Bunq vs DNB: New milestone or just a signpost? (Dutch Item)

24-11-2022 | treasuryXL | Enigma Consulting | LinkedIn |

In oktober oordeelde het Centraal College voor Beroep en Bedrijfsleven (CBB) dat online bank Bunq in zijn recht staat om klanten te screenen met kunstmatige intelligentie en data-analyses. De uitspraak is door het FD en Banken.nl gebracht als een monumentale overwinning voor Bunq, terwijl andere media juist benadrukken dat een gedeelte van de aanwijzing in stand blijft.

Wat betekent de zaak Bunq nu daadwerkelijk voor de praktijk binnen de financiële sector? Is het echt een nieuwe mijlpaal of ligt de zaak genuanceerder?

Arjan Bom is adviseur bij adviesbureau Enigma Consulting en gespecialiseerd in financial crime-vraagstukken. Hij zet de zaak uiteen en geeft een doorkijk op wat de uitkomst voor de markt zou kunnen betekenen.

Achtergrond

Bunq is een bank die volledig online werkt en al het betalingsverkeer via de app verwerkt. Het wijst een klant bij acceptatie een ‘regulier profiel’ toe, gebaseerd op analyse van klantgegevens en kunstmatige intelligentie (AI). Vrijwel alle klanten van Bunq vallen binnen dat profiel.

Opgemerkt zij dat we hier spreken over de betaaldiensten van Bunq en niet beleggingsdiensten of hypotheken. De uitspraak geeft eveneens weinig inzicht in de rol van AI in de toewijzing van dit profiel. Dat is an sich niet ongebruikelijk, aangezien het hier gaat om concurrentiegevoelige informatie welke in een publieke versie van de uitspraak zelden uiteen gezet wordt.

Volgens DNB is het toekennen van een dergelijk regulier gebruikersprofiel aan elke nieuwe klant niet hetzelfde als het uitvoeren van een klantenonderzoek naar het doel en de beoogde aard van de zakelijke relatie. In 2019 vaardigde DNB daarom een instructie uit waarin het Bunq de opdracht gaf een bepaalde handelswijze te volgen. De aanwijzing ziet specifiek toe op een drietal componenten:

  • Bunq heeft niet voldaan aan de verplichting tot vaststelling van het doel en de beoogde aard van een zakelijke relatie zoals neergelegd in artikel 3, tweede lid, onderdeel c van de Wwft.
  • Bunq heeft artikel 3 lid 2 onder d Wwft geschonden voor zover het het onderzoek naar de herkomst van de gelden betreft.
  • Bunq heeft artikel 8 lid 5 van de Wwft heeft geschonden in zoverre dat het voldoende en geschikte risicomanagementsystemen dient aan te houden om te bepalen of een cliënt of uiteindelijk belanghebbende een politiek prominent persoon (PEP) is.

Simpeler gesteld is het standpunt van DNB dat Bunq de anti-witwasregels heeft geschonden. Dat is iets wat wel vaker voorkomt en waarvoor meerdere banken flinke boetes hebben gekregen of schikkingen hebben getroffen.

In de praktijk kiezen banken relatief vaak voor een minnelijke schikking zoals ING in 2018 met een bedrag van €775 miljoen en ABN Amro in 2021 met een bedrag van €480 miljoen. Opgemerkt zij overigens dat het hier een schikking met het OM betrof en er al strafrechtelijk onderzoek liep. De context is daarom iets anders dan een traject waarbij ‘slechts’ DNB betrokken is.

Bezwaar Bunq

In een voor de financiële sector ongebruikelijke zet heeft Bunq bezwaar aangetekend tegen het besluit van DNB tot het geven van een aanwijzing. Bunq escaleerde de twist zelfs door te procederen tot de hoogste rechter. Het komt zelden voor dat banken kiezen om de strijd met hun toezichthouders in de rechtszaal aan te gaan en zelfs tot de hoogste rechter door te procederen.

Een ongebruikelijke zet om te procederen betekent echter nog niet dat de zaak ook een praktische impact heeft. Het CBB geeft Bunq gelijk op het eerste punt. De verplichting tot vaststelling van het doel en de beoogde aard van een zakelijke relatie schrijft niet de exacte methode voor die bij een dergelijke beoordeling moet worden gebruikt.

Daaruit volgt dat Bunq geacht wordt in staat te zijn het doel en de beoogde aard van de zakelijke relaties vast te stellen op basis van het risicoprofiel dat in de loop van de door hen gekozen beoordelingsmethode is vastgesteld, aldus het CBB.

DNB krijgt gelijk op de overige twee punten wat betekent dat de originele aanwijzing uit 2019 van kracht blijft. Dat betekent op zijn minst dat het geen klinkende overwinning is, noch voor Bunq noch voor DNB.

