Managing just-in-time liquidity

One of the key enablers of the financial industry’s success will be to address the liquidity challenges banks face. The more efficiently banks can generate and manage liquidity, the more opportunities they have to finance the economy. And a thriving, effective economy fosters economic growth.

Listen to David Rich, executive vice president for services, Mastercard New Payment Platforms in conversation with journalist Libby Potter, as they discuss the challenges associated with just-in-time liquidity management — and a new solution.

Effectively managing just-in-time liquidity is not as simple as stock-piling the reserves: If assets are held in liquid form, they’re not available for use in other activities; and holding too much liquidity results in significant processing and other costs.

Amid the global shift to real-time payments, the challenges are compounding — the quicker things happen from a bank’s point of view, the harder it is to generate liquidity to make them happen. And in a real-time world it can be harder to identify trends and forecast for change.

Our reporting and analytics solution involves applying advanced data analytics and artificially intelligent (AI) algorithms to historic transactional data to help financial institutions predict their liquidity more effectively, and significantly reduce the risk of a breach. The AI allows us to create an adaptive forecasting model, which can change as the payment flows evolve, making it more reliable and more accurate than rules-based solutions.

This is not just a solution to manage liquidity, but to optimise it. The better banks can manage their liquidity, the more resources they have for more profitable activities and to capitalise on unforeseen opportunities when they arise.