Cash Flow Forecasting – Why having the right tools can prove a significant advantage

| 10-11-2021 | treasuryXL | Nomentia | LinkedIn

Introduction David Kelin

 

 

David Kelin is the Managing Director of DNA Treasury Limited. He is a cash management specialist with over 30 years of experience working with corporates and financial institutions. Expertise in helping companies analyse their cash management requirements. He has experience in providing advice on treasury management systems selection. Recently he attended a roundtable discussion on cash flow forecasting for Nomentia, and tells us why cash flow forecasting is a crucial activity for every treasury department.

 

 

 

Round table on cashflow forecasting

I recently chaired a roundtable discussion on cashflow forecasting for Nomentia, a market-leading cash management & treasury solutions provider headquartered in Finland. The group included a cross section of treasury professionals representing a wide range of industry sectors and companies of varying sizes but each shared one common objective: how to best improve their cashflow forecasting processes and methods.

Of the many interesting themes to emerge, one challenge remained agnostic to each treasurer: securing ongoing collaboration from their business units and subsidiaries in the provision of reliable, consistent and accurate cashflow data. Given the importance of accurate cashflow forecasting for organisations of all sizes in today’s economic climate, this is one area of the cash forecasting process we’ll return to at a later stage in this article.

According to the Office of National Statistics (ONS) in the UK, 90% of businesses fail due to cash flow issues. Sir Richard Branson summed it up very well when he said, “Never take your eyes of the cash flow because it’s the life blood of the business.”


Focus on cash flow

Cash flow management is crucial for business survival and well-informed decision making around cash flow maximisation can ensure companies are adequately equipped to navigate times of uncertainty and plan for the long-term. Focussing on cash flow, rather than profit, is what successful businesses do. Let’s think of this in simple terms: a profit-making business that does not manage its cash flows effectively can struggle to pay suppliers and suffer from subsequent delays in meeting customer demand. The end result is unhappy suppliers, lost customers and a negative impact on profits.

The burning question therefore remains, if we unanimously agree that cash flow management is vital to business success, then why does it continue to prove an ongoing headache for many organisations. A sentiment I regularly encounter when meeting with treasurers across my network and hotly resonated during the course of the roundtable in question.

Data is key

When we explored this matter in more detail there was a broad consensus that cash flow forecasting is only as good as the data it comprises. The old adage of Garbage In, Garbage Out (GIGO) is true for cash flow forecasting. Inaccurate data leads to inaccurate forecasting, rendering the process inadequate and almost unfit for purpose.

The key outcome? Data is absolutely key. But data can come from many different sources for example the P&L, ERP systems, payroll etc. These data sources tend to be reliable in so much as they reflect known activities, however as a panel member correctly pointed out, relying on data that is derived from the P&L alone, to produce the forecast, does not lead to accuracy. You must also get the business units to provide and update cash flow forecast data in order to complete the picture.

Securing business unit ‘buy-in’ to the benefits of the forecasting process and, just as importantly, being able to depend on their full collaboration around accurate data provision can sometimes prove a hard challenge – here’s some guidelines to increase your likelihood of success:

  1.  Get senior management buy-in: the panel agreed it’s not enough for Treasury to simply tell the businesses to provide accurate, timely and reliable data. The process should be endorsed and championed by senior management through regular communication to the business units
  1.  Communication, Communication, Communication!: business units must also buy-in to the process. Companies that are the most successful at cashflow forecasting agree that when business units understand the importance of good forecasting, they tend to do a better job of providing quality data. A good example of this was offered by one of our panel members –

“We meet with our business units on a regular basis to explain why we ask them for cash flow forecast information. We always say that poor cash forecasting affects our bottom line. If you get your forecasting wrong, then your exposures are wrong, your hedging is wrong and this can ultimately lead to a potential FX loss which in turn, affects the P&L.”

Another treasurer further explained:

“The best business units are those who have bought into the forecasting process and understand its importance to the whole organisation. They take pride in providing accurate data in a timely manner. This behaviour doesn’t happen overnight but as a result of a change in the company culture which they have bought into. Cash flow forecasting is now part of our Key Performance Indicators (KPI’s).”

  1.  The right tools for the job: getting buy-in from business units takes more than just great communication. Panel members were clear that you need to make the data provision process as easy as possible, given most business units are busy running day-to-day operations and have limited bandwidth.

