Who should “give a push”​ and work on APIs?

12-01-2023 | treasuryXL | LinkedIn |

A new year, a new edition in which we discuss the latest treasuryXL poll results. It is encouraging that once again many treasurers participated in the vote. We examined the voting patterns of treasurers and gathered the perspectives of experts Jack Gielen and Konstantin Khorev on the topic of APIs in treasury.

Source

Who should “give a push”​ and work on APIs?

It is commonly understood that APIs are prevalent in today’s digital landscape. However, corporate treasurers can also reap benefits from API technology and its advantages. If you are unsure about the importance of APIs in Treasury or need more information, you should definitely watch the recording of the joint webinar together with Cobase on the future of APIs. It is encouraging that once again many treasurers participated in the vote. The current treasuryXL poll remains open and we encourage you to continue to have your voice heard! You can cast your vote on this link.

Question: Who should “give a push”​ and work on APIs?

First observation

That looks quite straightforward: partners should join forces. Do the treasuryXL experts agree, or what is their view on this?

View of treasuryXL experts

Jack Gielen (Cobase)

Jack voted for the option that partners should join forces.

Geen alternatieve tekst opgegeven voor deze afbeelding

 

“APIs and the benefits are clearly on the map but there is also an understanding that there is still work to be done before those benefits will really be realised”

It is good to see that regarding the results of this poll, the market agrees that the success of corporate APIs and OpenBanking requires cooperation and cannot be dictated by 1 party. This means Treasurers clearly understand the complexity of the playing field. At the moment, although there are many initiatives by individual parties, there is a need to create a good partnership where the whole eco-system works together

The main benefits that APIs could realise if banks and companies were to work together are:

  • Better integration of banking services into customers’ own internal systems,
  • Easier connection to new banks and expansion of banking services
  • Better and more real-time data that can be converted into actionable information

These benefits translate into being able to use the systems the treasurer has chosen more efficiently and better, more up-to-date insight into status, exposures and required actions.

Recently, Cobase set up the webinar “The Future of APIs” in collaboration with treasuryXL to discuss this topic. I was particularly impressed by the level of knowledge Treasurers have gained over the past year which was also reflected in the questions. APIs and the benefits are clearly on the map but there is also an understanding that there is still work to be done before those benefits will really be realised. Ultimately, the priority with the end customer, the treasurer, will determine how quickly other market players act.

Konstantin Khorev

Konstantin voted for the option that partners should join forces.

Geen alternatieve tekst opgegeven voor deze afbeelding

 

“By working together, we can achieve a more efficient and effective treasury management system.”

I agree with the majority view that the implementation of APIs in the treasury field should be a collaborative effort. Banks will play a key role in implementing these changes, but it is also crucial for corporates and TMS providers to set and specify the requirements. This ensures that the solutions being implemented align with the unique needs and goals of each individual corporate, and TMS providers can develop the tools and services necessary to support these needs. By working together, we can achieve a more efficient and effective treasury management system.

Recently, my latest article on this topic was published on treasuryXL. In it, I try to make it plain that APIs are a nice and easy solution, although they come with some limitations and challenges. At the same time, I believe that the future of bank connectivity lies in API technology. What do you think?

How can fintech rise to the challenge of AML compliance?

12-01-2023 | treasuryXL | Refinitiv | LinkedIn |

A new white paper from Refinitiv, produced in collaboration with global consultancy, FINTRAIL, unpacks some of the key financial crime-related challenges facing fintech today, and explores how companies in this evolving sector can best manage AML compliance.

 

  1. A new white paper explores three key challenges currently at play in the fintech space.
  2. Fintech priorities are balanced between operational efficiencies, positive customer experiences and regulatory compliance.
  3. Discover more in the paper from Refinitiv and FINTRAIL, which is based on interviews with experts in different international fintech.

For more data-driven insights in your Inbox, subscribe to the Refinitiv Perspectives weekly newsletter.

Fintech and illicit activity

The fintech space is highly dynamic and agile, but this industry of innovation and opportunity is substantially impacted by a constantly evolving financial crime landscape.

Emerging technology, quickly adopted by fintech and leveraged to make every facet of our lives easier, is similarly harnessed by financial criminals seeking to engage in illicit activity.

Criminals seeking to evade controls are resourceful, quickly making used of new opportunities to conduct illicit activity

New findings from Refinitiv and FINTRAIL – based on interviews with experts in different fintech across a range of geographies – reveal the top challenges faced by the fintech and focus on three key challenges currently at play in this dynamic space.

Read the white paper: AML challenges for fintechs: Insights for the future

What are the three key challenges facing fintech?

Online fraud

Fraud continues to grow across the globe and is a key pain point highlighted by the fintech we spoke to.

One of the top fraud-related challenges currently in play is application fraud, where sophisticated financial criminals typically impersonate individuals or make use of synthetic identities.

Illicit actors are leveraging powerful technology to do this – manipulating information, tapping into advanced graphics techniques and exploiting vulnerabilities wherever possible.

In the UK, reported losses totalled £2.35bn in 2021. In the U.S., 2.8 million consumers made fraud reports in 2021.

In the United Kingdom, where fraud is the most commonly experienced crime, reported losses totalled £2.35 billion in 2021. In the United States, fraud trumps all other proceed-generating crimes and 2.8 million consumers made fraud reports in 2021.

 – AML challenges for fintech: Insights for the future

The fintecs we spoke to are responding in a range of ways, from providing better customer education and raising awareness to protect vulnerable customers, to ramping up collaboration initiatives between the private sector, governments and law enforcement agencies.

Digital assets and cryptocurrency challenges

Crypto continues to grow, and hand-in-hand with this, regulation within the sector is also increasing.

Against a highly dynamic situation, where products and technologies are evolving at speed, virtual asset service providers (VASPs) need to keep pace with a changing regulatory curve, especially when it comes to complying with differences across jurisdictions.

