Podcast with Sridhar Kanthadai

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Karen: Sridhar, thanks for joining me today. I'm looking forward to our conversation, a continuation of the series that we've been doing with JP Morgan Chase on digital transformation of treasury. This time, treasury transformation in the tech regions. Thank you so much for taking the time.

Sridhar: You're welcome.

Karen: Sridhar, let's start with the basics. I think what we've all observed over the course of, certainly the last nine to 10 months, is that businesses, when confronted with the pandemic, had to abruptly change course and shift to a remote work environment.

And all of the business resiliency and processes required needed to be distributed and remote as well, in order to keep the businesses running. And I'm curious to get your take on what that was like for businesses in the region and the impact of that remote environment on the shift to digital.

Sridhar: You're right. COVID-19 has certainly created a lot of disruption and accelerated, in most cases, the digitization journeys of our clients across sectors and geographies. In a recent white paper that we published along with euro finance, we polled about 130 leading professionals in treasuries across the world.

And I think the interesting outcome of that, is that almost 70% of the companies in Asia-Pacific have said that the pandemic has accelerated their journeys, digital journeys, and transformation. Much higher than statistics that we saw for India and Latin America, which were in the 50s. So I think it's a good example, where the extended lock down and the digital opportunities that we have in Asia have allowed companies to think about this in a more unique fashion.

The way I look at it is that there are digital native companies, especially in things like e-commerce. And so their ability to continue business, because they were primarily digital, has enabled them to take a faster leadership in the space. Most of their payments are already electronic. They have direct connectivity to the banks.

And they continue to use technologies like API and machine learning, et cetera. I think where the opportunity has been a little more challenging, but certainly more fulfilling, is the more traditional companies that had, for a variety of reasons, a mixed set of processes, a lot of manual paperwork, checks, in many cases, where there were physical delivery of goods and services.

And therefore, they had to, in some ways, think out of the box to see how they could continue to stay in business. And I think the good thing is that there was a necessity and therefore, people have been very creative and people have been very accepting of change, and that's what has helped the evolution of these companies.

Karen: I want to pick up on something you said about the appetite for change in APAC, versus other regions of the world. To what do you attribute that? I mean, is there a particular philosophy, pinpoint, something that creates more momentum in APAC than other parts of the world?

Sridhar: I think it's probably necessary, in most cases. And probably some of the digitization opportunity as well, in the more nascent stage. Certainly, if I think about the payment space, you would assume that we have countries with very high degree of electronification of payments.

And then, we do have some of the laggards from that standpoint. And so I think about digitization is a journey. And perhaps, in some of our marketplaces, companies were in the early part of the journey as opposed to others. I think what the pandemic has really created is an opportunity for everybody to move much faster than they would have done. Because as I said, out of necessity. And I think that's been the opportunity for companies like us in supporting our clients in this.

Karen: So what are some of the biggest obstacles still to overcome? So there seems to be a willingness to change and adopt new digital methods and workflows and processes that surround it, but there are obviously things that need to happen in order for that to reach it's potential. What are they?

Sridhar: Yeah, that's a great question. Quite often, we think about digitization and we use that as a proxy for simple electronification. And I think, from our client's standpoint, they're not just looking at payments and digitized payments, but they're looking at the entire set of processes that they deal with, whether with their own clients or their suppliers. And then, obviously, with their banking partners in the middle, as a continuum of things that need to get digitized.

Digitization also means that we now have data. And the whole purpose of digitization, or the secondary purpose of digitization, is really around understanding the data and being able to get intelligence of the data. So the way we think about digitization is in a more holistic fashion. And coming into this crisis of COVID, we've already been working on a number of these fronts, whether it's the on-boarding of clients, whether it's the connectivity with clients, whether it's the transaction management with clients, or even the servicing fees.

And there are elements of digitization or automation that we've done across each of these domains. I think what the crisis has actually allowed us to do, is to really bring all that together in a much more powerful way. And at this point in time, because of remote working, because of a lack of ability to move people around, signatures, I think there's an acceptance that every part of that value chain that they talked about had an opportunity to automate, to electronify, to digitize. I think that value proposition is much more compelling for us to put forward and it's certainly much more receptive in the minds of our clients.

Karen: How are you helping corporates prioritize where to start? I realize that's a general question that probably varies client by client. But how are you helping them decide where to start? And what kinds of questions do they need answered from you in order to make those good decisions?

Sridhar: Well, it depends on, as you said, where the client is in the journey. For some of the clients, there was a crisis in terms of being able to collect payments, for example. If you had a process that was heavily dependent on collecting checks and you had lockdowns and inability to go and collect, that became a crisis.