Providing the right tools for the job demonstrates treasury’s commitment to supporting business units with their part of the process. Spreadsheets can be a quick, no-cost tool of choice but are prone to human error and require consolidation at treasury level. Spreadsheets are also time-consuming, not user-friendly and limit data manipulation capabilities around forecast comparisons, variance analysis, what-if scenarios etc. Modern and affordable specialist cloud cash forecasting systems are fast replacing spreadsheets as the forecasting tool of choice, allowing business units input or update data from anywhere, quickly, efficiently and accurately.

In summary, cash flow forecasting is a crucial activity for treasury departments everywhere but to do it well you need to ensure that the entities supplying the information have bought into the process and are provided with the best tools for doing it.

 

CONTACT US 

 

 

 

 

Announcement | FIS is partnering with Cashforce to bring best-of-breed cash forecasting abilities to its TMS system

08-11-2021 | treasuryXL | Cashforce

Our partner Cashforce is excited to announce that FIS has launched a new cash forecasting and working capital data analytics solution: FIS Cash Forecasting with Cashforce. FIS Cash Forecasting with Cashforce complements and integrates with FIS Treasury & Risk Mgr (Quantum & Integrity edition) and gives organizations the ability to forecast their cash position & FX exposure more accurately for the short & long term.

FIS is enabling mid-market and enterprise companies to manage their cash more effectively, overcoming the existence of
fragmented data, disparate workflows, limited transparency into root-cause analysis and the inefficiency of manual
reporting. With the launch of FIS Cash Forecasting with Cashforce, organizations will gain the ability to forecast their cash
position more accurately for the near term and into the future.

“The solution leverages deep insights into working capital drivers and all the power of artificial intelligence to turn
educated guesswork into specific, reliable predictions,” said Nicolas Christiaen, CEO of Cashforce. “With out-of-the-box
ERP connectivity and the ability to feed forecast data into FIS Treasury and Risk Manager – Quantum Edition and FIS
Treasury and Risk Manager – Integrity Edition, management teams are empowered to generate more timely reporting and
organize their workflow to streamline the cash forecasting process and sharpen decision-making.”

According to PwC’s 2021 Global Treasury Survey, cash and liquidity management – together with funding and capital
structure – are the top two priority topics for treasurers and CFOs. In fact, nearly one third (32%) of respondents to the
2021 FIS Readiness Report indicate that they are investing in digital technology to improve cash visibility.

FIS Cash Forecasting with Cashforce is responding to that need, helping corporations overcome the problem of
fragmented data by consolidating information from ERPs, AR/AP, procurement, sales, treasury management and other
systems while leveraging pre-built connectors that ensure a seamless flow of high-volume, granular data. Smart
forecasting logic creates highly accurate forecasts to evaluate different scenarios, analyze impact and calculate
forecast/actuals variance. Collaboration across the organization is simple with easy-to-define workflows that result in an
enterprise-wide forecast that can be consumed by treasury.

“We wanted to find a partner that could complement our treasury management solutions with an AI-driven cash
forecasting solution to help solve our clients’ forecasting challenges. I am happy to say Cashforce is that partner,” said
Steve Evans, senior vice president, Product Management, Corporate Liquidity and Insurance at FIS. “And because the
solution is SaaS-based, it is easy to implement and maintain – enabling treasury departments to focus on running their
treasury operation.”

 

Request a demo

 

About Cashforce

Cashforce is a ‘next-generation’ Cash forecasting & Working Capital Analytics solution, focused on automation
and integration. Our cloud-based software enables corporates to unlock their data and create smarter decisions,
saving time and money. By integrating internal & external company data (ERPs, TMS, data lakes etc) and
processing them through machine learning techniques, our software provides insight into cash flows & working
capital, automates manual and cumbersome treasury tasks and enables AI-powered-scenarios. Cashforce is
used by midsize to large corporates and has users in over 120 countries. To learn more, visit www.cashforce.com. Follow Cashforce on LinkedIn and Twitter.

About FIS

FIS is a leading provider of technology solutions for merchants, banks and capital markets firms globally. Our employees are dedicated to advancing the way the world pays, banks and invests by applying our scale, deep expertise and data-driven insights. We help our clients use technology in innovative ways to solve business-critical challenges and deliver superior experiences for their customers. Headquartered in Jacksonville, Florida, FIS ranks #241 on the 2021 Fortune 500 and is a member of Standard & Poor’s 500® Index. To learn more, visit www.fisglobal.com. Follow FIS on Facebook, LinkedIn and Twitter (@FISGlobal).