Even fintech that don’t bank digital assets need to stay acutely aware of the crypto-related risk as they may interact with VASPs, and consequently, need to understand potential regulatory obligations.

Sanctions

Sanctions are another key challenge for fintech, and little wonder given the global sanctions landscape that has unfolded throughout most of 2022.

AML teams have been scrambling to keep pace with the exponentially rising volume of sanctions, especially – but not only – those related to the Russian invasion of Ukraine.

Not only has the absolute volume of sanctions been increasing, but individual sanctions have been becoming increasingly complex, leading to rising compliance costs for fintech as well as their traditional financial services industry counterparts.

Non-compliance can have far-reaching consequences – ranging from financial to reputational and more.

Sanctions are our highest priority and receive dedicated 24/7/365 attention

A best practice response

The fintech we spoke to are acutely aware of the need to protect against widespread illicit activity and of the requirement to remain compliant at all times.

At the same time, they operate in a lean industry of constant change, exponentially growing customer bases and a breakneck pace of business.

This means that building a best-practice response to financial crime must be carefully considered, efficient and effective.

Leading-edge AML technology, robust data and skilled compliance professionals – whether in-house or outsourced – can offer the solution to help manage and mitigate financial crime risk and the key challenges outlined above.

High on the list of fintech priorities is striking the all-important balance between operational efficiencies, positive customer experiences and regulatory compliance – and with the right data, technology and human insights, this delicate balancing act can be maintained.

Read the white paper: AML challenges for fintechs: Insights for the future

APIs for Corporate Treasury: Not only efficient but also easy

10-01-2023 | Konstantin Khorev | treasuryXL | LinkedIn | APIs, or application programming interfaces, have revolutionized the way that corporate treasury departments operate. Getting timely information about cash balances and transactions running through your bank accounts is crucial not only for treasury but also for other corporate functions: A/R, A/P, business operations and other departments

Read more

Interview | 7 questions for Adesola Orimalade, Seasoned Treasury Professional

09-01-2023 | treasuryXL | Adesola Orimalade | LinkedIn |

 

Meet our newest expert for the treasuryXL community, Adesola Orimalade

Adesola is one of the few Treasury professionals around who has worked in both banking and corporate treasury, across various industries and in both Africa and Europe.

Since walking into his first role over a decade ago, he has built his competence in many areas of treasury including cash management, treasury operations and operational/liquidity risk management.

Aside from his professional background Adesola is passionate about using his professional knowledge and expertise to support voluntary organisations that operate within his areas of interest (homelessness, poverty, climate change etc). He currently serves on the board of a U.K. charity.

 

We asked Adesola 7 questions, let’s go!

INTERVIEW

 

 

1. How did your treasury journey start?

 

Having obtained a diploma in Town and Country planning and a first degree in Estate Management, my desired career path was to work for any of the regional or multilateral agencies devoted to development finance, urban renewal, housing etc. Growing up I had seen the slums in cities like Nairobi, Johannesburg and even Lagos. I wanted to make a difference.

Life however had a different plan for me, I started working in international banking operations at Citibank purely by accident.

It was during my time in international banking that I was first introduced to Treasury. Trade Finance as you know has a lot of opportunity to interface with Treasury and whether that’s in terms of arranging FX for importers to enable them to pay for machinery or raw materials purchased from abroad or issuing an advance payment guarantee on behalf of a contractor.

Later on I joined Standard Chartered Bank as the pioneer head of trade finance in Nigeria and as it was a small team I also served as back up to the treasury operations manager whenever she was away. It broadened my exposure to banking treasury as I got involved with managing risk across the front, middle and back office functions including taking responsibility for the confirmation and settlement of deals, position reporting and so on.

It wasn’t until 2005 however that I got into the corporate treasury which was again purely by accident. A large telecommunication service provider was seeking to enhance their corporate treasury and someone recommended me to the CFO. I was offered the deputy head of treasury role and was promoted into the Treasury Manager shortly thereafter.

That role was to fuel my passion for Treasury and although I had enjoyed my career in international trade, I wanted to build my future career path within the Treasury space.

 

2. What do you like about working in Treasury?

 

As biased as this may sound, I believe that Treasury sits at the center of an organization, and we are therefore a significant player in many of the major decisions required especially those with financial implication.

That importance of Treasury and the ability to make a positive impact within the organization is what I really like about Treasury.

In addition, I also enjoy the fact that Treasury interfaces with a lot of internal and external stakeholders. Building and nurturing those relationships is also something I enjoy about working in Treasury.

Finally the treasury is impacted by a lot of socio-economic issues external to an organization. I enjoy being informed. I enjoy current affairs. I enjoy reading and understanding the world from an economic, social, environmental and political perspective. It is great to be in a career where my passion can relate with my day to day activities.

 

3. What is your Treasury Expertise and what expertise gives you a boost of energy?

 

I view myself as a Treasury Generalist given that I have worked in both banking and corporate treasury. I have had the opportunity of working in organisations where I had responsibility for the typical front, middle and back office treasury functions.

The areas that give me a big boost however are Cash/Liquidity Management and building cash forecast models/tools, Working Capital Optimisation/Management, building greenfield treasury teams and/or functions as well as developing existing treasury teams and/or process re-engineering.

 

4. What has been your best experience in your treasury career until today?

 

When I left Nigeria to relocate to the United Kingdom, I wanted to continue building my career in Treasury but the response from my looking for roles was ‘you lack U.K. Treasury experience’.
I was excited when I got my first role in Corporate Treasury and when I look back now my best experience is that I have been able to build my career twice in a lifetime on two different continents.
Very few people can say that .

 

5. What has been your biggest challenge in treasury?

 

Successfully managing the treasury function for an online travel company during the recent covid pandemic comes easily to mind. This is bearing in mind that the travel/airline industry was one of those that was significantly affected by the local and cross border restrictions that were introduced globally.