Wat betekent dit voor de markt?

Wat praktisch kan worden gehaald uit de zaak is het volgende:

  • Financiële instellingen hebben een beoordelingsvrijheid om aan de verplichtingen van de Wwft te voldoen aangezien de wet open normen stelt.
  • Voorwaarde is dat doel en aard van de zakelijke relatie adequaat kunnen worden vastgesteld. Aangezien DNB op dit punt ongelijk kreeg, zijn andere stellingen van DNB over de kwaliteit van de vaststelling niet inhoudelijk behandeld. Dat is voor de praktijk een gemiste kans aangezien de lessen die daaruit zouden volgen bijzonder handig zouden kunnen zijn.
  • Het inzetten van kunstmatige intelligentie en digitale CDD-tools is acceptabel, ook al kunnen we uit het besluit niet afleiden hoe Bunq deze precies inzet.
  • Het besluit kan instellingen de ruimte geven om het beleid meer af te stemmen op de eigen werkwijze en het klanttype van de instelling.
  • Hoewel DNB zich recentelijk wel meegaander lijkt op te stellen, kan niet worden uitgesloten dat DNB zich in dit opzicht conservatief zal opstellen, al moet daarbij worden meegenomen dat DNB zelfs expliciet het statement maakt om te kijken wat deze casus betekent voor het toezicht.

Het was zeker een dapper en ongebruikelijk besluit van Bunq om te gaan procederen en in dat opzicht een indicatie voor een kentering in de markt. Tegelijkertijd wordt vergeten dat DNB zelf ook aan het werk is geweest en input vanuit de markt duidelijk erkent.

Wat mij betreft is het besluit dan ook geen nieuwe mijlpaal maar meer een wegwijzer die indicatief is voor de huidige ontwikkelingen in het landschap van banken en toezicht. De nuance wordt soms vergeten aan beide kanten van het spectrum in de berichtgeving, waarbij geen recht wordt gedaan aan de stappen die zowel DNB als Bunq (hebben te) maken.

Hoe gaat dit er in de toekomst uitzien? Wellicht kiezen instellingen bij conflicten met hun toezichthouder vanaf nu sneller voor de gang naar de enige onpartijdige scheidsrechter: de rechter.

Why you need to automate swap execution

22-11-2022 | treasuryXL | Kantox | LinkedIn |

Do you struggle with having a perfect match between your currency hedging position and the cash settlement of the underlying commercial exposure? We’ll let you in on a secret: most treasurers and finance teams do. But how can you simplify this time-consuming and resource-intensive task? In this article, we show why you need to automate swap execution and how you can do it.

We reveal why this is an essential issue for treasurers, how it’s typically handled, and why automated swap execution can help finance teams play a more strategic role in the business. 

Setting the scene

Treasurers know that it is practically impossible to have a perfect match between the firm’s currency hedging position and the cash settlement of the underlying commercial exposure. That’s especially the case if those hedges were taken long before. This is why swapping is so essential.

Let us briefly see an example. If you have a ‘long’ USD forward position with a given value date and you need, say, 10% of that amount in cash right now, a swap agreement allows you to perform that adjustment.

With the ‘near leg’ of the swap, you buy the required amount of USD in the spot market while simultaneously selling —with the ‘far leg’ of the swap— the same amount of USD at the value date of the forward contract. And that’s how you adjust your firm’s hedging position.

Pain points: a resource-intensive activity

Swapping can be extremely time-consuming and resource-intensive, particularly if many transactions, currencies and liquidity providers are involved. We recently saw how a large European food producer was struggling mightily with manual swap execution, a dreadful situation faced by many, if not most, companies.

Among the most common pain points, we can cite the following three:

  • Operational risk. Many tasks are manually executed: retrieving incoming payments, selecting liquidity providers and confirming trades. The entire workflow relies on emails that circulate back and forth with spreadsheets carrying potential data input errors, copy & paste errors, formatting errors, and formula errors.
  • Lack of traceability. Lack of proper traceability hinders the process of assessing hedging performance, as swap legs are manually traced back to the corresponding forward contracts.
  • Risk of unethical behaviour. Understood as the risk that early mistakes that are not immediately reported may lead to severe losses down the road, it is prevalent throughout.

Traceability and automated swap execution

Traceability is when each element along the journey from FX-denominated entry to position to operation to payment has its own unique reference number. But how can we apply this concept to solve the problem of manual swap execution?

The answer is automated swap execution, a solution that is embedded in Currency Management Automation software. It relies on the perfect end-to-end traceability between the different ‘legs’ of a swap agreement and the original forward contract. Meanwhile, FX gains/losses and swap points are automatically calculated. It’s dead simple!