 

 

 

A Review of EBICS & One of Its Most Unique Payment Features for Corporates

08-11-2021| treasuryXL | TIS | LinkedIn

In the early 2000s, a team of German banks began collaborating on a project to simplify and harmonize corporate payment processes across Europe. After several years of development, the Electronic Banking Internet Communication Standard (EBICS) was released and has since become a critical component of Europe’s broader corporate payments infrastructure — particularly within Germany, France, Austria, and Switzerland. With regards to the EBICS protocol, one feature of particular interest to corporates is VEU – meaning “Verteilte Elektronische Unterschrift”. In English, the abbreviation EDS is used, which stands for Electronic Distributed Signature. In this blog, a technical summary and sample use case of EDS are provided in order to demonstrate the security and data quality-related benefits for corporates and banks. For more information on EDS, you can also download EBICS’ recent technical whitepaper, which is linked here (download the PDF marked “Final” and see page 148). 

A Recap of EBICS: 16+ Years of Bringing Structure to European B2B Payment Standards  

For those who may be unfamiliar, the Electronic Banking Internet Communication Standard (EBICS) is a German-based transmission protocol that helps regulate the standards and formats that many European banks (including those in France, Switzerland, Germany, Austria, and other regions of the Single Euro Payments Area (SEPA)) use for transmitting corporate financial and payments information between one another.    

When the EBICS standard was first launched in 2005, it aimed to create a more secure way for banks to manage corporate payments and data workflows across Europe. Although several other standards already existed at the time, EBICS has since proven to be a superior standard and has become the leading protocol for conducting corporate payments in Europe. Today, EBICS is also widely considered as the role model for progress towards standardized corporate SEPA payments.  

In the years following its formation, EBICS has continued releasing updates to their financial messaging and payment standards as the European business and banking landscape evolves. This is done in order to provide the highest level of data quality, security, and privacy for all the participants in a transaction, including the financial institutions, their corporate clients, and any associated vendors, suppliers, and partners.  

As part of these updates, EBICS introduced the Electronic Distributed Signature (EDS) – also known as Distributed Electronic Signature (DES) – to allow orders and transactions to be authorized by multiple users and participants, even if they are operating at different companies or in unique locations and time-zones.  

Using EDS, an order or transaction remains stored in an initiating bank’s processing system until either the necessary number of signatures with suitable authorization have been received, a time limit set by the bank’s computer system has been exceeded, or the order is cancelled by the responsible parties.  

This process was introduced by EBICS in order to strengthen the controls used by organizations and institutions for initiating and approving large or complex payments within Europe. Today, it enjoys broad usage throughout the SEPA region and is considered a standard practice when conducting B2B payments.   

Who Benefits from Using the EDS Capability?  

EDS is most helpful for organizations that have users and personnel working remotely, or from offices in diverse locations and regions. It is also advantageous for companies that routinely pay hundreds or thousands of suppliers and business partners and that are subsequently at a higher risk of payments fraud. In practice, EDS enables a broader degree of control and oversight on payments by allowing signers from any company, location, or branch to each independently verify and approve an order before it is processed by the bank. At the same time, using EBICS provides a greater level of underlying remittance data for each transaction compared to other payment standards, which aids the participating banks and corporates in confirming the exact nature and status of each order.  

Integrating EDS to a company’s banking and payment landscape is usually handled directly within the payment platform used for transmitting payment instructions to the bank. For instance, a corporate that uses a TMS for executing Euro payments could access the EDS standard directly in the TMS, but they would also be able to rely on the initiating bank for additional oversight. For each payment initiated through EDS, the rules of submission can also be customized, and the fulfillment can be tracked automatically by each party and signer. While processing the order, there are also designated pathways for viewing the order status and alerting inactive signers that the transaction requires their approval.  

Utilizing the EBICS EDS Capability Through TIS   

When combined with TIS’ other data, system, and payment security measures, using EDS adds an additional layer of control for our banks and enterprise customers, as well as their suppliers and partners. For organizations that maintain an active presence in Europe, utilizing the EDS capability is also recommended in order to remain compliant with EBICS’ latest standards for payment processing, data quality, and information security.  

More information about other security and data privacy tactics employed by TIS can be found here. 

For TIS customers, the EDS capability is available for EBICS payments as a standard service. This means that multiple users, even those from different organizations, can view and authorize one single order. It also enables the provision of the first and/or second signature for electronic payment transactions to take place from completely separate locations. The authorized signatory is thus able to check and authorize the payment transaction orders provided from other branches or systems directly within the TIS platform. Authorized users can find the Distributed ES (VEU) option under Administration > Bank Transaction Manager Settings > EBICS > Download Configuration; the orders will be visible in the BTM Monitor. 

The EDS-specific data available through TIS includes the number of outstanding signatures required before an order is processed, the list of approved and pending signatures, and also details regarding the timeframe for signatories to approve the payment before it is automatically halted by the bank. The underlying remittance information on each order is also provided to users through TIS as a standard service.  