 

6. What developments do you expect in corporate treasury in the near and further future?

 

I think the recent experience from the pandemic means that businesses would continue to focus on cash visibility, liquidity and financial risk management and how technology can be used to achieve better cash forecasting.

 

7. Is there anything that you would like to share with our treasury followers that they must know from you?

 

Over the last couple of years I have been trying to get more young people involved in treasury; especially young people from ethnic minorities in the U.K and across Europe.

On one level treasury professionals can come across as being all technical and number crunchers so the idea is to show that the profession is all inclusive.

I have been to take that message to various institutions within Europe, sharing with them “What a day looks like in the life of a treasurer”. I ran workshops for that purpose at the University of Nottingham Business School and Cologne Business School.

 

Want to connect with Adesola? Click here

 

Thanks for reading!

 

 

Kendra Keydeniers

Director Community & Partners, treasuryXL

Main trends in blockchain and crypto in 2023

05-01-2023 | Carlo de Meijer | treasuryXL | LinkedIn |

Turning back from our almost one month stay during November in South Africa, our beloved travel country, I was heavily chocked by the events on the crypto markets. During our stay I had promised my wife not to follow the news in these areas. But looking at internet I read the various articles and blogs on the FTX crypto exchange collapse and the negative reactions throughout the crypto space. These events will of course have their impact on the various trends in the blockchain and crypto markets in 2023 and beyond. So let us start.

By Carlo de Meijer


1. The crypto markets will further undergo the impact of the recent FTX collapse

Meanwhile the shock waves of the collapse of one of the biggest crypto exchanges make it still feel throughout the whole crypto sector. It affected the credibility and trustworthiness of crypto as a reputational asset. It also brought the dangers inherent in the cryptocurrency space, cementing the vision of an insecure landscape and acts as a barrier to the growth of the industry.

This time trust has fallen to an all-time low greatly reducing the interest among retail investors as well as institutions and financial players alike in the crypto markets,  causing many crypto currencies to fell sharply.

It also caused an increased number of crypto firms being crashed or confronted with liquidity problems, while other distressed companies could be entrained by the fall of FTX. As a result the total crypto market capitalization has dropped from $ 3 tn  to $821 bn as of the end of November.

Expectations are for a new tough and volatile 2023 for many in the crypto industry. Investors remain much more reluctant to enter the crypto market as long as there is no clearness on crypto regulation. This will heavily restrict the sprawling crypto ecosystem known as decentralized finance (DeFi) as well as the NFT market, that were booming segments in recent years. As a result a growing number of crypto firms will get into trouble.

2. The collapse will pop up the quick introduction of stricter crypto regulation

Triggered by the events on the crypto markets, more stringent regulation will rise much sooner than later to prevent events like the FTX collapse and limit the misuses in the crypto markets. Regulatory authorities are now urgently working on stringent regulations of the largely unregulated crypto world. And that for various reasons. The FTX collapse underlines the risks and  dangers of the unregulated crypto markets faced by consumers inherent in the crypto currency space. Given the crypto industry’s inability to self-regulate, it emphasized the need for tighter supervision and clear and more stringent regulatory frameworks. Regulators around the world will intensify their work in 2023 and come up with tougher rules for crypto companies. Aim is to meet the various risks and challenges of the crypto industry, including cryptocurrencies, crypto assets, stable coins, DeFi, NFT, lending and staking etc. but without frustrating or harming technology developments.

These rules should protect investors in crypto products and should ensure that crypto firms are more compliant and more transparent to act in a responsible way. Regulators should thereby look more closely at account balances and reserves at centralized crypto exchanges. This should ensure consumer protection, making crypto companies more transparent, while improving disclosures and risk awareness within the sector.

3. We will see the process towards an international regulatory framework

Regulators worldwide are expected to work more closely together to deliver a clear and effective global regulatory framework and supervision for crypto markets including crypto currencies to make crypto regulation effective. Without global coordination, even comprehensive local laws will do little to prevent cross-border regulatory arbitrage and the potential abuses. International institutions like BIS, IMF, G7, G20, the BIS, the World Bank and others are messaging that international regulatory collaboration and a cohesive regulatory framework  is urgently needed. They are prepared to take the lead.

4. As well as earlier than expected introduction of CBDCs

These developments on the crypto markets will also trigger central banks worldwide to accelerate their process of developing and implementing their own CBDC. In 2022 we observed increased interest in the concept of CBDCs in a growing number of countries worldwide. More than half of central banks all over the world are now exploring their potential as they could offer several benefits. Most central banks thereby already moved beyond conceptual discussions and are either in the researching, testing or deploying stage of the process. There are already CBDCs that have gone live.

This process will further continue in 2023 when we will see a growing number of CBDC projects, triggered by the recent developments in the crypto market. This will also initiate more central banks an earlier than expected introduction of their own CBDC. Thereby there will be growing collaboration worldwide supported by international organisations like IMF, BIS  etc. This may indicate another viable field for blockchain growth.

5. Technology innovations in the crypto market will continue to expand

It will not mean the end of the sector. Crypto markets such as DeFi and NFT may revive when new and more stringent regulation will have been implemented. Both the Defi and NFT markets are expected to further develop with the help of innovative developments, including tackling the main security issues.

a. The DeFi market will further innovate
We will see more technological innovations in the DeFi market, leading to more complex and interesting applications. These may include the creation of new digital assets and online payment systems, including utility tokens, digital shares, natural asset tokens, stablecoins, etc.

Next year will also likely bring more traction for use cases like self-custody wallets, synthetic assets, and prediction markets. And Improvements in the decentralized finance (DeFi) sector like the protocol Compound’s version (v)3 and the arrival of the zero-knowledge (ZK) ecosystem continued regardless. New infrastructural developments will continue such as the arrival of decentralized perpetual exchanges and  regulatory-compliant platforms that connect traditional finance (TradFi) to DeFi.

b. The NFT market is expected to develop further technologically and creatively
NFTs, also known as non-fungible tokens, gained great popularity since 2021. In the past few years there has been a lot of talk about crypto games and crypto collectibles with the advent of NFTs. With this new asset class, there has been a shift in the way these assets can be used.