Swap automation is a powerful tool for the treasury team. At the company level, it opens the way to:

  • According to recent surveys, increasing the efficiency of treasury operations is the No. 1 expectation in tech for CFOs.
  • Using more currencies in the business to take advantage of the profit-margin enhancing possibilities of ‘embracing currencies’.
  • Taking a concrete step toward the ‘digital treasury’ is a concern voiced by many CFOs and treasurers.

At a personal level, in terms of the daily workload of members of the treasury team, automated swap execution means:

  • More time to concentrate on high-value-adding tasks such as fine-tuning and improving cash flow forecasts.
  • Reduced stress levels.
  • Increased productivity at work.

And that’s no small achievement! 

Currency Impact Report October 2022

15-11-2022 | treasuryXL | Kyriba | LinkedIn |

According to a recent Kyriba report, the earnings of North American firms will suffer a shocking $34 billion fall in Q2 2022 as a result of headwinds. When compared to previous quarters, headwinds rose by 3583% since Q3 2021 and by 134% from the prior quarter.

Source

Currency Impact Report

The average earnings per share (EPS) impact from currency volatility reported by North American companies increased from $0.03 to $0.10.

The USD is at a 20-year high, and when combined with volatility and interest rate changes, many corporations have seen their currency risk double or triple, as well as their hedging expenses double.

Kyriba’s Currency Impact Report (CIR)

Kyriba’s Currency Impact Report (CIR), a comprehensive quarterly report which details the impacts of foreign exchange (FX) exposures among 1,200 multinational companies based in North America and Europe with at least 15 percent of their revenue coming from overseas, sustained $49.09 billion in total impacts to earnings from currency volatility.

The combined pool of corporations reported $11.82 billion in tailwinds and $37.27 billion in headwinds in the second quarter of 2022.

Highlights:

  • The average earnings per share (EPS) impact from currency volatility reported by North American companies in Q2 2022 increased to $0.10.
  • North American companies reported $34.25 billion in headwinds in Q2 2022, a 134% increase compared to the previous quarter, and 3,583% increase since Q3 2021.
  • European companies reported a 68% percent increase in negative currency impacts, with companies reporting $3.02 billion in FX-related headwinds.


Ask the treasuryXL expert #5 What is Factoring in Trade Finance?

03-11-2022 | treasuryXL | Wim KokLinkedIn |

treasuryXL is the community platform for everyone with a treasury question or answer! A common question asked by treasurers is what Factoring means in Trade Finance. In today’s article Ask the treasuryXL Expert, Wim Kok defines factoring in trade finance for us.

Factoring in Trade Finance

Question: “What is Factoring in Trade Finance?”


Answer provided by Wim

What is Factoring in Trade Finance?

Well, there is a pretty good definition included in the Standard Definitions for Techniques of Supply Chain Finance, prepared by the Global Supply Chain Finance Forum and published by the ICC in 2016. It is currently being updated, but the definition is still alright.

There they give the definition of factoring in trade finance as: Factoring is a form of Receivables Purchase, in which sellers of goods and services sell their receivables (represented by outstanding invoices) at a discount to a finance provider (commonly known as the ‘factor’). A key differentiator of Factoring is that typically the finance provider becomes responsible for managing the debtor portfolio and collecting the payment of the underlying receivables.

Would you add anything to this definition? 

There are a number of things I would add to this to explain the terminology and make it more clear:

  • The term “factoring” is sometimes used as an umbrella term for all forms of invoice financing, including confidential invoice discounting. Strictly speaking, “factoring” refers to both debt management and debt purchase.
  • In the UK, factoring is usually communicated to the debtor, as the collection procedures are carried out by the funding provider (the “factor”).
  • Non-public factoring is usually more popular than full factoring. In this case, the customer retains control over the collection of the receivable.
  • In some markets, disclosure is required by law. Some even require the debt to be formally acknowledged before purchase.
  • In the UK, the standard practice is for the factor to purchase all debt – known as “whole turnover” – even if not all debt is eligible for financing. This gives the factor leeway to absorb any dilution or non-payment of individual invoices. Banks also take secondary security in the form of an “all-asset debenture”. This is registered at Companies House and notifies other potential lenders that debts have been transferred.
  • A subtle but important point is that a debt assignment can serve two purposes: it can mean that the debt has been bought or that the debt has been taken as security for a loan.
  • Many Fintechs offer single invoice/selected invoice/selected debtor solutions, but these are inherently riskier than whole turnover solutions. Large bank providers are generally reluctant to follow suit.
  • Factoring can be done with or without recourse. Even arrangements without recourse include provisions allowing the factor to require the customer to buy back the invoice under certain conditions (e.g. contractual dispute).
  • Factoring can possibly be “wrapped” in credit insurance.
  • In the UK, major finance providers tend to operate an “availability model” in factoring rather than funding individual invoices. The “availability” changes in real time as new eligible debts are purchased (within agreed counterparty limits etc) and existing debts are settled, defaulted or become ineligible. The customer can then draw down to “availability” at any time. This is similar to a “borrowing base” approach, albeit with frequent increases and decreases within the day. This model, combined with the “whole turnover” mandate, provides the factor with a secure source of repayment even if some invoices remain unpaid.

