The past decade has seen mainstream financial institutions unable to make the most of emerging opportunities in online markets, ultimately causing them to lose ground to more nimble card providers and fintech companies.

In recent years, traditional FIs have retaken some of this lost market share, partly by leveraging their size and stability and updating their systems with solutions using current-generation technologies. One recent development that's allowed some FIs to be more competitive in the current environment is the broader deployment of modern treasury management system (TMS) solutions.

While modern TMS solutions facilitate the same treasury management tasks as previous generations of software, the employment of advanced artificial intelligence (AI), machine learning (ML), and cloud-based technologies has resulted in a massive leap in capabilities. If you're considering investing in such a solution for your FI, here are some key areas where a TMS upgrade would make a big difference and therefore be worth the investment:

Network Availability

Current-generation treasury management systems tend to be more reliable than their predecessors, which is broadly true thanks to iterative improvements in how these software packages work. However, most of the reliability gains are thanks to a widespread move towards cloud-based banking systems.

Most modern TMS solutions can be implemented over the cloud through SaaS (software as a service), PaaS (platform as a service), and other similar models. The main advantage of these is that the solution provider is typically the one maintaining the system through the work of their highly specialized IT teams.

With traditional onsite systems, the FI usually has to hire a team of finance IT specialists and pay for the necessary hardware to operate the system. While this is not necessarily a problem, these specialists often have to do more than maintain these local systems. This often leads to less frequent updates and more extended downtimes for maintenance.

Updating to a new cloud-based system will boost available uptimes and improve essential system reliability if your FI currently uses onsite techniques for core TMS functions.

System Integration

Better intersystem integration allows better data sharing throughout the entirety of an organization. When a TMS is linked to another system like an enterprise resource planning (ERP) or marketing automation software, it could use data from those networks to create more reports and utilize automation at a greater level.

For instance, money market forecasts on an ERP could be used to validate or supplement the native capabilities of a TMS, allowing the organization a more nuanced view of currency movements. Drawing data from sales and marketing software could help planners better understand the root causes of these market behaviors.

Newer TMS options are usually better at integrating with existing systems, mainly if these systems are popular or were developed by the TMS vendor. In any case, the improved data visibility brought by better integrative capabilities can do much to reduce an FI's relative transaction risks.

Improved Reporting and Forecasting

Reporting and forecasting functionality is critical for FIs, as decision-makers rely on these to make important transactions. Today's TMS suites are generally designed for maximum data visibility, making it easier for FI leaders and managers to decide optimal transaction times with high confidence.

Including better AI and ML modules allows some TMS offerings to create highly customized reports in just a few seconds—a vast improvement over older systems that sometimes take hours or even days to generate similar reports.

Some AI and ML-enhanced TMSs can also integrate with an FI's other systems, such as their ERP and payroll systems, allowing reports to be more comprehensive and better contextualized. Significant improvements in reporting, forecasting, and financial decision-making build a good case for investing in an upgraded TMS.

AML and Legal Compliance

Various treasury management activities are subject to government oversight, chiefly for anti-money laundering (AML) purposes. As such, virtually every transaction a bank does has to follow laws and guidelines intended to prevent money laundering and other criminal activities.

The list of government and interbank guidelines tends to increase every year. FIs have to comply with all of these to not only protect themselves and the wider community but also to maintain their reputations.

While you can often update older TMS solutions to pass compliance standards, this can become more and more difficult each year. To avoid regulatory fines and reputational losses, FIs are now simply upgrading to new cloud-based TMS systems where the service providers manage critical compliance requirements. This allows FIs not only to avoid fines but also to keep their overhead costs low.

Core TMS Functions

The primary function of a treasury management system is to help FIs and other organizations bring down the cost of routine transactions. Traditionally, this is done manually by reviewing different potential courses of action for a broad set of transaction types. The software can help automate many of these processes, making treasury management activities more cost-efficient.

Updated TMS software can take this automation even further. AI and ML can create dynamic and accurate forecasts of money market and foreign exchange (FOREX) trends based on historical data.

When implemented well, newer TMS solutions can help organizations optimize their cash positions for each transaction for any given period. FI managers can then use this information to automate transactions or execute them at the best possible times, reducing the FI's baseline overhead costs.

Should You Update Your TMS?

Treasury management systems are among the most overlooked regarding FI software updates. But the added speed, reduced labor requirements, and dynamic data processing enabled by new TMS packages can allow FIs to improve their internal processes significantly.

It is worth noting that not all new TMS systems will work for your FI precisely the way you want them to. It would help if you took the time to consider each option's capabilities and requirements against your FI's medium- to long-term needs. That way, you'll improve your chances of choosing a treasury management system that will help you meet your organization's goals.