Though the recent crypto turmoil will cause minor interest – for the time being – this market is expected to develop further technologically and creatively. We will see industry disruption and ideas for utility NFTs such as in-game NFTs, identity tokens, and token-gated communities. Another trend is that the NFT market – previously only on the Ethereum platform – will increasingly be conducted in different chains. There will arrive a growing number of blockchain based platforms that allow players to trade their crypto  assets on secondary markets.

c. We will the growth of interesting applications of tokenised assets
A new model around blockchain technology that will further emerge in 2023 and beyond is so-called asset tokenization. Tokenization thereby uses blockchain technology to turn digital or physical assets such as stocks, treasuries or corporate bonds into digital tokens. They are becoming increasingly popular, as smart contracts automate tokens transactions, while helping reducing  and increase transparency.

We may see the growth of interesting applications of tokenised assets such as flash loans and real estate, while we will also see a surge of start-ups focused on bringing TradFi institutions into crypto in a regulatory-compliant way. Unlike crypto currencies, tokening makes assets easier to other people – both retail and business-users, to own that asset. It may open the present markets where trillions of dollars/euros are locked up in assets that cannot be deployed or to which there is extra ordinary limited access. Via asset tokenization anyone can invest in assets. People no longer need to go solely to the stock or cryptocurrency market.


6. The blockchain markets will further develop

But also in the blockchain area there will be a number of interesting trends that will determine the future development of the blockchain industry and how this technology is evolving in the coming years.

a. The blockchain markets will show further growth
Over the past few years, interest in blockchain technology has grown steadily and rapidly, with an increased adoption of the technology by finance and banks, governments, international trade and supply chain management, triggered by the various benefits it could deliver.

As a result the blockchain market is expected to further grow in 2023 and beyond. The spending on various blockchain solutions (market volume)  is forecasted to increase to $ 23,3 bn in 2023 (from $ 12,2 bn in 2022).

b. Private blockchains are becoming popular
A trend that has started a few years ago and will further continue in 2023 is the growing adoption of enterprise or private blockchains. Enterprises are becoming more interested in private blockchains, because it permits only authorised users to access the network and take part in transactions. They require a key, sometimes called an invitation key from the owner. Private blockchains networks prove essential for safekeeping enterprise data. Access to certain documents and information is role-based and programmable to the authorised private blockchain based systems.

c. Blockchain will become mainstream
The adoption of blockchain-based systems is increasingly becoming the new standard across numerous industries. A growing number of Industries outside finance, are now searching for blockchain solutions. Thanks to blockchain’s ability to be used in almost any field, the trend will continue for years to come.

As the technology continues to evolve, more and more businesses are leveraging blockchain to streamline their operations. Blockchain is increasingly seen as an ideal for industries like finance, international trade, insurance, legal, logistics, supply chain management, healthcare, insurance, media and e-commerce where payments must be transparent, secure and efficient.

 

7. Blockchain infrastructure becomes more mature

The year 2023 will see a number of interesting developments showing the blockchain infrastructure is becoming more mature, including cloud services, DAO’s, interoperability and compatibility tools.

a.  Blockchain as a service (BAAS)
While the cloud services industry is still young, their transaction growth is driving innovation. For business it makes it possible to use technology, software etc. without huge investment, to build their own infrastructure and acquire new skills. More broadly for cloud services, blockchain brings greater privacy and security capabilities. Currently start-ups and established companies of all sizes both use Blockchain as a Service (BAAS). It is now offered by numerous well-known organisations incl. Microsoft, IBM, Amazon etc.

During 2023 we will see a firm pick up of BAAS. It supports IOT applications by offering different blockchain-enabled services such as smart contract services, dApps, verification services or user information and cloud blockchain storage. Beyond these improvements to to-day’s cloud services, blockchain can be added as a service offering itself for secure network management.

b. DAO’s go mainstream
With the rise of blockchain technology, Decentralized Autonomous Organizations (DAOs) has grown in popularity and this trend will continue in 2023. Decentralisation is changing the way business is done, thereby helping to reduce costs while eliminating the need for intermediaries.

DAOs are new model for organizations that are managed and operated on decentralised networks and use blockchain technology to store and share information. These  are automated entities that operate on rules encoded as smart contracts and have no single point of failures. They can exist and make decisions without any human management. DAO’s also give individuals more access to economic resources, by allowing them to invest their money into projects they find promising, without needed someone else to manage it. How DAOs can overcome incentive challenges, implement cross-chain asset management and interaction capabilities and expand use cases will be key for the next phase of its development.

c. We will also see cross-chain solutions to solve  interoperability and compatibility issues
Protocols are entering the blockchain market that provide fast connectivity of different blockchains. Initially there were many protocols and platforms in this sector but there were no standards. For this reason, companies could not achieve compatibility across platforms at the same time. The main challenge was the usual transfer of data from one user to another without the ability to negotiate the terms.  New protocols such as Polkadot, Cosmos, Wanchain and others are now providing fast connectivity of different blockchains with trouble-free interaction. In these solutions various cross-chains are connected to achieve interoperability and compatibility.

 

8. More blockchain innovations will enter the market

As blockchain technology further develops we will see more innovations entering the market, including dApps, smart contracts and new consensus mechanisms.

a. Firm uptake of dApps
In 2023 we are going to witness a more massive adoption of Decentralized Applications or dApps. These are applications that run on a decentralized network and use blockchain technology to store and share data. As companies seek ways to increase efficiency and reduce costs, DApps are gaining popularity. Blockchain networks offer endless possibilities for dApps with peer-to-peer nodes and smart contracts. With dApps one can diminish censorship from centralised authorities and ensure privacy or dApps development flexibility. dApps do not experience downtime since they leverage decentralised computing and utilize open source licenses to lease or use. dApps are also crucial to accelerating WEB 3.0 integration.

b. Increasing popularity of smart contracts
Another trend we are going to see is the increasing popularity of smart contracts in a growing number of sectors. These are digital ones that are automatically executed after meeting several conditions. When certain conditions are met, agreements are instantly implemented by a blockchain allowing for proxy-free contracting without the need for intermediaries.