However, this information will only be visible to authorized users that are responsible for overseeing and executing the relevant orders; these settings can be configured by admins in the TIS system.  

For our enterprise and multinational clients, EDS is particularly helpful in instances where the payment approvers are globally distributed (such as with remote finance and treasury teams), or when making supplier payments to a diverse range of beneficiaries. This is because signatories from all parties and locations can authenticate and verify each transaction before it is processed, thereby adding an additional layer of security to the standard payment approval process. These benefits have been particularly important for organization in the real estate industry, as the parties in a transaction are often distributed across multiple regions and there are commonly numerous stakeholders involved in each payment. An overview of how EDS has impacted real estate can be found in our recent whitepaper, attached here.  

About TIS

TIS is reimagining the world of enterprise payments through a cloud-based platform uniquely designed to help global organizations optimize outbound payments. Corporations, banks and business vendors leverage TIS to transform how they connect global accounts, collaborate on payment processes, execute outbound payments, analyze cash flow and compliance data, and improve critical outbound payment functions. The TIS corporate payments technology platform helps businesses improve operational efficiency, lower risk, manage liquidity, gain strategic advantage – and ultimately achieve enterprise payment optimization.

Visit tis.biz to reimagine your approach to payments.

 

The impact of miscommunication or missing knowledge occasionally! (Dutch Item)

03-11-2021 | Ger van Rosmalen | treasuryXL | LinkedIn

Laatst werd ik gebeld door een mevrouw van een financiële afdeling van een mooi bedrijf uit de maakindustrie. Ze wilde graag even met een expert spreken over een Letter of Credit (L/C) transactie. De levering ging over een kostbare machine, puur maatwerk voor een Egyptische afnemer.

Contract omtrent de levering

Afspraak volgens haar was contract 30% aanbetaling en 70% tegen directe betaling met een L/C. Haar eerste vraag was of bij niet-levering de 30% terug betaald moest worden. Wat staat daarover in het contract was mijn vraag. Er was niets afgesproken in het contract en er was ook geen terugbetaling/vooruitbetalingsgarantie gesteld. Ik maakte hieruit op dat er geen terugbetaling hoeft te volgen bij niet-levering. Overigens blijkt dat de 30% aanbetaling niet de totale kosten van de bouw van de machine dekken. Vanwaar deze vraag? De mevrouw gaf aan dat er discussie was over de directe betaling bij het laden van de machine in de haven van Rotterdam. Afgesproken Incoterm is CFR Alexandria. De producent wilde geen risico lopen en wilde betaling als de machine op de boot was gezet. De Egyptische afnemer gaf aan dat de betaling zal volgen bij aankomst van de boot in Alexandria zoals afgesproken in het contract. Ik vroeg haar wat staat er in jullie contract over met name de betaling van de resterende 70%? Ze leest voor “30% aanbetaling en 70% CAD”.

Conditie CAD en alternatieven

Ik leg haar uit wat de conditie CAD betekend. Hier is helemaal geen sprake van een Letter of Credit maar van een documentair incasso/documentary collection waarbij de actie tot betaling van de resterende 70% volledig bij de kopende partij ligt. Immers alle handelsdocumenten worden op incasso basis naar de bank van de Egyptische koper gestuurd. Die bank mag de handelsdocumenten alleen maar uitleveren tegen gelijktijdige betaling. Meestal zal de koper de documenten vlak voor aankomst van de boot opvragen bij de bank waarna bij uitlevering van de documenten ook gelijktijdige betaling volgt. “En als de koper niet wenst te betalen?”. Dan staat daar in de haven van Alexandria jullie dure op maat gemaakte machine die de klant nu even niet wil afnemen. Mogelijke demurrage kosten in de haven van aankomst liggen op de loer. De koper kan nu gaan marchanderen of er nog iets van de prijs af kan of besluiten de machine niet af te nemen. De koper is dan zijn 30% aanbetaling kwijt en jullie hebben slechts 30% betaling ontvangen maar die is niet voldoende om de volledige kosten van de bouw en verscheping van de machine te dekken. Dit hebben wij helemaal niet afgesproken zegt ze en haar stem slaat over van de schrik. Toch heeft de verkoper dit zo afgesproken en vastgelegd in een contract. Wellicht heeft het de verkoper ontbroken aan de juiste kennis over de verschillende betalingsinstrumenten of heeft hij uit commerciële overwegingen deze beslissing genomen? Ze ging direct met de directie contact opnemen. Wat zijn de alternatieven vroeg ze want die CAD transactie gaat het zeker niet worden. Er is een contract dus de koper kan de verkoper daaraan houden. Mogelijk zal er dan geen levering plaatsvinden en ontstaat er contractbreuk met wellicht vervelende (juridische/financiële) consequenties. De onderhandeling open gooien en nieuwe afspraken maken met de koper om de resterende 70% via een L/C te betalen is een mogelijkheid. Als de koper daar al in wil meegaan kan hij wederom een korting bedingen.

