A treasury management system (TMS) provides a company with a single, real-time view of all cash balances across different accounts and currencies. They aid businesses in optimizing cash management, reconciling payments, and maintaining liquidity across accounts and entities. They forecast cash needs, facilitate better decision-making, and help manage currency risk in cross-border transactions. By optimizing payment timing and routing, a TMS can also reduce banking and FX fees, ultimately improving a company's financial efficiency and risk management.
This market is established with an incumbent presence from both bank-owned treasury portals and TMS software players. Each solution currently has its own limitations, and the mid-market remains underserved.
On the one hand, corporate banks have developed treasury portals across their international first-party account network to support simplified cash management for their customers rather than needing to manage and keep track of a wider variety of third party international bank accounts. This approach is typically unavailable to smaller SMEs, and is insufficient as a standalone for complex international businesses that require diverse local banking relationships for tax, regulatory, or yield-seeking purposes. These businesses also typically need to work with various external cross-border payment solutions for comprehensive coverage resulting in complex reconciliation processes.
On the other hand, standalone software TMSs have largely targeted the enterprise market to date, to help them control cash and manage liquidity across a range of third party banks and across group entities. Payments are initiated by the software platform, but processed by the underlying banks - as such, these platforms have been out of the flow of funds. Typically, these platforms required a heavy lift in terms of integration to the company’s ERP, AP/AR, and banking partners to correctly configure. This has been too heavy for the majority of companies to take on, and our survey of European mid-market businesses suggested 45% of companies are still using Excel or pen and paper.
We have seen an inflow of new entrants and investment into businesses that are looking to either improve the user experiences and flexibility of treasury systems for enterprise, or bring treasury management solutions to a broader set of mid-market customers. This includes notable scaleups like Kyriba and Agicap; and startups like Atlar, Embat, Palm and Payflows. Each of these platforms differs in product emphasis and target vertical, but broadly they are providing enhanced user experiences, analytics and insights via SaaS-deployed platforms to manage accounts and payments through third party banks (typically either via mapped STFP connections or open banking). Demand for these solutions is increasing as companies are increasingly international earlier at smaller scale, and cash management and yield optimization have come into greater focus after banking crises, and in a higher interest rate environment.
Separately, a number of the cross-border players in the market - including Rapyd and Airwallex - have also started to market ‘treasury management’ as one of many use cases for their existing payments platform. In practice, they operate more similarly to bank-owned treasury portals, sitting in the flow of funds and supporting the cash management across a first party account network, facing similar limitations as the traditional treasury portals.
We believe that new TMS should be more accessible, easy to use and adaptable to individual businesses as they benefit from other fintech innovations, including payment infrastructure, open banking, cross border rails and more. Here at Dawn Capital, we are actively looking for the next winner. If you’re a founder in this space, we’d love to hear from you.