So that triggered a conversation around, what are the alternate ways of doing it? But then, you also have to understand that it's not just collecting the money, which is absolutely critical, but it's also being able to reconcile who paid? And so, that's the downstream process.

And so, what I think this has done, is that we've allowed us to come in there within a conversation and say, here are the alternatives to the process you have. But here is the way you can link it back into your downstream process. And then, how does the upstream change? So it's a very small example, but it's very similar across each of those domains I mentioned.

So you talk about onboarding. There is a significant amount of documentation that clients have to give us. Signatories are spread all over the country or internationally. And in many cases, we had-- career services were down for extended periods of time. So could we digitize that whole interaction? And there is obviously a regulatory angle to it because our digital signatures-- are e-signatures valid in law?

And so, there were elements of work that we had done over the last many months. And I think all of that was to be able to pull that together to make it a compelling conversation with clients. And so, I think the way this has been appealing to clients is not just about solving an immediate problem. I think that's where the need starts from.

But being able to extend that and say, how can we have better process, better control, better compliance environment looking forward?

Karen: How has the pandemic and some of the issues that you describe, that your clients are grappling with, how has it changed your own priorities, with respect to the digital transformation agenda that you are undertaking?

Sridhar: It's only helped us move faster, I think. And also, to be fair, it's helped us reimagine what the proposition is, as opposed to distinct silos of ideas.

And so, it's forced us to reconsider what would be a more complete way to talk to clients around this? A more compelling way to demonstrate impact? I think what's also done, is that it is, in many cases, we've had great partnership with local authorities, with regulators.

And just given the nature of pandemic and the opportunities that it presents, we've been able to work with a number of regulators to create more digital solutions. In Asia, across many markets, we have a lot of regulatory restrictions that require, historically, paper documentation for any cross-border movements of money, whether you're paying out or paying in.

And so, we have had an opportunity to reconsider that whole process, to see where we could digitize that interaction. And so, we have a number of solutions across markets, such as India, Southeast Asia, even China, where cross-border payments have been brought down to, effectively, an automated interaction that does two things. That removes the need for paper invoices, shipping documents, et cetera, because we can now connect to customs and regulatory databases.

But it also-- so while it improves the operational efficiency, accuracy, it also means that we can immediately reconcile that back from a regulatory compliance standpoint, not just for the bank, but also for our clients.

Karen: That's amazing because those processes are, as you point out, very paper based and it slows-- on a good day, it slows the process. But certainly, given the crisis of the pandemic, makes it nearly impossible. It's good to see that kind of regulatory relaxation. What are the broader implications to commerce overall, through the efforts being undertaken, certainly by you guys at the bank, but also the corporates that you're helping to digitize the transformation of their treasury operations?

Sridhar: I think this is where everybody's thinking process is now headed. I think the opportunities that digitization presents is now being discussed and debated at a much more senior level. So we've historically talked about treasurers becoming more strategic in their outlook.

I think, in many cases, that's true. But they're also being challenged with more of the day to day operational issues. Whether you're talking about cash flow forecasting or other kinds of analysis to talk about, liquidity management, supply chain management, working capital management, all of these things have historically been on the dashboard of the treasurers. But there's been a lot of effort to just get data, as opposed to have time for analysis.

I think the real prize here is, how do you take all of this digitization efforts that now creates real time data and availability of that data, in your dashboards and your tools, and then be able to make a better decision for your company? I think that's the journey that we're all embarking upon. And we've got a number of ideas around this. We can talk about in terms of the analytics fees, we talk about the real time treasury.

So I'm excited that with some of the new capabilities that we have built that enables our clients to work directly from their ERP systems. So rather than having to log into bank portals, upload, download information, and then try to work offline in spreadsheets and the ERP, we now are able to embed the information from the bank directly within the ERP, directly within their systems of analytics. So I think it gives us much more ability to go forward around the analytics process, as opposed to the data gathering process.

Karen: As you think about the transformation to this real time treasury environment and streamlining, certainly, the access to data, but the ability to create insights to help businesses function better, manage their cash, how long will that journey take? I mean, I know it's hard to precisely pinpoint a time horizon. But are we looking at the next couple of years, the next decade? Give me a sense of the evolution of that journey.

Sridhar: I think certainly, many of our leading companies are already embarking on that journey. I think digitally native companies, because they started in a very different stage, are already there. And they not only use analytics, they actually have AI enabled analytics.

So it's not just about data that you analyze, but you use machine learning and other tools to actually analyze and drive outcomes. So I think there is a set of companies that are already in that space and for many other companies, the historic issue has just been the challenge around aggregating data. And once there is an ability to do that, I think it's really a question of, let 1,000 flowers bloom.