Hoe dit soort situaties voorkomen?

Kortom een vervelende situatie die voorkomen had kunnen worden als de verkoper de juiste kennis van betalingsinstrumenten had gehad of niet geheel zelfstandig had mogen handelen en tijdig gecorrigeerd had kunnen worden om een L/C te vragen. Het beleid binnen dit bedrijf is dat bij dit soort transacties er altijd op zeker gespeeld moet worden om geen risico’s te lopen met machines die speciaal voor klanten worden gemaakt. Er blijkt toch wel wat kennis te ontbreken niet alleen over de verschillende betalingsinstrumenten maar ook over de risico’s van bijvoorbeeld een L/C met een FOB leveringsconditie. Vergeet ook niet de impact van de tegenwoordig geldende Compliance/AML regels.

 

Wilt u niet in dit soort valkuilen terechtkomen laat u informeren. Tradelinq Solutions kan u bijstaan of trainen op het gebied van betalingscondities (L/C, Bankgarantie, Documentair Incasso etc). Ook trainingen over toepassing Incoterms of hoe om te gaan met Compliance/AML regels behoort tot de mogelijkheden. Voor meer informatie neem contact met ons op via [email protected] of bel mij op 0613377921 ik sta u graag te woord.

 

 

Ger van Rosmalen

Trade Finance Specialist

 

 

Kyriba Fact Sheet – Payment Errors & Compliance Violations

27-10-2021 | treasuryXL | Kyriba |

Payment errors and compliance violations cause significant losses for businesses of all sizes. Fraud alone cost companies more than $42 billion last year, according to PwC’s Global Economic Crime and Fraud Survey.

The repercussions are wide-ranging, from arduous public disclosures and legal fees to reputational damage. Some are the result of attacks by elite cybercriminals, while others are simple mistakes made by careless or inexperienced employees. Kyriba’s Payments Fraud Solution delivers confidence that payment fraud attempts, errors and policy violations are captured, identified, and eliminated, saving your organization time, effort, and money.

Have a read of Kyriba’s Fact Sheet to learn more about payment errors and how Kyriba can help you.

Kyriba Unlocks Access to $15 Trillion Payment Network with Launch of Open API Platform

25-10-2021 | treasuryXL | Kyriba |

Kyriba, a global leader in cloud-based finance and IT solutions, today announced the launch of its Open API Platform to enable composable technology solutions for CFOs, CIOs and Treasurers, and accelerate the next generation of finance innovation. Kyriba’s Open API Platform streamlines the creation and connectivity of new applications for the company’s trusted network, which connects 1,000 banks, manages over a million bank accounts, and processes over 200 million payments worth 15 trillion USD annually.

The Open API Platform is accessible through Kyriba’s newly launched Developer Portal, which connects fintech developers to Kyriba’s 2,000+ global corporate clients who have integrated Kyriba into their treasury processes, enterprise payments systems, and ERP platforms.

 

“Kyriba Open API Platform will radically unlock fintech innovation for enterprise CFOs and their CIO counterparts,” said Boris Lipiainen, CTO of Kyriba. “Beyond simplifying and accelerating bank and ERP connectivity, fintech developers will bring new apps to the Kyriba network and empower the next generation of financial technology.”

 

APIs are transforming the way Finance and IT consume and integrate data and are the gateway to delivering real-time services, artificial intelligence, and composable digital finance solutions for CFOs and CIOs. According to Gartner® research, “Gartner predicts through 2024, 50% of financial application leaders will incorporate a composable financial management system approach to their solution selection. Gartner defines a composable architecture as one where highly modular applications can be composed and recomposed to deliver capabilities and outcomes that keep up with the rapid pace of business change1.”

 

“Kyriba’s Open API Platform eliminates the need for internal IT teams to deliver a patchwork of custom interfaces and RPA bots to satisfy the growing need for hyperautomation,” said Félix Grévy, VP of Open API and Connectivity at Kyriba. “Our Platform enables Kyriba clients and our network of development partners to accelerate product innovation and deliver composable technology solutions to eliminate fraud, mitigate risk and optimize enterprise liquidity.”

