The buzz around this bold venture is just now becoming audible outside of Merck and its core banks. "We've been keeping the project quiet until now," van den Nouland says, "but we let a few of our large corporate peers know what we're doing. They were enthusiastic and a bit surprised that this could be possible. They love the standard message part. Everyone has been looking for that. They like the tight controls, especially for SOX compliance. And the fact that we're doing it all with plain vanilla treasury technology just blows them away."

Behold the future of cash management. It will not only be about straight through processing of a transaction between the bank and treasury; it will be about straight through processing of any kind of transaction from its initiation to the actual movement of funds, right through the reconciliation and, ultimately, to the notation on the general ledger and in a company's financial statement. "This is indeed the brave new world of cash management," says Gary Greenwald, global head of capabilities and information products for global transaction services in Citigroup's Citi Markets and Banking unit. "Finally, it's all coming together. We're blazing new trails by working this way with SAP and Wall Street Systems. We're redefining the paradigm. It's a coalition of an ERP technology backbone (SAP), treasury-specific middleware (WSS) and bank technology. Merck wanted to have it all, and together we found a way to keep the efficiency and control of straight through processing, with host-to-host file transfers, and bring back the granular detail of the individual transactions."

The biggest treasury banks are building systems that integrate more deeply with their client companies' accounts payable (A/P) and accounts receivable (A/R) systems with an aim to be the central player in this STP-style financial supply chain management. "They're defining a financial ecosystem and working to spread their services deeply through that ecosystem, otherwise known as the financial supply chain," observes Maggie Scarborough, research manager for corporate banking at Financial Insights, based in Framingham, Mass. "They're trying to reach as far up into the procurement system as the creation of the purchase order."

And what they can't build they are buying–as are all the major treasury system players. Among some of the transformational combinations: JPMorgan Chase & Co.'s acquisition of Xign; American Express Co.'s S2S initiative and purchase of Harbor Payments; the Bank of New York Mellon's acquisitions of SourceNet and ClearTran; and Citigroup's partnership with Orbian. "It's a major rearrangement of the furniture," says Anthony J. Carfang, founding partner of Treasury Strategies Inc., based in Chicago. "The major players clearly are rethinking their strategies and repositioning themselves for what they expect to be future opportunities."

Whether it is coalitions, acquisitions or banks building their own solutions, the dominant trend is to incorporate more and more logic into systems, reports Nick Alex, manager of product management for treasury and payment solutions at SunTrust Bank. That means corporations now download complete A/P files to a bank for disbursement, and the bank uses rules, file codes and computer logic to split the file into the proper or most efficient payment streams–wire, check or ACH for starters but eventually p-card as well.

On the collecting side, checks coming into a lockbox are sorted for ACH conversion or image exchange, using programmed logic to find the optimal collection path, Alex says. "We're turning to artificial intelligence to take the growing complexity out of payments," he observes. "To relieve busy treasury staffs, we're building systems to automatically find the best route for each transaction. If the rules change, we change the software."

While the treasury game for banks used to be all about credit facilities, it's now becoming all about payments, liquidity management services and financing within supply chains–and that change of focus has required technological innovation. Bank Web sites, such as Bank of America Direct and Wachovia Connection Plus, have been aggressively expanding their scope with the kind of information that treasury workstations would have provided to company treasuries in the past–if they had one.

Citi's Web-based TreasuryVision is one of the most ambitious bank efforts in this regard, moving well beyond a Web site and providing a tool that can replace treasury workstations and even assist in compliance and security efforts, given more recent upgrades. "The [Web] interfaces banks now have with corporate treasuries are already much more porous, with lots of information moving back and forth," Carfang points out. Yes, treasury workstations are multibank, and that's important for some treasuries, he concedes, but some of the largest companies are settling on a single global bank or one per region, so their need to collect data from many banks is shrinking, he notes.

In addition, some tech-savvy banks are also developing more targeted Web-based tools to address activities, such as liquidity management, working capital management and cash flow, that have gained importance in recent years. This year, for instance, Justin Bell, cash manager of the $6.1 billion NCR Corp. in Dayton, Ohio, found a technological solution, the liquidity management service (LMS) portal from Mellon Bank, now merged with the Bank of New York, that gives him three distinct payoffs when it comes to investing the roughly $900 million cash portfolio that he handles–the lion's share of NCR's approximately $1.2 billion cash horde.

First, it gets him higher return, especially for offshore investments, where the gain can be as much as 100 basis points. Second, it brings a more efficient, more automated process that has saved NCR an estimated half a full-time employee between its treasury staff of five and the accounting staff which deals with the reporting. Third, it brings greater control over a standardized process, which helps reduce risk and facilitate SOX compliance. "We now have greater control over our investments and can change policies, limits and authorizations much quicker than we could before," Bell reports. "We're very centralized in our investing, and the LMS portal helps us bring everything together."