They are becoming increasingly popular, as smart contracts help reduce paperwork and manual processing, as well as eliminate the need for intermediaries. Due to smart contract mechanisms blockchain services are now available to companies that do not have the resources for several years of research and development of their blockchain system, allowing them to make their own  self-executing contracts, protecting against unforeseen circumstances.

c. New consensus mechanisms entered the market
New methods of cryptography to verify transactions are entering the blockchain space such as Proof of Stake (POS), Proof of Authority (PoS) and Zero Knowledge.

Proof of Stake (PoS)

Newer protocols to reach consensus are focused on eliminating the problem of power consumption and become more eco-friendly. The Ethereum switch in 2022 from proof-of-work (PoW) to proof-of-stake (PoS), in an attempt to make their algorithm greener, reduced Ethereum’s energy usage by an incredible 99.9%, while speeding up data transfer and reducing fees. This trend is likely to be seen more in 2023 and beyond and is said to become the major topic. This will likely make blockchain an even more attractive solution for many companies.

Proof of Authority
Proof of Authority uses a large number of trusted and private networks in business. It has been introduced as a more energy-efficient alternative to PoS as less computational resources are needed. In proof-of-authority, machines earn the right to generate new blocks by passing a strict vetting process. These system moderators are preapproved participants who check blocks and transactions. The Proof-of-Authority model is scalable because it is based on a small number of block validators.

Zero knowledge protocols

Zero knowledge protocols may be one of the significant WEB 3.0 and blockchain solutions in the coming years. As the question of privacy comes to the forefront of the crypto industry, zero-knowledge technology has been particularly notable this year.

Zero knowledge technology can solve privacy and scalability issues for the newer layer 1 blockchain projects. Because blockchains are inherently transparent, this application is huge for the industry and allows many more interactions to take place on-chain in a private way. With ZK proofs, users are able to prove their identity on-chain without having to reveal sensitive data. ZK proofs are also extremely lightweight, making on-chain interactions much more scalable and efficient.



9. New identity, security, tracking and data analytic tools will further evolve

a.  Blockchain-based identification management will further evolve
With the move to digital commerce and communication, the individual identity (id) – as mapped to digital websites – becomes increasingly important to control and authenticate. Present id techniques are flawed in quite a lot of methods. They are porous, operate in isolation and are prone to errors. Blockchain techniques however can solve these issues, and offer a single source to verify identity and assets. Digital verification processes have already been developed based on blockchain technology that covers the entire user journey.

The operations for blockchain identity management are wide ranging. Blockchain identification can even supply a kind of ‘self-sovereignty. This is mainly for providers in the DEFI system and other necessary services that require verification. With the entry of NFTs and Metaverse into the market, the issue of digital identity will continue to trade.

b. There will be increased focus on security audits
Another trend is the increased focus on security audits. Many cross-chain bridges have been launched with the focus on speed, this at the expense of disregarding security. Cross-chain bridges have as a result become a popular target for hackers. With the raise in security-related incidents, we anticipate that more projects will recognize the value of auditing going forward. It is essential for projects to undergo a comprehensive security audit, together with other methods such as using bug bounties (a monetary reward given to ethical hackers for successfully discovering and reporting a vulnerability or bug to the application’s developer) to improve a project’s security throughout its ongoing operations and development.

c. Tracking tools will continue to develop
But also tracking tools will continue to develop in the near future, and may add more capability to anti-money laundering investigations. On-chain data can benefit blockchain analytics and anti-money laundering investigations immensely. We are already starting to see a multitude of on-chain trading and analysis platforms and tools. Through the data aggregation of these tracking tools, users can discover information such as the location of their funds and determine whether their assets are connected to stolen funds.

d. Blockchain data analytics will get more priority
Rich and open-source data is one of the blockchain’s best features, as it allows for deep analysis of on-chain activity. Data reveals a massive amount about how blockchains are used, emerging trends, user behaviour, and on-chain money flows. Blockchain data is however still largely untapped. Leveraging this data in an efficient and responsible way is integral to the expansion of blockchain dApps and their use cases. In 2023 we will therefore see more blockchain analytics platforms entering the markets which will be critical for understanding on-chain analytics through wallet activity.


10. Blockchain technology will be used for other applications

On the macro level, we will see more advanced implementations between blockchain and other technologies such as Web 3.0, Metaverse and Artificial Intelligence (AI).

a. Increased involvement of blockchain technology in Web 3.0.
We also will see an increased involvement of blockchain technology in Web 3.0. Web 3.0 is the next generation of the World Wide Web, that  will radically change of how people interact with each other, by putting them in control of their personal data. Web 3.0 also aims to provide a personalised browsing experience for each uses. 2023 may see a further move toward adoption of Web 3.0 technology including blockchain as many will start to realize that it has to offer plenty of benefits over traditional systems such as increased security and transparency, lower costs, faster transactions, and more efficient storage space.

By being built on top of decentralised technologies like blockchain, Web 3.0 will provide users with a way to interact without having their personal information known by central authorities. The other significant aspect of Web 3.0 is that transactions are going to be done via crypto users that will serve as tokens for identity verification purposes.