 

For more information about Kyriba’s Open API Platform, visit Kyriba.com or the Kyriba Developer Portal and listen to their webinar APIs:The Catalyst for Real-Time Treasury.

Recap #3: Round Table “Digital currencies for a digital future?” | Toekomst Betalingsverkeer

20-10-2021 | François de Witte | treasuryXL | LinkedIn

 

Here is my third and final recap where I will highlight the round table topic: Digital currencies for a digital future?

 

1. Introduction

On September 9, 2021, the event “Toekomst Betalingsverkeer”  has taken place in Amsterdam. Amongst others, following topics were covered:

  • The Fintech evolution of banking.
  • Platform strategies & developments big tech.
  • Customer experience strategies.
  • Open banking.
  • Instant payments.

I hosted two round table sessions on “Payment Challenges in a Post-Covid” World and we made a deep dive on the following 3 topics:

Click on the above links to read my previous articles where I discussed the first two topics.

2. Setting the Scene

Facebook’s Libra announcement in June 2019 has shaken up the finance industry, forcing regulators around the world to take a closer look at it. This has sped up analyses and projects around Central Bank Digital Currencies (CBDCs).

Moreover, the fears that the Covid-19 virus might live on banknotes and coins, fostered the development of CBCDs.

In the context of this article, CBDC is regarded as general-purpose central bank digital currency, which has 3 elements:

  • It is a digital currency and therefore only exists electronically.
  • Issued directly by a central bank;
  • Universally accessible.

Several countries started CBCD projects: e.g., China, The Bahamas, The Marshall Islands, Sweden, the UK and the EU.

For the digital Euro: According to the ECB, this will take 2 more years from now to establish its characteristics (See announcement ECB) .

3. Positioning of CBCDs versus the cryptocurrencies and the stablecoins

In the table below, you will find the positioning.

 

 

4. Current Status of the CBCDs

Below you can find an overview of CBDC adoption across global markets.

5. CBCDs: Benefits and Challenges

CBCDs offer several benefits such as:

  • Playing a role in retaining public money for general use. The increasing adoption of user-friendly digital money reduces the demand for cash, currently the only public form of money.
  • Acting as a backup for the critical infrastructure in the payment system, as physical cash currently has a function as backup during failures in non-cash payment. CBDC could serve as a parallel backup and its role could gradually become more prominent.
  • Considering the preferences of the public, related to privacy and the use of data. Some citizens and businesses value privacy when paying, as is the case with cash. Central banks could restrict the use of data generated by CBDC transactions to just that information required for public duties such as compliance with anti-money laundering legislation.
  • Facilitating financial inclusion: especially in countries whereinto everybody has access to a bank account with a commercial bank.
  • Enable new monetary policies: If central banks now want to pump money into the economy, the CBCDs are a new channel to get money directly into the economy.
  • Providing Financial security: There is less need for fractional banking and your bank can hardly fall over. This makes the deposit guarantee scheme virtually superfluous.
  • Capitalizing on « Trust », as it is supported by a central bank, whereas a stablecoin is merely capitalizing on technology and is not supported by a « Trusted » Party.

However, there are also some challenges such as:

  • Ensuring that the infrastructure for CBDC is sufficiently segregated from the current infrastructure to prevent both from becoming disrupted.
  • Time to market. The ECB is now starting to investigate what a digital euro might look like. This investigation phase will start in October 2021 and last for about two years. Other countries like Sweden and China seem to have a quicker time to market.
  • The risk that some central banks focus resources on other topics like instant payment and open banking models, rather than digital currencies.
  • A potential negative impact on the potential of commercial banks to cross-sell profitable products if customers were to switch to CBDC entirely. Banks use the payment account as an anchor to offer and grant higher-margin products such as mortgages and personal loans. Customers switching to CBDC entirely could put pressure on their profitability. The ECB took this into account by putting a maximum amount on CBCD accounts per citizen.

Thank you for reading!

To see all my previous blogs, click here.

François de Witte

 

 

 

 

 

 

A Letter of Credit is still an undervalued payment instrument! (Dutch Item)

| 19-10-2021 | Ger van Rosmalen | treasuryXL | LinkedIn

Vorige week was ik aanwezig bij Trends in Export 2021 en vanuit mijn eigen achtergrond was ik nieuwsgierig naar de ontwikkeling van het afdekken van betalingsrisico’s. Interessant om te zien is dat veel ondernemers nog steeds kiezen voor vooruitbetaling op basis van eigen gemak en kosten. Deze trend lijkt zich ten opzichte van voorgaande jaren weinig te wijzigen. Daarnaast lees ik dat veel exporteurs aangeven om voor een bepaalde betalingsrisicoafdekking te kiezen ingegeven door diverse factoren.