Bank technology is indeed stretching to offer more holistic solutions, but it is also using the salad-bar model to satisfy middle-market companies and even large corporations that want to pick and choose their own ingredients, Citigroup's Greenwald reports. "Treasury staffs want to see a lot of little components, so they can pick what they want and then mix and match their choices with little components from other vendors to create just what they need." All the new applications are being done in open architecture now to accommodate this preference, he says.

Not all banks, however, find it necessary to develop their own state-of-the-art technology, preferring instead to work with best-of-breed and workstation providers and act as expediters to connect their clients by building interfaces from the bank. At Deutsche Bank, the technology strategy is not so much to own and build comprehensive solutions as it is to proliferate access to tactical services that "fill the gaps." Deutsche then consolidates and simplifies delivery using just two channels–host-to-host and online portal. "Other vendors have very successful solutions. Our role is not to compete with them, but to help our clients link them to our services," says Mike LaCava, global head of Internet services, channel management and integration for Deutsche's Global Transaction Banking-Cash Management operations.

As banks redefine, so too must treasury workstation providers. SunGard AvantGard–still the 800-pound gorilla even after Wall Street Systems' acquisiton of Trema and Thomson Financial's acquisition of Selkirk–is expanding its definition of treasury operations to include more interfacing with A/P and A/R. "They see treasury as the owner of working capital and liquidity management," notes Craig Jeffery, managing director of Atlanta-based Strategic Treasury LLC, "so like the banks, they're taking a broader view of what they should provide."

The two hot buttons driving demand for treasury technology are the quest for a single view of cash to support optimal liquidity management (lowest bank fees, best cash investment returns, lowest cost of borrowing) and the quest for automated processes that make compliance with things like Sarbanes-Oxley easy and complete, says Ken Dummitt, president of SunGard/AvantGard. For SunGard, the key is "common services architecture," which means interoperable parts that can be plugged into the various SunGard solution packages, Dummitt explains.

Although some would argue that there have not been many brilliant new functionalities coming out of this consolidating industry, there has been one revolution over the past couple of years that is really taking off. ASP-hosted solutions have been the real winners in the past 12 to 18 months. ASP workstations were conceived initially for the middle market, but workstation providers like Thomson Financial–its Treasura product line has been a leader in the ASP space–are finding that larger companies like the flexibility and ease of implementation with ASP as well. "ASP hosting removes the high cost to get started and the pain of implementation, so it's a natural for middle-market companies," says Justin Brimfield, senior vice president for corporate treasury services at Thomson Financial. "But it also allowed us to get Staples up and running in just three days."

Pulte Homes Inc., a $14.2 billion home-building and financial services company based in Bloomfield Hills, Mich., also wanted to take advantage of the move to ASP by bringing in Thomson's Treasura, even though it meant switching away from a five-year-old SunGard ICMS system, reports Dory Malouf, treasury analyst and cash manager. "When our ICMS renewal time was getting close, we decided to take another look at the market and see what's out there," he reports. "We were impressed by the ASP offerings and think that's the way of the future for most companies."

The selling points, according to Malouf:

- The lower cost, especially the absence of a large upfront investment;

- The ease and speed of implementation;

- Automatic access to future enhancements and updates without going through an installed upgrade;

- Access to the system from virtually anywhere; and

- Outsourcing disaster recovery and backup responsibility to the host.

"We were affected by the big blackout a few years ago and had to go through a cumbersome process of making phone calls to our banks and asking them to do things for us manually," explains Malouf. "With an ASP system, we could have accessed the system through a Web browser at a site that had power. We've been running ICMS on two servers at two locations to provide backup. That's actually not necessary with Treasura."

Better still, the switch is definitely helping his performance, Malouf points out. "We have quicker access to more balance and transaction data. We don't have to depend on dial-out routines. We don't have to go to multiple bank sites to initiate wires." He estimates that by switching to Treasura, his treasury staff saves at least an hour a day in the cash management routine. "It works better and costs less," he says, echoing a familiar refrain among treasuries that have gone with this newer technology.

Kyriba, primarily a European provider until a couple of years ago, is also benefiting from the ASP surge. Strategic Treasury's Jeffery predicts that Kyriba will expand its marketing efforts to match its technical capabilities, now that it has established a beachhead in North America.

While the banks appear to be the ones currently pushing the envelope through their partnerships and expansions, some experts like consultant Jeff Wallace, managing partner of Greenwich Treasury Advisors LLC in Boulder, Colo., think the current is running in favor of systems vendors and away from banks. "Global treasuries can use the powerful new ASP-hosted systems to get bank balances through SWIFT and run cross-border pools themselves. You can automate that in any decent workstation and eliminate the convoluted, expensive overlay account structure provided by banks," he explains. "Direct corporate access to SWIFT is a godsend to the treasury system vendors, but I don't think they've all realized it yet. It can save companies money, increasing the value of their system solutions. It's a strong selling point."