As blockchain-powered “trustless ecosystems” evolve into Web 3.0, they are becoming key to the creation and monetization of digital assest. Web 3.0 may thereby  take many forms including decentralised social networks, play-to-earn video games they reward players with cryptographic tokens and NFT platforms.

b. Growing use of blockchain technology for developing Metaverse
Another new trend is the growing use of blockchain technology for developing a secure and extensive Metaverse. The Metaverse, a shared virtual world providing engaging experience, can be interacted with big users through their digital avatar, an electronic image or online representation of the user. The ideas of the Metaverse is increasingly becoming a reality, with numerous well known platforms attracting a sizeable user base. Due to its decentralised structure, blockchain development can provide frictionless and secure access to the Metaverse, free from cyber-security and trend issues and inadequate user authentication. In addition to privacy and security, blockchain also links the Metaverse to the crypto economy, making it an attractive investment for companies in 2023 and beyond.

c. Companies increasingly use the combination of AI and blockchain
Blockchain technology is increasingly used to help keep track with the rapid development of Artificial Technology (AI) solutions, which studies the data in the blockchain and predicts future events, that is happening right now. Companies are increasingly using the combination of AI and Blockchain technology to build powerful solutions and we see that accelerating in 2023 and beyond.

Using blockchain to store and distribute AI models will provide an advanced audit trail and enhance data security for AI development. With the help of AI and machine learning, blockchain networks will become even more secure and efficient. This will enable businesses and organizations to store and share data securely, automate processes, and reduce fraud. AI can also use Decentralized Applications (dApps) to automate processes, reduce expenses, and increase transparency.  

The business world needs to pay attention to these trends

Blockchain technology continues to advance, and applications of blockchain are being presented every day. Blockchain is a rapidly developing technology with new standards and delivery models and with a wide range of opportunities. For businesses it is important to stay up-to-date with the latest developments in the blockchain and crypto  field. There are a number of these blockchain trends which a business needs to pay attention  to gain the maximum out of it.

These trends described in this blog will help aid companies and organizations use the technology to its full potential to improve and streamline their operations, reduce costs, increase efficiency and boost security.

Wish you all a happy 2023.

Carlo de Meijer

Economist and researcher

 

3 Ways Liquidity Planning Technology Improves Cash Flow Forecasting Results

03-01-2023 | treasuryXL | Kyriba | LinkedIn |

The treasurer and CFO are today more closely linked to strategic financial objectives for the CEO, ensuring finance teams provide informed guidance on navigating risks and opportunities. This year, a revolutionary practice area and innovative technology is transforming the value of short and long-term cash flow forecasting with more certainty and analytics, empowering finance with a strategic liquidity planning toolset.

By Brian Blihovde
Senior Direct, Product Marketing

Source

The treasurer and CFO are today more closely linked to strategic financial objectives for the CEO, ensuring finance teams provide informed guidance on navigating risks and opportunities. This year, a revolutionary practice area and innovative technology is transforming the value of short and long-term cash flow forecasting with more certainty and analytics, empowering finance with a strategic liquidity planning toolset.

Modern technology solutions are driving value across cash flow forecasting and strategic planning through inclusion of more information from different sources, using artificial intelligence (AI), machine learning and flexible scenario analysis. These user interfaces, reporting and analytics provide finance with better identification of free cash flow targets, improve EBITDA, and deliver views and analysis of total working capital levels.

Creating Engagement and Clarity in Liquidity Decisions

New technology solutions for liquidity management planning create forecasts and analyses on actuals and planned cash flows to include liquidity instruments from debt to working capital programs. When the combination of cash, planned or committed financial flows (AP, AR, treasury) are used as an integrative planning tool with analytics, decision-making for the CFO is more accurate and based on today’s and tomorrow’s reality. Forecasted transactions originating from purchase requisitions, orders and finally invoices are a much better source of forecasted flows than spreadsheet estimates.

Liquidity planning tools and features created as part of an advanced solution gives finance the ability to see exact components of working capital and cash flow forecasts further out to deliver clarity on whether debt or other sources of liquidity will be too expensive. Identification of the mix of liquidity needed and the availability of planned sources or uses further helps the treasurer plan the intersection of borrowing levels, cash flows and confidence parameters for various scenarios and comparisons. The ability to quickly adjust parameters within a planned liquidity model with established, accurate cash management baselines, makes the job easier and faster for not only treasury and FP&A, but gives the CFO quick strike decisioning on the planned mix of cash and debt to fund operations or strategic decisions.

Achieving Optimal Levels of Liquidity

Global economic volatility continues to impact multinationals across a variety of indices and continued strategies by central banks to slow inflation with interest rate increases translates into significantly increased costs of borrowing. For finance organizations that provide liquidity as a net short-term borrower, it is extremely important treasurers can assess the mix of debt and the most advantageous debt instruments, or working capital programs, available. Treasury teams can directly impact greater overall financial performance by optimizing the cost of liquidity and keeping the right levels of available debt and free cash for investments. Modern liquidity planning solutions create better long-range views of available debt vehicles in cadence with cash and other programs to help prescribe the correct mix of long and short-term borrowing. Identifying where short-term debt has carrying costs over other sources of liquidity while also reducing the number of overall debt instruments (facilities or other lines) reduces costs that affect net earnings. Liquidity tools that incorporate the complete set of debt vehicles coupled with cash and forecasted flows create more ability to lessen reliance on borrowing, reducing and optimizing debt levels – all significant contributors to a stronger EBITDA.

Expanding C-Suite Confidence with Future Analytics

In a recent cash forecasting webinar, 90% of attendees stated that they “lose confidence in their forecasts within three months.” Regardless of a static or rolling forecast scenario, lack of confidence in your firm’s future cash and liquidity levels hinders the ability to fund longer-term, accurate strategic decisions without having more of a backup in the form of higher credit limits available to shore up potential liquidity shortfalls.

The new cash forecasting features and capabilities available in new liquidity planning tools are creating better capabilities to manage longer-term liquidity questions:

As the economy continues to spiral, uncertainty will bring down the values of organizations who are incapable of managing the rate at which volatility impacts EBITDA – a consequence of legacy thinking and systems. CFOs and treasurers who are taking a new tact in leveraging liquidity across the enterprise, are finding success in minimizing impacts to their income statement and have an unobstructed vision for how they can unlock near and long-term growth.

 

The Top 5 Most Popular Articles of 2022 on treasuryXL!

