00:00:08: Welcome to episode thirty-five of IFZ Talking Finance.

00:00:13: My name is Thomas Bieder and this episode features a special format, an audio summary generated with the help of notebook LM, designed to make complex insights accessible in a concise and practical way.

00:00:28: This summary focuses on ING's recent perspective on cash management trends in the most recent treasury and funding study of the Lucerne University of Applied Science and Arts.

00:00:39: The summary covers cash management trends across the EU and Switzerland, highlighting how regulatory dynamics, instant payments adoption and digital transformation are reshaping the strategic treasury agenda.

00:00:54: It builds on ING's latest publication, outlining developments such as the introduction of the EU's instant payment regulation, Switzerland's rollout of real-time payments, the evolution towards open finance and the growing interplay between digital identity, blockchain and central bank digital currencies, so-called CBDCs.

00:01:20: This content is particularly relevant for CFOs and corporate treasures who need to stay ahead of structural financial change.

00:01:28: Understanding these shifts is crucial for optimizing liquidity structures, future-proofing payment infrastructures, and aligning treasury strategies with the digital and regulatory trajectory of Europe's financial landscape.

00:01:46: So lean in for a compact yet insightful exploration of how Europe's evolving financial frameworks are redefining treasury priorities powered by data regulation and innovation.

00:02:01: Strategic calls being made right now in European cash management.

00:02:05: So maybe let's start with the fundamentals.

00:02:06: Okay.

00:02:07: Yeah, let's do that.

00:02:08: Let's start with a place known for stability Switzerland.

00:02:11: For gosh, decades now it's been a top spot for setting up regional treasury operations.

00:02:16: Why is it still seen as such a reliable foundation today?

00:02:19: It's

00:02:20: still reliable because its core value proposition is just rock solid.

00:02:24: Stability, first and foremost.

00:02:26: You're talking about a consistently well-regulated environment, strong economy, low inflation, and, crucially, for anyone managing risk, the Swiss francs reputation as a safe haven currency.

00:02:39: I mean, for a treasurer dealing with huge cross-currency exposures, massive liquidity pools, that stability, that's a core strategic asset, isn't it?

00:02:48: Definitely and it's not just the currency right.

00:02:50: the actual infrastructure.

00:02:51: there is top-tier Zurich Geneva world-class financial hubs.

00:02:54: They offer deep capital markets efficient operations largely supported by, you know, real-time payment systems already.

00:03:00: That efficiency is absolutely key.

00:03:02: And what's strategically interesting about Switzerland, I think, is its unique balancing act.

00:03:06: It's not an EU member, it maintains its political neutrality.

00:03:09: But it makes sure it has strong financial interoperability.

00:03:12: It participates in critical European systems like SEPA, that's the Single Euro Payments area, and Target too.

00:03:18: So companies based there kind of get the best of both worlds.

00:03:21: Right.

00:03:21: Local control, but still seamless access to the huge Eurozone market.

00:03:25: Exactly.

00:03:25: And they're not sitting still either.

00:03:27: I noticed our sources mentioned the digital Slysterland strategy, twenty twenty five.

00:03:33: What does that signal to a treasurer thinking about Switzerland as maybe a strategic anchor?

00:03:38: It signals they're looking ahead.

00:03:39: That strategy is actively promoting the integration of, you know, cutting edge tech.

00:03:45: AI, advanced cybersecurity, enterprise, blockchain applications, all within financial services.

00:03:51: So if your treasury operation wants to be a leader in automation, maybe in cross-border trade finance or complex settlements, a Swiss base looks pretty well positioned to leverage those future-proof systems.

00:04:01: Okay,

00:04:01: so social and represents stability, maybe a more market-led push towards digital.

00:04:06: But then you have the European Union offering a different, sometimes conflicting regulatory path.

00:04:11: Both regions want to advance digital finance, sure.

00:04:14: but their approaches seem to be diverging quite a bit.

00:04:17: Oh, they absolutely are.

00:04:18: The EU is working through its digital finance strategy that's explicitly aimed at reducing fragmentation, unifying financial systems across all twenty seven member states.

00:04:27: It's a huge undertaking.

00:04:29: Switzerland, on the other hand, it's pursuing its own digital agenda independently outside that EU harmonizing framework.

00:04:35: So that gives us a really interesting comparison point when we talk about open finance or open banking as many know it.

00:04:41: The EU took a very top-down mandatory approach, didn't it?

00:04:46: Correct.