Innovation is going to take over. But it's an expensive hobby if you get it wrong. So it's important that, in my mind, we take the step by step. And so, some of the tools that we as a bank provide, could be the foundation for clients to kind of think through their own analytics programs. And eventually, I think analytics works when you have a lot of data.

And it's likely that many of the companies that we do business with are going to be using multiple banks to support their process. That's the reality of life. And I think-- you're not going to be able to do the analytics in a wholesome way, with that particular piece.

So you start with opportunities that you have in front of you. And then it gives you an ability to understand and then build out what you'd want. So our programs are designed to support clients. Certainly, clients who have a lot of their processing and data with us, and so they can benefit and leverage off our investments, into that effort. Of course, they can take that as a starting point and build more within themselves.

Karen: And Sridhar, have you noticed-- I was asking one of your colleagues, Amiya, this question. We did a panel together about the digital transformation of treasury. And one of the comments that he made then was, this is an opportunity for a lot of treasury services, treasurers and CFOs, to rethink the banking relationships, holistically. And how banking relationships can support these digital transformations. Are you finding that to be the case in APAC?

Sridhar: Certainly. I think the exchange of ideas between treasury professionals and banker supporting them has never been as productive as we see today. I think, just the opportunity for people to reimagine, given the situation we are in, is a good catalyst for this. But I think the opportunity is also to consolidate where possible and where feasible business activity is with the fewer providers. And so, I think it's never going to be all or nothing.

But I think certainly, they have started to look at, for example, the portfolio of accounts and relationships that maintain and some of these, historically, have been for reasons that probably don't have much currency going forward. And so I think that is another impetus to reimagine what it could be.

So I think that our foundational activities that are important, some clean up, hygiene activities around making sure you have all the access to the accounts, the visibility, the ability to mobilize, and all of that, are going to be much more easier with the fewer a number of providers, as opposed to hundreds of providers.

So it's a combination of what, historically, we knew in a straightforward sense, less number of accounts, less number of providers. But I think the prize is much more clearer now. And the ability to automate, the ability to get more efficient, the ability to digitize, and therefore, be able to derive value from the analytics, is much more compelling.

Karen: In a year that I think none of us thought would ever end, we're approaching the end. Here we are, with just a couple of months to go before 2020 is in the rearview. As we look ahead to 2021, what are some of the things that you're going to be focused on and you believe your customers, your corporate customers, will be focused on, as well?

Sridhar: Oh, that's the crystal ball that you asked me to look into. From what I see with our clients, there is a clear move towards more e-commerce style or direct to consumer opportunities. And so across the board, you know, it's not just about e-commerce service companies, companies that make physical goods. Eventually, most of the consumption is done by individuals like you and I.

And so I think there is an opportunity for many, many companies to move towards that. And that would challenge their business models because today they deal with dealers, distributors, or other kinds of intermediaries. And so moving from there directly to consumers has a pretty significant impact in the way their sales process, their payment process, their collection process, the reconciliation process, all that works.

And so we've been thinking through this and investing, not just in the payment to suppliers process, or payment to individual process, but also about, how do we collect from consumers? Typically has been the an area of focus for fintechs. Historically, banks have stepped away from things like the electronic collection space, especially related to merchant acquiring or merchant services.

But I think JP Morgan has continued to stay invested in that space and we're expanding that program in Asia. And I think in Asia, there's a unique opportunity, not just to process and support card payments, but also with the growth of real time payments and wallet payments. So really, the idea is that clients of ours or merchants want to sell services or goods. They want to be paid in as many types of payment methods as possible that are unique to that particular country. They wanted as cheap as possible. And they want that interaction to be as quick as possible so that they can consummate the transaction quickly, and then automatically look to reconcile that whole process.

And so that's a wonderful opportunity that we see more and more companies, that historically, have not had an online presence, going towards. I think the second piece that I think are critically important is certainly-- and we are invested quite heavily around the blockchain space. And there is a number of experiments that we've been part of. It's in the public domain project, Ubin, for example, with the monetary authority of Singapore.

I think the JP Morgan infrastructure that we are building together on the back of JP Morgan coin, is another network that will allow us to change the way payments are made. It certainly is not ready for prime time yet, but I think in the next few weeks and months, we'll certainly have a number of applications on the distributed ledger technology, underpinned by our JP Morgan coin.

So I think that's another exciting opportunity for us to reimagine the payment space, more specifically, but the whole treasury space more broadly.

Karen: Wow. It sounds like 2021 is going to be an exciting year. I look forward to more opportunities to chat about that as we turn the page on 2020 and begin 2021. Thanks, Sridhar, for your time. I really appreciate it.

Sridhar: Thank you very much. I enjoyed it.

Karen: Thank you.

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