02-01-2023 | treasuryXL | LinkedIn | Welcome to 2023! We are excited to present the Top 5 Most Popular Articles of the year on treasuryXL!

Read more

3 Ways Treasury Can Save Money & Boost Revenue in 2023

29-12-2022 | treasuryXL | TIS | LinkedIn |

As 2023 approaches, many treasury teams are actively evaluating their operations to identify areas in need of improvement during the year ahead. As these analyses are performed, TIS has compiled a short list of projects that treasury should consider undertaking in order to save costs, boost revenue, and drive further efficiency for their companies.

Source

This blog serves as a precursor to TIS’ recent whitepaper, 5 Ways Treasury Can Save Money & Boost Revenue in 2023. You can download the full whitepaper using this link to review the full list of strategies and tips.

Introduction

Given their position at the helm of global cash, payments, and working capital activity, modern treasury teams play a vital role in controlling the various operational, financial, and technological costs that impact their companies. From monitoring and reducing banking and transaction fees to preventing payments fraud, managing daily liquidity, optimizing working capital, and developing short-term debt or investment strategies, today’s treasury groups are often in the ideal position to analyze their company’s cash flows and make improvements to boost revenue or save costs.

However, because most treasury teams have a relatively small headcount and are tasked with an ever-growing list of responsibilities, it is critical that practitioners maximize their available resources and focus on projects that will have largest impact on their company. This is especially true in today’s volatile economic environment, where cutting costs and maximizing revenue is more important than ever.

Given this context, it is likely that treasury groups will be seeking to undertake a variety of cost-savings or revenue-boosting projects in the months and years ahead. In-line with these expectations, this blog will highlight three strategic ways in which treasury teams can have a positive impact on their company’s bottom line in 2023. For extended analysis, you can also download our full whitepaper for additional strategies and tips.

  1. Rationalize Your Bank Partner & Account Landscape
  2. Simplify & Streamline Your Back-Office Technology Stack
  3. Deploy Payment Smart-Routing Tools for Cross-Border & Domestic Transactions
  4. Strengthen Your Treasury Security to Limit Losses from Fraud (See Whitepaper)
  5. Optimize Cash & Working Capital to Improve Short-Term Debt & Investments (See Whitepaper)

1. Rationalize Your Bank Partner & Account Landscape 

Today, it is common for global companies to work with numerous banks across different regions and entities. In fact, a 2022 TIS survey of over 250 treasury practitioners found that 40%+ of companies were actively using more than 10 banks globally. But while organizations obviously need a certain number of bank relationships to accommodate their geographical and operational scale, a larger than necessary group can result in higher costs, fragmented visibility, siloed workflows, and obscure points of communication.

For some treasuries, rationalizing bank relationships can be an effective way of reducing costs. By concentrating on a smaller number of relationships with a select group of core institutions, companies may be in a better position to negotiate more favorable pricing for their banking services. A more streamlined relationship structure can also improve operational efficiency by limiting the number of banking systems and connections required, reducing annual maintenance or service costs, and increasing transparency over all the related operations.

Data showing the complexity of treasury's global bank account structures.

In addition to analyzing each bank relationship, it’s also important to consider the number of bank accounts in use. Because the number of accounts can easily become inflated over time through organic growth and M&A activity, many multinational corporations end up with more accounts than they want or technically need. In 2021, a Strategic Treasurer survey showcased that nearly 40% of companies used more than 100 bank accounts. Furthermore, 38% of companies indicated the number of bank accounts they used were increasing, and 20% of practitioners had identified previously unknown bank accounts attached to their company within the past 2 years (2019-21).

In the long run, companies with excess numbers of accounts that have not been closely monitored will be confronted with excess manual labor, inefficient cash management structures, and higher-than-necessary costs. It will also be much more difficult for treasurers to maintain visibility and control over the company’s cash and to detect fraud or compliance exposures.

Given these challenges, a streamlined bank account structure can not only reduce bank account fees, but also help to minimize idle cash balances and support more efficient cash management. As such, treasurers may be able to save money by rationalizing both the number of banks and accounts that they maintain.

 

2. Simplify & Streamline Your Back-Office Technology Stack

Similar to how a company’s banking structure grows more complex over time, so too does the back-office technology structure that treasury groups rely on to manage operations.

While modern-day treasury software is undeniably critical for today’s practitioners to automate and streamline their processes, such solutions are not always implemented or integrated in an efficient manner. Sometimes the configuration is never completed, or various features are inactive and not functioning as intended. In the long run, a common result of company growth is to wind up with a large assortment of spreadsheets, banking portals, ERPs, and TMS solutions that are collectively causing redundant and fragmented workflows, overly manual processes, a lack of integration or interoperability, and unnecessary subscription and maintenance costs.

In recent years, industry data has demonstrated the effect that unnecessary technology complexity can have on companies. In fact, data from Strategic Treasurer found that 3 out of 5 companies that purchased a TMS were using less than 80% of the functionality they implemented. In addition, one of TIS’ recent research initiatives found that 38% of treasury and finance respondents were using more than 15 different treasury, vendor or payment systems – with two thirds using more than five systems. With this amount of diverse technology in place, it’s easy to see how processes can become inefficient and inconsistent, and how data can become siloed and difficult to consolidate.

Data showcasing the complexity of treasury technology.

In order to promote greater automation and transparency and to reduce overall technology costs, treasury teams with an excess number of systems should strongly consider a consolidation project. A simpler and more unified technology structure can result in more efficient processes, greater transparency, and improved decision-making as a result of more accurate information. Simplifying treasury’s technology stack can also result in other benefits such as improved reporting, reduced IT reliance, more secure fraud controls, and more standardized compliance management.

 

3. Deploy Payment Smart-Routing Tools for Cross-Border & Domestic Transactions

Considering that many companies today operate across multiple countries and regions, it makes sense that treasury teams are managing payments using a broad variety of currencies, channels, and methods. For example, a true multinational company will likely leverage ACH, check, wire, cards, and a variety of other options to send and receive payments. They will also probably use a diverse range of banking channels and financial messaging formats to transmit payments data, along with an equally diverse number of integration and service-level partners to assist with the process.