00:04:46: We saw that clearly with PSD-II, the Payment Services Directive.

00:04:49: The EU mandated structural change.

00:04:51: It required banks to allow third-party providers access to account information and payment initiation.

00:04:58: That mandate basically forced the door open for new kinds of payment providers, new services, forcing a change in how corporates connect.

00:05:05: So what was the Swiss approach?

00:05:07: Do they follow suit, mandate access?

00:05:09: No, they didn't.

00:05:10: Their model is market-led.

00:05:12: It's the industry itself, the big banks, the fintechs.

00:05:16: They determine if and how third-party payment service providers get access to financial data.

00:05:22: Now, for a treasurer, that's a really profound difference.

00:05:24: In the EU, you have to deal with the access rules.

00:05:27: In Switzerland, it's more about what competitive offerings your banking partners bring to the table.

00:05:32: Interesting.

00:05:33: But the outcome, generally speaking, seems to be a shared move towards API connectivity in both places.

00:05:39: open finance is facilitating that real-time data integration.

00:05:42: Letting treasurers move away from logging into multiple bank portals, maybe towards more automated data exchange, proper multi-bank software.

00:05:50: Yes, the direction on APIs is similar.

00:05:53: But, and this is crucial, treasurers still have to deal with very market-specific practical standards that need attention.

00:05:59: A perfect example in Switzerland is the QR bill, host speaker.

00:06:03: What's the practical benefit of that unique domestic standard for a corporate treasurer?

00:06:07: Oh, the QR bill.

00:06:08: Yeah, it's really all about automation and making reconciliation much, much easier.

00:06:12: It simplifies domestic invoicing and payments, whether you're dealing in euros or Swiss francs, actually, it works because it embeds structured payment data directly into the QR code itself.

00:06:22: And that structured reference data is invaluable.

00:06:25: It means when the money hits your account, the information needed for automated reconciliation is already there, ready for your ERP system to just ingest it.

00:06:34: It cuts down dramatically on manual matching errors, speeds up invoice settlement, accuracy improves.

00:06:40: I mean, that's a tangible efficiency.

00:06:41: gain any treasure would value.

00:06:44: Okay, let's pivot now.

00:06:45: From data structure to speed.

00:06:48: Because wow, nothing seems to be impacting cash management dynamics right now, quite like the acceleration of instant payments.

00:06:54: Oh, absolutely.

00:06:55: For a treasurer, instant payments really transform liquidity management.

00:07:00: You're talking faster insights into cash positions, you know, no more transaction cutoff times to worry about.

00:07:06: You can collect cash from customers in seconds, not days.

00:07:10: And it enables much better liquidity management through real-time fund concentration across different accounts, even different countries.

00:07:17: And the EU has been pushing this hard, hasn't it?

00:07:19: Since the sepa insincredid transfer scheme kicked off back in twenty seventeen, adoption is really hitting critical mass now.

00:07:25: I think the sources said by twenty twenty five, instant payments volumes were over twenty six percent of all separate credit transfers.

00:07:31: That's significant.

00:07:32: And that critical mass is now being legally locked in by the new instant payments regulation, the IPR.

00:07:37: This regulation mandates it's not optional that all payment service providers across the EU have to support sending and receiving Euro instant payments.

00:07:46: And crucially, the IPR gets rid of that previous somewhat arbitrary cap of EUR hundred thousand.

00:07:52: That opens up payments for high value corporate transactions.

00:07:55: Okay, sounds like a huge green light for efficiency.

00:07:58: But the IPR also brings in a pretty significant new challenge, especially for treasury risk teams.

00:08:04: Verification of pay or VOP.

00:08:07: What exactly is this and why is it causing some operational headaches?

00:08:10: Right, VOP.

00:08:12: It's the crucial anti-fraud piece of the puzzle.

00:08:15: It means every single sepa, instant credit transfer and eventually standard sepa transfers too will be subject to a check.

00:08:21: Does the pay's name actually match the name on the account linked to that I've been?

00:08:25: If there's a mismatch, the payment gets flagged before it's executed.

00:08:28: Which is great for stopping scams, obviously.

00:08:31: But I can see how that becomes a potential administrative nightmare for a big multinational.

00:08:36: processing say thousands of payments in a batch file Especially if your internal vendor or customer databases have slightly inconsistent name formatting or use nicknames.

00:08:45: It is a massive data cleanliness issue.

00:08:48: Companies now really have to drive for impeccable data consistency in their master data.

