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Liquidity Management – a Real Time Payments Challenge

Solid liquidity management helps ensures the availability of funds to meet all cash outflow commitments for day-to-day operations and deploys cash in an optimal manner. It implies managing cash on a global level for the purpose of minimizing idle cash, reducing external debt, and optimizing returns on excess cash by grasping better investment opportunities.

Having worldwide operations throws open myriad challenges in the form of timing the flow of funds, handling multiple currencies, regulations, and the difference in liquidity management strategies being followed, etc. The core premise of liquidity management is to have a centralized global view of the cash and a global liquidity management structure.

The processing of payments through legacy batch-based system has enabled banks to have predictable liquidity flows, aiding liquidity management. With real-time payments, cash inflows and outflows become more unpredictable as they can occur at any time of day or night.