Tag Archive for: Electronic Banking

The Bank of England – a fintech company?

| 20-04-2018 | treasuryXL |

The Old Lady has a long history – the second oldest central bank, who has always kept the market in check. Whilst the financial Big Bang of 1986 changed the landscape in the Square Mile, her power and influence are still very evident. On Wednesday, she surprised the banking market by granting direct access to her interbank payments system to a Fintech company. This means that they can process their payments without having to use a commercial bank as an intermediary. What is the motivation for this step and what are the consequences?

Transferwise is a peer-to-peer money transfer service with its main head office in London, whilst being based in Estonia. Turnover per month reached in excess of EUR 1 billion in May 2017. They have developed a money transfer systems that reduces the amount of cross border payments but trying to match supply and demand in different countries. By reducing the actual number of cross border payments and using mid-rates for FX calculations, they are able to offer a competitive alternative to traditional bank transfers.

They have now be granted direct access via the Faster Payments Scheme to the Real Time Gross Settlement system run by the Bank of England. Allowing direct settlement will lead to reductions in costs whilst, at the same time, speeding up the money transfers. This means that Transferwise can compete evenly with large commercial banks.

The Bank of England stated “by stimulating competition and innovation, we anticipate increased diversity and risk-reducing payment technologies will reinforce financial stability while enhancing customer service.” Fintech is having a clear impact on the revenue of traditional banks in London. A survey by Accenture shows that non banks now account for 14 per cent of the annual revenue in the payment sector.

This is forcing banks to design and adopt new solutions – mainly built around the blockchain. What is remarkable is that the Bank of England appear to be taking a very proactive approach to how the payments market will develop in the future, and recognising the role that Fintech has to offer in this area. They are looking at ways to increase efficiency and transparency in financial markets.

The Bank of England is leading the central bank market in providing new solutions. A policy of first adoption could lead to a huge advantage in the payment transfer market. As these solutions are cross border, other central banks would do well to investigate this trend and come up with their own solutions as soon as possible.

It also provides a counterpoint to MiFID II, and shows how the payments industry could be structured in the future.

If you have any questions, please feel free to contact us.

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How to cope with the interconnectivity trap part II

| 16-08-2016 | Hans de Vries |

Erphansdevries (1)

 

Electronic Banking has been here for more than thirty years now. And it certainly had a big impact on the way the corporates and banks communicate. Nevertheless, ever since the introduction Treasurers have been struggling to incorporate this feature into their IT ERP environment. They get stuck in the middle. You can read more about that in part I of this article. Today I will show you my “way out”.

A bank and ERP (and TMS) system agnostic solution to upgrade the Treasury function

The SaaS solution described in this article is particularly interesting for Treasurers because of the very limited implementation efforts that are needed to set-up the system at the corporate side. All the platform needs, is a connector that takes care of the automatic upload of files from the ERP environment to the platform. The platform takes care of the conversion of transaction files to the file format needed by the specific banks for processing and performs a validation on the contents of the files to ensure Straight Through Processing at the bank.

So there is no need for changing the output at the current ERP system. This is extremely handy in situations where the corporate landscape consists of various ERP systems, or various versions of an ERP system. The same goes for the download of statement files. After collection of the bank statements, the platform takes care of the conversion into the needed file formats and delivers them into the ERP (and TMS) environment for automatic reconciliation purposes. By using the (SaaS) bank agnostic platform the Treasurer is immediately freed from all usual IT concerns with regard to the bank connections. Most systems also provide the Treasurer with a Dashboard Function to monitor the actual total balances at all banks and the cashflows (End of day and Intraday) that enables them to perform bank (automated) independent cash balancing transactions if needed.

Streamlining the authorization processes to get full control

In most multibank situations the treasurer is faced with one bank only authorization schemes that in most cases use unique bank authorization codes tokens and procedures. This wide variety of tokens, passwords etc. makes life for a Treasurer far from easy especially from a compliancy perspective.

