Traditional banks began to offer businesses of all sizes a technological tool that fintechs had developed for small businesses: forecasting cash flows or anticipating how money will flow in and out of a bank’s coffers. business before it was caught short.
PNC Financial Services Group and Bank of America each launched a product last month. JPMorgan and Wells Fargo unveiled their offerings in October. Citi presented its version earlier this year.
The challenges of forecasting cash flows plague businesses of all sizes. Many businesses, even large ones, have long turned to spreadsheets to predict their ebb and flow.
“Your cash flow situation will affect you whether you plan ahead or not,” said Karl Augenstein, executive director of technology and management consultancy Capco. âKnowing if you will have enough funds for your next project will help you plan if you need to find a loan. “
But banks have only recently started exploring how they can automate this task, as part of a larger effort to use data and information to engage their customers. They integrate such features into their cash management systems, use artificial intelligence and machine learning to automate forecasting, or partner with fintechs that do the same.
With a few exceptions, “most of the big banks are still just talking about cash management, liquidity, historical stuff,” Augenstein said. “” We will help you to pool funds, we will inform you of your foreign currency positions in the world. But that’s not really a forecast – it’s how much money you have and where it is.
PNC recently presented their tool after starting to think about the idea last year.
In November, PNC’s cash management division announced the addition of Cash Forecasting to the Pinacle corporate banking platform it has been offering for over a decade. Customers can download any data they want, including from corporate resource planning systems and other bank accounts. The tool uses artificial intelligence and machine learning to apply one of five models and produce rolling 31-, 60-, or 90-day forecasts to predict cash flows, plan for variances or surpluses, and explore positions. current and future cash flow for different scenarios. This product was primarily built in-house.
“If you can forecast cash flow more frequently and in a more integrated fashion, you’ll have more control over your business and spend less time entering data into Excel,” said Chris Ward, head of data, digital and corporate. innovation for PNC cash management.
The response to date has echoed this goal.
âWe have received feedback from clients on how this has improved their ability to be more decisive about their businesses,â Ward said. âThey spend a lot less time on manual tasks and a lot more on what to do with the forecast. “
Bank of America also launched cash flow forecasts to its large customer base last month. But the road to incorporating this capability into CashPro, its online banking platform used by business customers, dates back four years.
âThe first thing a Treasury client will do in the morning is forecast. Before they do their outgoing debts, before making their decisions on cash investments, they will want to know their cash flow forecast, âsaid Tom Durkin, Global Head of CashPro in Global Transactions Services at Bank of America.
Paul Smithwood, product manager for data and artificial intelligence in global transaction services at Bank of America, said the CashPro team has repeatedly heard the same concerns from their customers.
âForecasting is usually an extremely manual task,â he said. âCompanies can spend a considerable amount of time exporting data from banking portals and internal systems, integrating it with whatever tools they have, which are usually spreadsheets, and then trying to do ad hoc analysis. and make liquidity decisions accordingly. “
At the same time, they care about accuracy and having the resources and technical know-how to invest in the task.
After identifying potential fintech partners and testing products with a few clients, Bank of America narrowed its choices to a vendor that specializes in cash forecasting and machine learning and performed beta testing with 75 clients during the course of the year. last year. The bank refused to name its supplier.
After personalizing the product and collecting feedback, he launched CashPro Forecasting to all customers last month. So far, hundreds have registered.
Once customers sign up, machine learning algorithms generate forecasts using two years of historical customer data, including balances and transactions within Bank of America, data from other bank accounts, and whatever they want to enter manually. Businesses can create custom categories and assign rules to automatically classify transactions into the categories they create, such as payroll or collections. Graphs and grids will illustrate the results so that they can quickly interpret the forecasts.
Some other big banks have taken similar steps.
After a pilot, JP Morgan Payments introduced in October a forecasting tool as part of JP Morgan Access, its cash management platform. JP Morgan clients can see up to three years of historical flows, compare different time periods and analyze transactions. The feature uses artificial intelligence and machine learning capabilities developed in-house.
In October, Wells Fargo announcement that he will direct clients to Trovata, a San Diego-based company that automates cash flow reporting, forecasting and analysis for medium and large businesses.
Citi’s treasury and commerce solutions integrated forecasting tools from Cashforce, a forecasting and analysis platform, in the first quarter of 2021. Citi Ventures acquired a stake in Cashforce in 2020.
FinTechs, such as To watch and Centime, are partnering with banks to tackle the problem of small businesses. To watch spear in September 2020 while Cent started a pilot project with First National Bank of Omaha in August.
Bottomline Technologies, a business payments company, offers its own cash flow forecasting tools and recently partnered with Centime, a software company that helps small businesses manage and forecast cash flow.
âCash flow forecasting is a long-standing need that has been partially met here and there, but banks are now taking it more seriously,â said Norm DeLuca, director of banking solutions at Bottomline Technologies.
Augenstein predicts that forecasting is yet another way to build customer loyalty.
âOnce companies have the taste to be able to do this, they will fall in love,â he said. “It’s an incredibly sticky product.”