00:08:54: now the regulation technically allows treasurers to sort of opt out of performing VOP checks for every single page payment in a batch, but realistically, can a corporation afford to just skip that crucial fraud protection step?

00:09:08: Probably not for high value payments.

00:09:09: Exactly.

00:09:10: The consensus seems to be that treasury operations, especially for significant amounts, will have to implement VOP properly.

00:09:16: And that likely means a big internal data remediation project for many.

00:09:19: OK,

00:09:20: so the EU is mandating speed, mandating VOP.

00:09:23: Now, if we contrast that with Switzerland, their adoption of instant payments has been, well, conspicuously slower.

00:09:29: Our sources indicated that back in May, twenty twenty-five, less than half the percent, more or more than five percent of Swiss transactions were instant.

00:09:36: Why the lag?

00:09:37: Well, it really

00:09:37: comes down to that absence of a unified top-down regulatory mandate like the EU's IPR.

00:09:43: The implementation timeline is underway, don't get me wrong.

00:09:45: The largest Swiss banks had to be able to process instant payments from August, twenty-twenty-four and all the retail PSPs have to be reachable by the end of twenty-twenty-six.

00:09:53: But there are still deterrents slowing down corporate use, right?

00:09:56: Absolutely.

00:09:57: The main hurdles right now are the frankly quite low initial transaction cap of twenty thousand Swiss francs.

00:10:05: And the fact there's no mandated fee parity instant often costs more than a traditional payment.

00:10:09: So think about a common B to B scenario.

00:10:12: A corporate client owes say fifty thousand francs for some machinery part.

00:10:16: That payment cannot be sent instantly unless there's some special agreement to raise the cap for that specific transaction.

00:10:22: It forces the payment onto the older slower rails.

00:10:26: It completely undermines the efficiency benefits for typical high value corporate flows.

00:10:30: And that's why the Swiss B to B sector has been pretty slow to embrace the shift so far.

00:10:34: Right.

00:10:34: OK.

00:10:35: Shifting gears again from payment speed to maybe more fundamental structural change.

00:10:40: Let's talk about the next frontier.

00:10:41: Digital assets, regulation.

00:10:43: The whole payments infrastructure is being challenged by distributed ledger technology or blockchain.

00:10:47: It feels like the unavoidable next step, doesn't it?

00:10:50: Europe is actively preparing for blockchain and tokenization.

00:10:54: Switzerland was actually an early leader here, regulatory speaking.

00:10:57: They passed their DLT Act back in twenty twenty one.

00:11:00: The EU followed with my car, the markets in crypto assets regulation.

00:11:04: Both of these frameworks provide that necessary regulatory clarity and that clarity is really the foundation needed for institutional adoption.

00:11:11: You need rules the road.

00:11:13: So if my car provides the clarity, what exactly should.

00:11:18: excite a treasurer about the underlying tech, about blockchain itself.

00:11:22: What are the core benefits for finance?

00:11:24: I print to three main things.

00:11:25: First, the potential for near instant transaction processing.

00:11:28: This could directly solve those painful multi-day delays we still see in cross-border payments.

00:11:33: Second, immutability.

00:11:35: Once data is on the chain, it can't be altered.

00:11:37: That dramatically improves audit trails and trust.

00:11:39: And third, programmability.

00:11:42: Okay, explain programmability for us.

00:11:43: What does that mean in practice?

00:11:44: Programmability basically means money can be embedded with conditions.

00:11:48: It becomes smart.

00:11:49: Imagine writing a contract directly into the payment instruction.

00:11:52: So payment automatically releases only when, say, sensors confirm goods have been delivered, or only after the required trade documents are digitally signed by all parties.

00:12:03: this ability to automate complex settlement rules without needing manual checks or interventions.

00:12:08: That promises really radical efficiency gains in areas like corporate procurement and supply chain finance.

00:12:13: Fascinating.

00:12:14: Okay, on a related note, thinking about seamless digital interactions, we're also seeing efforts towards digital identity.

00:12:20: The EU's INID regulation is introducing the European Digital Identity Wallet, the EUDIW, trying to provide secure digital IDs across the whole union.

00:12:29: And meanwhile, Switzerland is developing its own system.

00:12:32: There's actually a public referendum planned for September, twenty-twenty-five on it.

00:12:37: If that gets adopted, the key strategic question will be interoperability.

00:12:41: Can the Swiss digital ID talk to the EU wallets seamlessly?

00:12:45: Regardless of which system you're using though, a trusted digital ID could really streamline some core treasury headaches, things like KYC compliance.