I trust this will be helpful and give more insight into this subject.

Wim Kok



Do you also have a question for one of the treasuryXL experts? Feel free to leave your question on our treasuryXL Panel. The panel members are willing to answer your question, free of charge, with no commitment.

Optimising cash and liquidity through currency management

31-10-2022 | treasuryXL | Kantox | LinkedIn |

Can you improve cash and liquidity management with the help of more effective currency management? The answer is: yes, you can! In this article, we see how currency management and cash management are, in effect, joined at the hip.


Five important touchpoints

There are at least five crucial, yet sometimes unduly neglected, touchpoints between FX risk management and cash or liquidity management. Let me briefly set the stage first. Then I will discuss their interactions.

(1) Swapping. Adjusting the company’s hedging position to the cash settlement of the underlying commercial exposure requires a lot of swapping.

(2) Collateral. In a world of shifting interest rates, treasurers need solutions that allow them to optimise collateral management.

(3) Working capital management. Solutions to improve working capital and liquidity are rarely mentioned in the context of FX risk management. Yet, they exist!

(4) Netting. Netting allows companies to generate savings in trading costs and in terms of the cash balances needed to satisfy collateral requirements.

(5) Cash flow forecasting. According to a recent survey by HSBC, more than half of treasurers worldwide say that cash flow forecasting is the most important task in treasury.

How and when currency management meets liquidity management

Take the case of a hedging program designed to protect the FX budget rate. It includes stop-loss orders to protect the FX rate used in pricing or a ‘worst-case scenario’ FX rate. It can also include profit-taking orders to lock in more favourable exchange rates.

As long as the stop-loss orders are not hit, hedge execution is postponed. This means that the cash required for collateral requirements can be set aside at a later date. It also means that treasurers have more time to improve their cash flow forecasts.

And it’s not over yet! Hedging incoming firm sales/purchase orders or invoices leads to very precise currency hedging. This means that purchasing managers are in a position to buy confidently in the currency of their suppliers. These, in turn, will be more inclined to grant extended paying terms.

With the perfect end-to-end traceability that comes with automated programs, managers can safely aggregate exposures without fear of losing the benefits of data granularity. This can create more netting opportunities, again reducing the need to set aside cash in terms of collateral.

Finally, swapping can be easily automated.

And voilà!

Feedback effects

That’s how effective FX risk management ends up improving liquidity management. Note that the process feeds on itself. Let me give you an example. Because swap automation releases valuable treasury resources, treasurers can take advantage of the benefits of using more currencies. Automated swap execution, therefore, improves not only the cash management part of the FX workflow but also —indirectly— working capital management.

That’s what I call a win-win situation!

Brush up on your treasury knowledge? Get our eBook: What is Treasury?

27-10-2022 | treasuryXL | LinkedIn |

How can you fast brush up on your treasury expertise, Treasurers, CFOs, Cash Managers, Controllers, and other Finance Addicts? Or how would you describe “What Treasury is” to family and friends? Well, there is an easy solution for it. Download our free eBook here: What is Treasury?

This eBook compiled by treasury describers all aspects of the treasury function. This comprehensive book covers relevant topics such as Treasury, Corporate Finance, Cash Management, Risk Management, Working Capital Management.

This eBook was prepared by treasuryXL based on the most useful best practices offered by Treasury professionals throughout the previous years. We compiled the most crucial information for you and wrote clear, concise articles about the key topics in the World of Treasury.

We took a deeper dive into each of the above-mentioned treasury functions and highlight:

  • The purpose of each named Treasury function (What is?)
  • What specialists do
  • Examples of Activities
  • Summary of Frequently Asked Questions and answers
  • Conclusion

How to receive the eBook ‘What is Treasury’ for Free?

We simply giveaway two presents for you! By signing up for our newsletter you will automatically receive the following in your inbox:

  1. On Fridays, our Coffee Break weekly newsletter will land in your inbox. In this weekly newsletter, we will highlight the whole week full of the latest treasury news within our community.
  2. The 41 pages eBook, What is Treasury?

 

Subscribe, Join, Download and Relax.

Welcome to our community and have fun reading!

