers, the non-banked and senior citizens. As we climb out of the current crisis, as a society and a financial technology industry, we should be careful to support all payment mediums – after all, we need a recovery that helps everyone, not just well-paid, white collar employees who can afford all that modern technology can provide.

The use of cheques is also declining steadily, yet cheques remain a small but significant part of overall B2B transactions. Whilst a lot of the pre-crisis discussion on cheques focused on lengthy clearing times etc, the lock down has presented a very different, practical problem for businesses that get paid by cheque; there’s no-one in the office to open envelopes, collect cheques and take them to the bank. At Fennech, we’ve had a number of conversations with businesses looking to support their trading partners by switching to electronic payments, by taking the data they currently use to print and distribute cheques, and turn that into electronic payments.

Looking beyond payment methods, it’s clear that the longstanding visibility and control objectives of treasurers and CFOs will become even more important for businesses during the recovery. Having a clear view of what the business is owed, what liquidity is currently available and what needs to be paid is absolutely critical in an environment where customers may struggle to pay and key suppliers need to be supported. The good news is that the digital tools are now available to easily automate many of those activities and ensure that finance leaders get clear, accurate information in a timely fashion. Liquidity processes can also be automated to ensure that cash is available at the right place and in the right currency to meet day-to-day needs. This goes beyond what most banks make available today in terms of zero-balancing bank accounts to provide automated sweeping based on forecast cash needs. Fennech’s technology bases that forecast not on the statistical view of what cash was needed last month or in the same quarter last year, but on the granular view of what is owed and due to settle today and this week.

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