00:12:53: You know your customer, yeah.

00:12:54: Always have been.

00:12:55: Exactly.

00:12:56: Simplifying cross-border document signing, significantly reducing the risk involved in just verifying who your counterparties actually are.

00:13:03: Okay, finally, we really need to dive into central bank digital currencies, CBDCs, and this overarching theme of strategic financial autonomy.

00:13:11: The EU is piloting a retail CBDC, the digital euro.

00:13:15: Initially, the talk was mostly about safeguarding the role of central bank money in an increasingly digital economy.

00:13:21: Yes, but the narrative around the digital euro has shifted significantly, largely due to,

00:13:27: well,

00:13:27: rising geopolitical instability intentions.

00:13:30: The focus now is fundamentally about strategic autonomy for Europe.

00:13:33: What does that mean?

00:13:35: It means reducing Europe's dependence on non-European, often US-based, international card schemes like Visa and MasterCard for handling everyday European payments.

00:13:44: The EU wants to ensure that the digital payment rails for the Euro are controlled entirely within the continent.

00:13:49: That's also why you see the Parallel Development of the European Payment Initiative, or EPI, which aims to compete directly with those global card giants.

00:13:57: This geopolitical driver changes the whole strategic context for treasures.

00:14:01: Right,

00:14:01: so the EU is focused on a retail BPDC.

00:14:04: Driven by autonomy, maybe competition, how does Switzerland contrast with this project, Helvetia?

00:14:09: Switzerland

00:14:10: is on a completely different track here.

00:14:12: Project Helvedia is exclusively focused on a wholesale CBDC.

00:14:16: That means it's designed only for transactions between banks and other financial institutions.

00:14:21: The specific aim is to use blockchain technology to make the underlying financial market infrastructure how banks settle large values with each other more secure and more efficient.

00:14:31: They are not focused on competing with retail payment methods like cards or apps.

00:14:35: Their focus is purely on stabilizing and securing the back backbone of the financial markets.

00:14:40: That distinction, retail autonomy versus wholesale security, really sums up the complexity of this two-speed European landscape, doesn't it?

00:14:49: Despite all the ongoing efforts to integrate infrastructure like SEPA now covering forty-one countries, I think Bulgaria joins next year.

00:14:55: January twenty-twenty-six, yes.

00:14:57: Right.

00:14:57: Despite that integration, treasures still face these very market-specific characteristics and sometimes conflicting regulatory approaches.

00:15:04: That really is the core challenge you face if you operate across these regions.

00:15:08: On one hand, you have this continuous, often mandated expansion of unified solutions like SEPA, good news.

00:15:15: But on the other hand, you have rapidly diverging technological speeds, like we saw with instant payments and different regulatory philosophies, particularly that contrast between the top-down mandates of the EU and the more market-led stability, perhaps, of Switzerland.

00:15:29: Treasures have to constantly reassess their cash management structures.

00:15:32: They need to decide, you know, Where does it make sense to centralize euro flows and where do we maybe need to maintain local accounts to handle unique things like the QR bill or those Swiss instant payment limitations?

00:15:45: So the ultimate strategic takeaway here is that Treasury teams need to make really informed, smart choices about API connectivity, about payment acceleration strategies, funds, concentration techniques, maybe even with new digital instruments to pilot or test, and all these operational decisions, they absolutely have to align directly with the bigger business goals of resilience and efficiency.

00:16:05: Absolutely.

00:16:05: Treasury is quite literally, you know, at the heart of every major organization, it offers the insight, the liquidity, the resilience, that underpins every big strategic decision the company makes.

00:16:17: So the ability to navigate these unique European systems, understanding the structural demands coming out of Brussels, and the stability benefits you might get from Zurich that's just paramount for success in this coming digital decade.

00:16:30: Which brings us to a final provocative thought for you, our listener, to maybe Chuan.

00:16:35: Given that the EU seems to be prioritizing a retail CBDC, largely to boost its strategic autonomy.

00:16:41: While Switzerland is focused exclusively on a wholesale CBDC to secure interbank transactions, what are the long-term implications for a multinational corporation operating across both, especially when you're managing cross-border liquidity and settlement?

00:16:54: Will these differing mandates create new, maybe unforeseen points of friction in cross-currency payment flows?

00:16:59: Or could they actually somehow complement each other and ultimately create a more robust, maybe more complex European financial architecture, something to consider as you navigate this new digital payment reality?