 

 

Director, Community & Partners at treasuryXL

 

 

Crisis After Crisis, Treasury Steps into the Advisor Role

24-10-2022 | treasuryXL | Kyriba | LinkedIn |

From the 2008 global financial crisis to the ongoing COVID-19 pandemic, treasury departments have served as strategic advisors regarding capital structure, liquidity and finance operations. Without the guidance and leadership of treasury management in these critical moments, many organizations would not have survived. But it begs the question—what can companies do on an ongoing basis to best position themselves for when the next crisis happens?

By Andrew Deichler
Content Manager, Strategic Marketing

Source

The Company Vaccine

Treasury is often viewed as a bit of a niche area. Even though virtually every company has some semblance of a treasury department and the function has been around for a long time, many departments outside of finance don’t really know what treasury does. That’s essential for understanding the value of the function.

But as Lee-Ann Perkins, CTP, FCT, assistant treasurer for Specialized Bicycle Components, explained, they suddenly have a wake-up call when a crisis occurs. “During COVID and the financial crisis, treasury became that department that had a chance to shine,” she said. “I think, myself and other treasury folks, used that opportunity to really raise the profile of the treasury department.”

In the case of the pandemic specifically, companies relied on treasury to immediately get them into a better liquidity position and procure PPP loans if needed. “Treasury was the department that ran with those projects,” Perkins said. “We have the relationships with the banks, and we understand the importance of covering liquidity and covering covenants.”

Much of what treasury does is forward-looking—constantly future-proofing the organization. And in crises like the pandemic or the current supply chain shortage where cash is paramount, the C-suite looks to treasury to make sure the company can withstand future shocks. “I think, along with the heads of accounting, finance and tax, treasury has become known as our own department that can provide useful answers to the C-suite,” Perkins said. “During COVID, I made this analogy that the treasury department should really be the ‘prevention’ department. We want to be the vaccine that’s out there to prevent you from needing the medicine in the first place.”

But for the vaccine analogy to really be accurate, shouldn’t treasury already have that voice as an advisor? There will always be another crisis around the corner, but if companies are already listening closely to what treasury has to say, they might be able to weather those events much more efficiently than if they were asking for treasury’s advice at the last minute.

Building Strategic Relationships

Perhaps the most important relationship a treasurer can have in an organization is with the CFO. The CFO is typically the one that represents finance (and treasury by extension) in meetings with the CEO and the board. But if a treasurer has a good relationship with the CFO, that CFO may bring the treasurer into those conversations, explained Jim Gilligan, former assistant treasurer for Evergy and currently senior vice president of MFR Securities. “If you have a CFO that recognizes the strategic value of treasury in those executive discussions, then that goes a long way towards becoming a strategic partner,” he said.

The treasurer’s personality and skill set are also important factors in this regard; treasurers shouldn’t just hope the CFO notices them. “If you have a personality that allows you to interject yourself in those sorts of strategic discussions, then that could help to get you a seat at table,” Gilligan added. “If you’re not that type of personality or your CFO does not necessarily recognize that specific skill set, then you’ve got to find a way to get yourself noticed.”

Getting noticed by the CFO and senior leadership isn’t easy. Treasury professionals can establish themselves by adding value in other areas of the business that they may not typically have much interaction with. For example, payment processing is handled through customer service at many companies. Customer service representatives may not be aware of some of the new payment rails and capabilities that have cropped up in recent years, like real-time payments. By getting involved and helping customer service adopt some of these new payment methods, treasury can show a lot of value, Gilligan explained.

Treasury can also better establish itself by developing relationships with the operational teams and inserting itself in the annual budget process, explained John Dourdis, CTP, a corporate treasurer most recently with Conair. “Say, ‘I want to be part of that.’ Because I think that gets a lot of attention with regard to CEOs and COOs,” he said. “That’s important to give yourself that visibility that treasury isn’t always going to have.”

Dourdis noted that, whatever the company’s business might be, treasury is not going be top of mind for operations. But operations and the C-suite might look to treasury sooner if it inserts itself in the budget process. And that can lead to treasury being involved in other areas, like the forecast update process.

Treasury would also be wise to get involved in 12-18-month strategic cash flow forecasting. CFOs have been prioritizing this area in recent years but have mostly relied on FP&A to do so, while leaving treasury to handle short-term forecasts. Treasury departments should reach out to FP&A to see how they can help in the process. With treasury’s overall proven track record of developing accurate forecasts, both FP&A and the CFO may welcome their input.

Treasury departments can also help companies with large debt burdens as interest rates begin to rise. With the era of inexpensive debt coming to a close, organizations could face strict enforcement of loan covenants. Treasury’s knowledge of covenant compliance and forecasting should help immensely in this regard; a bank may agree to amend a loan and add new covenants if financial projections are strong.

Strategy and Technology

Technology can play a key role in helping the treasury department establish itself further. With the latest treasury management software, team members can spend less time doing manual work and more time contributing strategically.