So how can treasury simplify these payment workflows?

When it comes to cross-border payments, one helpful consideration would be to execute transactions at the local level (i.e. in local currency), rather than relying on traditional correspondent banking or FX conversion services. Because many cross-border payment networks charge exorbitant fees for swapping currencies and delivering funds, companies that regularly transfer money between different countries and regions could save substantially by leveraging a more specialized service.

On the other end of the spectrum, there are also plentiful opportunities to optimize the use of domestic payment methods. In the U.S. for example, switching from physical checks (still a common instrument) to ACH can save time and effort, while other options like virtual cards may offer rebate or cash-back rewards. For companies that have a large network of suppliers and partners in the U.S., joining a rebate program or converting paper-based payments to ACH and virtual cards can provide substantial efficiencies and cost-savings, especially when such projects are executed at scale.

How TIS helps companies streamline domestic ACH, check, and card payments.

Final Thoughts: How Can TIS Help Treasury Unlock New Cost-Savings Opportunities? 

In today’s uncertain and volatile economy, it’s essential that companies take every opportunity to minimize costs and maximize revenue. As we’ve seen with treasury, there are numerous areas where cost-savings and revenue-generation projects can be pursued. Whether it’s through bank and technology rationalizations or improved payments execution and liquidity management strategies, treasury teams have numerous options at their disposal to impact the bottom line. Moreover, the benefits associated with many of these projects often create efficiencies outside of pure costs savings and include enhanced workflow automation, streamlined data management, and the elimination of error-prone, non-compliant, and fraud-exposed processes.

For organizations interested in pursuing any of these strategies or projects further, we strongly encourage you to consider how the TIS solution can help foster the desired outcomes.

At a high level, TIS helps organizations simplify and streamline their global payments and liquidity management operations. Our cloud-based platform empowers businesses to optimize critical functions surrounding cross-border and domestic payments, bank connectivity, cash forecasting, fraud prevention, payment compliance, and more.

Today, corporations, non-profits, and institutions all leverage TIS to transform how they connect with global banks and financial systems, collaborate on payment processes, execute outbound payments, analyze cash flow & compliance data, and promote working capital efficiency. Ultimately, the TIS technology platform enables businesses to improve operational efficiency, lower risk, manage liquidity, gain strategic advantage – and achieve enterprise payment optimization.

For more insight on ways treasury can save money and boost revenue in 2023, download our full whitepaper.

A guide to conditional FX orders

27-12-2022 | treasuryXL | Kantox | LinkedIn |

In this article, we look closely at conditional FX orders, a powerful tool when executing your hedging strategy, and the unique role it plays in currency management — especially when it comes to delaying the execution of hedges.

Conditional orders: a brief definition

A conditional FX order is an order to execute a spot or a forward transaction to buy or sell one currency against another—but only when a predetermined limit is reached.

Conditional orders include stop-loss (SL) and take-profit (TP) orders. While SL orders are aimed at avoiding losses beyond a certain limit, PT orders are designed to take advantage of favourable moves in currency markets.

Note two time-related aspects of conditional orders in forward markets:

(a) The tenor of the underlying forward contract is specified (it could be one month, six months, or a year)

(b) The validity of the order is specified too (it can be valid for two weeks, six months, or set on a  good-until-cancelled basis).

Conditional orders are usually set on an OCO basis: one-cancels-the-other, automatically to avoid the same exposure being hedged twice in the event of extraordinary market volatility. 

Note, too, that in the event of extraordinary market volatility, conditional orders can be executed at less favourable levels than desired. This limitation exists not only in FX but in all financial markets. 

A powerful tool for risk managers

The primary purpose of conditional orders is to provide a safety net around an FX rate that the treasury team wishes to defend.

It can be the rate used in setting prices —aka the campaign/budget rate—or a ‘worst case scenario’ FX rate.  

Say that you wish to defend the rate of EUR-USD = 1 on a spot basis while the market is trading at 1.08. In this case, it is prudent to set three SL orders, each covering a third of the exposure, at 1.02, 1.00 and 0.98, respectively.

Assuming that the three levels are hit, you are mathematically assured to defend your budget or worst-case scenario FX rate.

Time is on your side

In hedging programs designed to protect a budget FX rate, the ‘buffer’ set between the market rate towards the start of the campaign and the rate to be defended with SL orders provides risk managers with a critical resource: time. 

As long as the SL orders are not executed, the passing of time means that hedge execution is delayed while FX risk remains fully under control. This brings the following four systematic advantages:

(a) More time to update cash flow forecasts

(b) More savings in terms of the cost of carry when forward points are unfavourable

(c) No cash immediately needed for collateral requirements

(d) More netting opportunities

And it’s not over yet! With luck, your TP conditional orders can be hit as well. 

Backtesting conditional orders

We recently conducted a backtest of a hedging program designed to protect the budget rate of a UK-based exporter selling into emerging markets. Over a four-year period (2017-2020), the firm would have outperformed its budget rate in three of those years while equalling it in the remaining year. In one year alone, overperformance reached 5.8%.

Delaying hedge execution with risk under control allowed the treasury team to hedge on the back of firm commitments, providing a better hedge rate than the stop-loss orders. So there you have it: when managing currency risk, consider using conditional orders. Time will be on your side. And you’ll sleep well at night! 

P.S. If you’re drafting your upcoming budget, download our Budget Hedging report and find out how to use conditional orders.

Conditional orders

Is the EU market ready for instant payments?

22-12-2022 | François de Witte | treasuryXL | LinkedIn | On December 1, 2022, I had the opportunity to attend in Brussels a panel discussion on “Is the EU market ready for instant payments?”. The event was organized by CEPS (1) and ECRI (2), and featured several prominent speakers.

Read more