Welke factoren zijn dit onder meer?

  • Onbekendheid met de afnemer: 87% van de exporteurs zegt dit belangrijk tot heel belangrijk te vinden.
  • Slechte betalingservaring met afnemer: 77% vindt dit belangrijk tot heel belangrijk.
  • Risicovol exportgebied: 75% vindt dit belangrijk tot heel belangrijk.
  • Hoog risico in verhouding tot de totale omzet: 67% van de exporteurs vindt dit belangrijk tot heel belangrijk
  • Kosten van eventuele wanbetaling zijn hoger dan afdekken hiervan: 60% van de exporteurs vindt dit belangrijk tot heel belangrijk.
  • Geen vertrouwen in afnemers in het algemeen: 31%  van de exporteurs geeft dit aan als belangrijk tot heel belangrijk.

Wat als een afnemer geen vooruitbetaling accepteert laat u de deal dan lopen? Indien ja dan denk ik dat u door geen gebruik te maken van het alternatief “Letter of Credit” u omzet laat liggen.

Bekendheid met dit product scoort bijzonder laag bij de exporteurs volgens Trends in Export.

Ik heb een mooi familiebedrijf mogen begeleiden die voorheen alleen op basis van vooruitbetaling zaken wilde doen. Geen vooruitbetaling, geen deal. Door ze mee te nemen in de wereld van Letters of Credit, stap voor stap kon ik ze maanden later los laten en gingen zij vol vertrouwen zelf aan de slag met deze uitstekende betalingsinstrumenten. Het heeft de omzet een mooie boost gegeven.

Laat u informeren over de mogelijkheden en onmogelijkheden van het gebruik van Letters of Credit. Welke risico’s er zijn en hoe uit te sluiten. Welke kosten van toepassing zijn.

Tradelinq Solutions neemt u graag mee in de wereld van Letters of Credit. We verzorgen trainingen in combinatie met andere betalingsinstrumenten. Ook de samenhang met Incoterms en Compliance is een vast onderdeel van de training. Support op basis van slechts 1 transactie is ook mogelijk. Alle ondersteuning is gebaseerd op overdragen van kennis. Het is voor ons belangrijk dat u begrijpt welke risico’s u loopt of uitsluit en op basis daarvan beslissingen kan nemen.

 

 

Tradelinq Solutions neemt u graag mee in de wereld van Letters of Credit. We verzorgen trainingen in combinatie met andere betalingsinstrumenten. Ook de samenhang met Incoterms en Compliance is een vast onderdeel van de training. Support op basis van slechts 1 transactie is ook mogelijk. Alle ondersteuning is gebaseerd op overdragen van kennis. Het is voor ons belangrijk dat u begrijpt welke risico’s u loopt of uitsluit en op basis daarvan beslissingen kan nemen.

 

 

Ger van Rosmalen

Trade Finance Specialist

 

 

A 360 Degree View On Security

| 13-10-2021 | treasuryXL | Nomentia |

One would think data protection and security measures are baked into our identity as digital people, especially in a year where we are working remote more than ever. But is it though? The breaches show that security is too often seen as something to kind of ‘wing it’. And there is an eternal question whether the best way to a secure IT environment is to educate the employees to make the right decisions or to put measures into place.

We personally believe that security and combatting Fraud is a combination of people, processes, and tools. Security literacy is a skill everyone should have and constantly develop, and companies can further support this by making use of tools such as multi-factor authentication to mitigate risks and implementing processes to keep their corporate environments safe. We think security deserves a 360 degrees view in an organization that is implemented throughout their solution landscape.

Login & User access control

This is a simple thing organisations can implement either with Single-Sign-On and/or multi-factor authentication. Multi-factor authentication (MFA) is a method of authentication that requires the use of more than one verification method and adds a critical second layer of security to user logins. A user is only granted access after successfully passing all authentication phases. The different factors are based off of different things as opposed to a simple password which bears some vulnerability. The first authentication phase is based on knowledge. A person needs to know their username and password, and this can also be initiated through single sign on with corporate credentials for a further security increase. The second authentication phase is based on possession. A person must possess and have access to a mobile phone to for example receive a code per text message or a phone call to double authenticate the log-in.

In practice this means, even if a username and password get compromised, cyber criminals will still not be able to login to the account protected with multi-factor authentication. And neither does a stolen mobile phone as both phases are required for a successful login.