Easton Dickson, vice president and global treasurer for Bain & Co., believes that technology can improve the situation drastically. He has observed treasury teams spending copious amounts of time reacting to daily operations. And with a company as big as Bain that operates in over 40 countries, that means that any day of the week, treasury may have to resolve a mini-crisis in any part of the world, while maintaining its ongoing M&A activities, due diligence, etc.

“Operationally you’re bogged down,” he said. “And so, I think whatever we can do to streamline and automate processes will make it so much easier because it’s freeing up time.”

Those times of crisis typically shine a light on areas where companies need to sharpen their edges. “Maybe you’re underinvesting in technology and relying too heavily on manual processes,” explained Dana Laidhold, treasurer for Nasdaq. “You realize, now we need to move faster, and we’ve got tons and tons of people running manual processes that could be automated.”

But often in those chaotic moments, it can be too late to course correct. A treasury department that suddenly needs to provide liquidity positions to senior leadership on a weekly or even daily basis is going to be sufficiently challenged if they are relying solely on Excel. And at that point, there’s also no bandwidth to begin a treasury management system implementation project.

“I hope finance leaders have learned, having gone through the Great Recession and the pandemic, that it’s really important to think ahead,” Laidhold said. “It’s so much harder to backpedal than it is to build smartly along the way.”

It’s therefore incumbent on the treasury team to communicate to senior leadership what insights it needs to deliver and the right technology that can make that information more accessible and accurate. Treasury should vocalize the problems that it may need to solve in the future and whether it will need greater capabilities to do so.

Laidhold hypothesized that there might be a question that doesn’t need to be answered currently, but somewhere down the line it could become important. And there’s a type of analysis that treasury would need to do, but it doesn’t have the data or technology to do it yet. “So how do we plan today to be in the position to be able to do that? I think it’s myopic to assume that whatever situation you’re in now you’re going to be in forever,” she said.

Taking Action

The treasury department needs to be proactive if it wants to be seen as a strategic partner outside of times of crisis. That means adding value wherever possible, establishing strong relationships with senior leadership and other departments, and making the business case for technology that will improve its efficiency. Crises are happening more rapidly. Companies will be in much better shape for the next one if treasury is already at the table, providing necessary insights.

Learn More:

  1. AFP Treasury in Practice Guide: Treasury Opportunities in Strategic Cash Forecasting
  2. eBook: Perfecting the Cash Forecast


Sibos 2022 | How did our expert Philip Costa Hibberd experience the event?

19-10-2022 | Philip Costa Hibberd | treasuryXL | LinkedIn |

 

We sent our expert Philip Costa Hibberd to the SIBOS conference to discover and explore the World’s Premier Financial Services event.

Last week, the SIBOS conference took place in Amsterdam. Sibos 2022 brought together more than 10,000 participants in Amsterdam and online, as this event returned in-person for the first time in three years.

Philip is delighted to share his experience with you. Happy reading!

 

What is Sibos?

The Sibos conference is an annual event organized by Swift that brings together leaders in the payments, banking, and financial technology industries. The conference provides a forum for attendees to discuss the latest trends and developments in the industry, but – as it turns out – it is mostly used as a venue where bankers meet other bankers with the occasional FinTech thrown in the mix.

During the 4 days of the 2022 edition, I learnt that little focus is given to the needs of the corporate treasurer. Throughout the conference, a few interesting recurring themes emerged nonetheless, which I’ll describe in the paragraphs that follow.

Purpose of the financial industry

Queen Maxima – acting as the “United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development” – kicked off the opening plenary by speaking about the importance of financial inclusion and access to banking services for all.

 

The first priority is to make sure we do no harm […] but we have a chance today of moving beyond doing no harm to actually doing good. So, beyond transaction volume and customer acquisition can we create the rails for transformative change to help users become more financially healthy?

 

Sadly the answer I heard from the bankers speaking on stage during the sessions that followed was not promising. “Maximising shareholder value” was still the dominating mantra… which – as experience teaches us – has seldom led the banking industry to “doing no harm”, let alone “doing good” in the past.

 

Banks vs FinTechs

A bit more hope for the industry “doing good” came from the voice of FinTechs on stage. As it turns out, a mantra based on “innovation and disruption” makes it easier to attract scarce resources (such as talent) and ironically deliver shareholder value as a consequence.

It was interesting to observe the evolution of the Bank-FinTech relationship. The change in how banks perceive FinTechs today compared to a few years ago was remarkable. Once seen as a threat, FinTechs are today considered an ally by banks.

 

When asked “Are FinTechs Friend or Foe?”, bankers gave answers as:

 

“Partnership with FinTechs is our main strategy”. 