Routing all outgoing transaction files via the SaaS platform, provides the Treasurer with the unique opportunity to streamline the authorization process. He now gets the opportunity to fully control and maintain the granted functionalities / authorization levels per user that are applicable on all bank accounts. Especially in the upcoming times of real-time 24/7 processing by the banks, using this sole gateway to the banks will provide the Treasurer with maximum control of all outgoing transactions and therefore avoiding fraude to the max. Since these systems also provide all necessary audit trails, the Treasurer can take full accountability for the banking processes.

Saving substantial money

Depending on the platform and the number of banks that need to get connected, the costs of the implementation and annual subscription fee will vary per provider. However, the benefits of such an investment are not only measured by the upgrading of the internal cash management processes.

Implementing the platform will also directly lower the operational costs:

  • Experts estimate costs of € 15,000 per year per e-banking solution (maintenance, license fees, software updates, system administration, system tests, database configuration etc.)
  • Elimination of expenses for manual liquidity tracking, manual administration of bank accounts and bank master data as well as the bank-specific administration of signatory authorizations.
  • Reduced banking fees as a result of higher transparency, easier comparability as well as the maximized flexibility towards banks: daily choice of transaction bank(s) per currency/ transaction type.
  • Saving operational costs due to the elimination of manual intervention for the collection and upload of bank statements to the ERP system. In the perfect set-up the reconciliation process can be fully automated and finalized in the early hours of the day providing a head start to the credit management department.

In most cases, these savings pay back the investment in the bank agnostic platform within a year. The introduction of this relatively new cash management service will free the treasurer from the interconnectivity trap, upgrade the internal organization, provide a uniform authorization scheme on all banks while at the same time reducing the operational costs. This solution is also future proof due to its capacity to adopt quickly to new standards, formats etc. All in all, a perfect perspective on upgrading the cash management function within the treasury. For more information, check: PowertoPay.com.

 

How to cope with the interconnectivity trap?

| 09-08-2016 | Hans de Vries |

Erphansdevries (1)

 

Electronic Banking has been here for more than thirty years now. And it certainly had a big impact on the way the corporates and banks communicate. Nevertheless, ever since the introduction Treasurers have been struggling to incorporate this feature into their IT ERP environment.

This struggle has proven to be a tough one, due to the ever changing internal ERP environment as a result of various versions of the same ERP system or even various ERP systems within the company due to take-overs/ mergers. And of course there was quite some turmoil in the banking industry itself: the introduction of the Euro, then SEPA with all new transaction formats and regulations, meanwhile a banking crisis etc. Moreover, the ever growing demands on security and compliance pose further pressure on the interconnectivity. As a result, it has become more and more difficult to keep all connections in place and up-to-date. Especially since most corporates are forced to spread their cash management business amongst multiple banks from a risk mitigating perspective. On top of that the Treasurer is facing a radically changed attitude towards data processing operations, from management but also business environment perspective. We now live in an internet world that does not allow for slacking reactions and inefficient procedures. Action is reaction and efficient reconciliation processes are the key for survival.

Treasurer gets stuck in the middle

To optimize this situation, the Treasurer usually finds himself squeezed between the limited IT budgets for optimizing the connections with his back office environment on the one end and his banks on the other with their multiple banking solutions. While SEPA was presented as a unifying power to align all European banks, in practice there still appears to be a great variety in approaches per bank. So therefore in practice, the Treasurers dreams of a flawless interconnectivity often proved to become nightmares and he most of the time winds up somewhere in the middle of an endless implementation process.

Is there a way out?

The answer is negative as long as the Treasurer remains dependent on the internal IT departments and the offered bank solutions. However, if the Treasurer wants to actively take control of this situation there are now options available that will provide the Treasurer with all the connections and security/ compliance checks he needs for his day to day cash management operations. Instead of using the internal systems, the Treasurer can have his back-office systems (ERP and TMS) connect to the banks via a bank independent (SaaS) platform that will take care of conversion and validation of the uploaded files, the authorization according to the internal compliance guidelines and the routing towards all corporate banks. At the same time the electronic bank statements will be collected and forwarded to the back-office systems for automatic reconciliation in the ERP (and TMS) environment. Apart from the authorization of the transactions, no manual intervention is needed.

Next week Hans will introduce you to his ‘way out’: the SaaS platform.