One of the potential downsides to multi-factor authentication is that it adds one extra step in the process. And I can admit myself, every time I am going through the process of logging into our internal tools, we are sometimes a bit impatient while waiting for the text message. But it’s a small trade-off for security. Especially since single-sign on also adds convenience.

Single sign on means that people can log into systems with their corporate credentials and just speed up the process on that end. It’s fast and adds an additional security layer which is extremely powerful if paired with MFA.

Integrations

This is a crucial part in terms of security. We believe that monolithic enterprise platforms are dead and best-of-breed solutions that are highly integrated are the future. This best-of breed approach however also ads emphasis on the need to ensure the integrations are safe. Which data is travelling via which channels from where to where? How is the data in transit being secured from theft and man-in-the-middle attacks?

The first step is to map out all needed integrations and systems and create a use case scenario and based on this define the needed setup. For instance, in the context of cash management you might for instance end up protecting payment information with a higher security standards than a simple accounts payable extract that is used to cash forecasting only. The key is to have a companywide and regularly maintained risk analysis process that recognizes risky areas, measures the levels of set controls (preferably audited by external experts) and constantly comes up with better and better controls.

User access control

Understanding and carefully designing which user has access to which data and processes is not bullying your employees but is a crucial step in setting processes in place that further support security. In our case, our customers need to answer questions such as: which user can approve payments, who can add a new account number to the system, who can manipulate user rights, who can make a manual payment, or who can view balance information from banks and the likes.

Infrastructure and Platforms

Making sure that you run your IT infrastructure and solutions on secure platforms is a crucial control point. One would think that in this day and age that shouldn’t be a question anymore, yet we would recommend checking this anyway. How is the user access to databases and servers or other backend artifacts controlled? Are your administrators using multi-factor authentication? Have you segregated the so-called privileged access and user accounts? Do you keep a list of such accounts? Do you collect logs from your systems and store them securely?

Many industry standards come handy here. For us relevant standards are for instance ISO 27001 and ISAE 3402 auditing framework. In our domain particularly relevant is SWIFT Customer Security Program (CSP) which is a security framework developed and derived for financial industry from such international standards such as NIST and PCI DSS. All these standards should not be considered just as acronyms but a toolbox that can help you to build a company culture that takes security seriously in every step and by every employee in every role.

Security comes from within

Above are the steps that each organization can take to ensure that their set-up is secure. Let’s face it, there is no such thing as absolute security. But by establishing a strong security culture in your organization we believe you can make it really hard for criminals to gain access to our systems.

If you want to reach have an assessment of your security measures in terms of people, processes and tools for your cash management, please get in touch with us and we will assess your set-up and provide you options how you can further tighten your security. Cash is king, but hopefully a well-protected king.

CONTACT US 

 

 

 

 

Question treasuryXL Panel #2 | How is PSD2 being applied in a business context?

12-10-2021| treasuryXL | Cobase |LinkedIn |

treasuryXL is the community platform for all your relevant treasury questions.

We received the following question from one of our followers…

 

QUESTION

“As a treasurer, efficient and risk-free handling of payments and reporting are top of mind. In the daily news I read a lot about PSD2, but why don’t I see much of this being applied in a business context?”

 

ANSWER

We asked for assistance of our highly valued partners to answer the question: Joost Kevelam, Head of Sales and Head of Financial Markets & Risk Solutions at Cobase.

With his expertise he could help out our contact perfectly!

Joost Kevelam responds:

“That is a great question. Today PSD2 is very much geared towards retail users. For corporate usage, we see three key hurdles that need to be cleared.

Firstly, for reporting purposes PSD2 still demands use of bank-specific tokens; either for periodical consent (for reporting) or for each payment. For treasurers that have several banks this is prohibitive.

Secondly, corporate treasurers want to connect in such a way that they can do all their cash management tasks in their ERP and the ERP then connects (unattended) to all their banks. The banks’ PSD2 (or Open Banking) connections often do not support these patterns.”

Lastly PSD2 protocols vary wildly across banks, there is no standard yet. Developments in the right direction are unfolding slowly.
In the meanwhile there are solution providers in the market that offer much of the touted future PSD2 benefits, but with technology that is already easily available today (e.g. swift, host-2-host and other APIs). If you select a provider, please consider whether they have the license and capability to easily migrate you to the PSD2/Open Banking interfaces once they are suitable for corporate usage.
Feel free to contact me if you wish to discuss how these technologies can make your life as a treasurer easier.

Do you also have a treasury related question? Feel free to leave your question at our treasuryXL Panel. The panel members are willing to answer your question, free of charge, no commitment.