“Partnership with FinTechs is crucial. They bring agility and they are a matter of survival for us”.

 

It was hardly a surprise then to learn on day 2 of the conference about BNP Paribas’ acquisition of Kantox, a leading fintech for automation of currency risk management. The relationship between banks and FinTechs will probably only get warmer and tighter from here… but only time will tell if that is good news for us.

 

Regulation-driven innovation

Besides FinTechs, another often cited source of innovation for banks was “the regulator”.

Singapore was the most cited example of successful regulator-driven innovation. Its central bank has been encouraging innovation in the financial sector with generous grants to adopt and develop digital solutions, AI technology, cybersecurity capabilities, etc. On top of that, it has developed an exceptionally accommodating regulatory framework. It has for example introduced a “regulatory sandbox” for FinTechs and banks to test their products and services in a live environment without them having to be concerned with compliance hurdles (at least for the delicate initial phases of innovation).

There are hopes that Singapore’s success will be taken as an example by other regulators across the globe, but the most basic expectation from the industry is for regulators to at least set guidelines to improve standardization across the market. As nicely put by Victor Penna, there is still a lot of work to be done:

 

“Can you imagine if I sent an email from Singapore to Belgium and they couldn’t process it? That is exactly what is happening today with payments. This has to change.”

 

One last often cited trend where regulators are expected to play a dominant role in innovations, are Central bank digital currencies – CBDC in short.

CBDC (Central bank digital currency)

CBDCs are digital currencies issued by central banks. Typically central banks have two kinds of liabilities:

  • Cash: takes a physical form and is available to the general public
  • Central bank deposits: which take a digital form but with limited access

CBDCs are a third form of liability that complements cash and central bank deposits: they take a digital form and are directly available to the general public.

More than 100 central banks are estimated to be working on their own projects. They are important in the context of innovating the financial sector because they have the potential to provide greater efficiency and transparency in financial transactions. Additionally, CBDCs could help to reduce the cost of financial services and increase access to financial services for underserved populations.

There is still little consensus today on what exactly the impact will be, not least because of the fragmentation of all the initiatives. For example, when it comes to the digital Euro project, the impact on corporate treasury payments is expected to be limited. The project is still in the validation phase, but the assumption is that even if/when the project were to move into the realization phase (decision expected in September 2023) usage will be limited by design with the introduction of low limits to the maximum balances which could be held (exact limits need to be defined, but think of a few thousand euros max).

 

Realtime banking and 24/7/365

Banks have invested a lot in the technological backbone needed to support open banking and instant payment requirements across the world and seem to be puzzled by the modest adoption. The ambition is to move away from batches, cut-off times, and end-of-day statements in favour of instant payments 24/7 and provide information-on-demand via APIs.

From a treasury perspective, this brings some challenges. Moving to APIs can be hard, especially if you have a fragmented ERP/TMS/Banking landscape. But the biggest challenge is probably the way that we organize our work and our processes. As jokingly put by Eddy Jacqmotte group treasurer at Borealis:

 

 “Instant Treasury is nice: but I don’t like the idea of instant treasury on Saturday and Sunday”.

AI and (big) data

The ever-decreasing cost of storage and processing information, combined with the ever-increasing flow and value of user data has transformed the “AI” and “(big) data” brothers from geeky kids in the corner to rockstars in the centre stage.

Besides the obvious use cases such as fraud detection, sanction screening, reconciliation, payment repair, etc. the new trend is to use AI to generate new tailored content and to feed it to users to measure their interest in a specific topic and nudge their behaviour. Instead of asking you directly if you are interested in a mortgage, the algorithm might casually inform you about the price per square meter of properties in the neighbourhood where you go for coffee every weekend. If you interact with the prompt, the algorithm will take notice and will keep on feeding you with “property-related” information, until you find yourself asking for a mortgage…or showing interest in something else that the bank can do for you.

Sounds sketchy? It might be, that’s why another trend in this area has been making its way to the foreground: Explainable AI.

Explainable AI is a form of AI that can provide understandable explanations for its predictions and decisions. This is important especially in the financial industry because it can help to build trust with customers and regulators and avoid (or at least make explicit and controllable) unwelcome biases.

For example, the Apple Card / Goldman Sachs scandal in 2019 could have been prevented if the algorithm used by Apple had been more transparent and accountable. According to researchers, the algorithm used by Apple was biased against women, resulting in lower credit limits for women than men. If the algorithm had been more explainable, the bias could have been discovered and corrected before the card was launched.

 

 

 

 

In essence: AI is powerful, but transparency is key. On that note, I have a confession to make: the previous paragraph was written by an AI and not by me…

 

 

 

 

 

 

 


Thanks for reading!

 

 

 

Philip Costa Hibberd

 

 

 

 

 

 

BNP Paribas signs an agreement for the acquisition of Kantox

17-10-2022 | treasuryXL | Kantox | LinkedIn |

treasuryXL congratulates highly valued partner Kantox with the announcement that BNP Paribas has signed an agreement to acquire the leading fintech for automation of currency risk management!

Source

Kantox, a leading fintech for automation of currency risk management, will accelerate its growth with the support of BNP Paribas and the strengths of its integrated business model. This acquisition builds on the initial strategic partnership between BNP Paribas and Kantox initiated in September 2019.

BNP Paribas is pleased to announce the signature of an agreement for the acquisition of Kantox, a leading fintech for the automation of currency risk management. Kantox’s software solution has managed to successfully re-bundle the Corporate FX workflow, offering a one-stop-shop, API-driven, plug-and-play solution which has emerged as a unique technology within the B2B cross-border payments sector. Kantox’s technology provides an unrivalled level of automation and sophistication to Corporates in setting up hedging strategies.

By leveraging its integrated business model, BNP Paribas is well-positioned to accelerate and extend Kantox’s offering to a wide range of Corporate clients across the globe.

The acquisition of Kantox is supported by the Global Markets business of BNP Paribas’ CIB division and the business centres of the Commercial, Personal and Banking Services (CPBS) division. The two divisions aim to deploy Kantox technology to large corporates as well as SMEs and Mid-Cap clients, capitalising on market knowledge and the local presence of the group.

 

This acquisition illustrates BNP Paribas’ Growth Technology Sustainability 2025 plan that sets out to accelerate the development of technological innovations, enhance customer experience and provide best-in-class capabilities to its clients.

Philippe Gelis, CEO and co-founder at Kantox: “We have been serving clients together since 2019 when our technology partnership started. During those 3 years, we spent a lot of time together in the field, getting the opportunity to understand that together we were stronger and able to bring more value to clients. It is the best of both worlds, the leading software company in the currency management automation category and the leading bank in Europe.”

Olivier Osty, Head of Global Markets, BNP Paribas CIB: “We are delighted to strengthen our partnership with Kantox, which brings to our clients a unique and innovative platform to automate their currency risk management. Corporate treasurers are currently navigating turbulent markets, and advanced technology can help mitigate some of the challenges, easing the burden of manual tasks and allowing them to focus on their core business.” 

Yann Gérardin, Chief Operating Officer, Head of BNP Paribas CIB: “The acquisition of Kantox presents a further illustration of our ability to establish long-term partnerships with fintechs in an ever-increasing range of areas. Supporting our clients in their international development and providing them with the most advanced technological solutions have always been our priority and are, as such key pillars of our GTS 2025 strategic plan.”

Thierry Laborde, Chief Operating Officer, Head of BNP Paribas CPBS: “This acquisition demonstrates how our distinctive model and integrated platform strategy are able to create value and develop business opportunities. Our leading positions with European companies of all sizes will enable Kantox to further accelerate its development while improving our customers’ experience.”

The acquisition is subject to regulatory approvals and is expected to complete in the coming months.

Eurofinance remains THE event for corporate treasurers | By Pieter de Kiewit

12-10-2022  treasuryXL | Pieter de Kiewit | Treasurer Search  LinkedIn

 

Throughout covid times the organizers of Eurofinance remained active and were able to create interesting web-based events. Still, general opinion in last weeks’ event in Vienna was that there is nothing like the live thing. The programme was packed with interesting content, the event floor with interesting companies and visitors.

By Pieter de Kiewit

Communication leading up to the event and the venue, the Wien Messe, radiated experience in events of this size. The numbers of representatives and visitors were impressive. Luckily, the venue is big enough to not nerve the visitors who have to get used to large crowds again.

The programme was spread out over the very large room for plenary meetings, five large rooms for parallel session with presentations & panel discussions and “open rooms” on the trade floor. Key note speakers like Guy Verhofstadt and Goran Carstedt were able to enthuse with stories beyond the scope of treasury, others covered topics about treasury technology, both practical & visionary and treasury organization, for example about my personal favourite, the treasury labour market.

For many, the trade floor was easily as interesting as the content. Visitors gained market information, for example preparing for a TMS selection and implementation. Also reuniting with old treasury friends and getting to know new ones, was relatively easy during well catered breaks. Some of the visitors created new legends during the Thursday night afterparty that is not covered by this looking-back-blog.

As treasuryXL ambassador I visited the various partners of the platform present and received positive feedback on the event. So Cobase, Kyriba, TIS, CashForce, Nomentia, Refinitiv and CashAnalytics, we hope to see you again in Barcelona again and welcome a number of new ones.

 

Hasta luego,

 

 

 

 

 

 

Thanks for reading!

Pieter de Kiewit