Tag Archive for: FinTech

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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Cashforce and smart cash forecasting

| 03-04-2018 | treasuryXL | Cashforce |

As stated in our last blog, on Tuesday 27th March 2018, treasuryXL attended a seminar in Amsterdam organised by TIS about optimizing cash flow. The last speaker at this event was Nicolas Christiaen, mananging partner at Cashforce. They are a fintech leader in Cash forecasting & Treasury solutions for corporates. They took the opportunity to explain to all the attendees what their product is and how it works. In this article we shall attempt to provide an insight into what we learnt.

Cashforce focuses on automation and integration within cash forecasting and treasury management systems. They connect the Treasury department with other departments within a business – offering full transparency into the cash flow drivers, resulting in accurate and efficient cash flow forecasting. They also offer a flexible forecasting method which we shall explain later.

Forecasting is a subject that can cause irritation within a company. It requires different departments to collaborate on a regular basis and provide consistent information which needs to grouped together to present a complete overview of the expected cash movements for the agreed time period. This input encompasses accounts payable, accounts receivable, procurement, projects, HR, treasury etc. All this information needs to be presented in a consistent format so that everything can be aggregated. Problems arise when data is not delivered, or delivered too late, or inaccurate.

The solution would appear to be a single method to extract all the relevant data from all the relevant databases and systems and to have this incorporated together with the correct running opening bank balances.

Cashforce have developed a platform that links into all the aforementioned databases and uses the agreed metrics within the different departments to arrive at a forecast. This leads to an integrated platform driven by your own systems. As the data parameters have been mapped and agreed beforehand, this means that it is possible to drill down to a very granular level to predetermined transaction details. This means you can go from the comprehensive level to overview per account, per client, per accounting group as the original chart of accounts has been embedded into the platform.

Included with the platform is a special functionality that takes into account the actual dispersal from a particular client and allows you to see how they actually performed as opposed to their agreed performance. These metrics can then also be used to adjust the forecast to the past behaviour of all component parts from the chart of accounts, enabling a forecast to be presented that reflects the actual results from the past.

It becomes possible to drill down on every single aspect with the forecast and interrogate an individual item. Furthermore, it is possible to make adjustments to the forecast and see the results, whilst also giving a data trail showing what changes were made and by whom. The ability to review different scenarios, whilst still retaining the original data, makes this solution unique from the standard cash forecasting systems.

This can lead to greater understanding of the drivers within a company’s cash, good visibility of the behaviour of an individual counterparty, more accurate ability to determine when additional funds are needed, together with the potential to map the effects of changing individual items and seeing their outcome to the complete forecast.

In conclusion, this is an original solution to an age old problem for cash management.

treasuryXL would like to thank Cashforce for illustrating their solution at this seminar. If you have any questions, please feel free to contact us.

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Cashforce raises €2 Million to accelerate international rollout

| 27-02-2018 | Nicolas Christiaen | Cashforce | sponsored content |

Cashforce, a fintech leader in Cash forecasting & Treasury solutions for corporates, announced today that it has closed € 2 million in Series A financing. The internal funding round was led by Volta Ventures and Michel Akkermans (Pamica NV), reinforcing their previous commitment to the company. The Series A financing enables Cashforce to accelerate the ongoing international roll-out and fuels its rapid global growth and industry leadership as a premier provider of Cash forecasting & Treasury solutions. Organisationally, staff will be expanded, and operations will be scaled up – with a significant number of new hires in 2018. Product-wise the company is working on developments that will enable even more insights and potential savings for its clients. Commercially, supporting and growing the customer base and increasing customer success and adoption as well as continuing to build strategic partnerships and alliances are part of the strategic plan.

“Cash management & Treasury is evolving from a focus on data acquisition to Treasury automation and data analysis, enabling Treasury departments to bridge the gap between the Finance and other operational departments and enable data-driven strategic decision making. On top of that, Cash flow forecasting has become the major focus of the industry.”, said Nicolas Christiaen, CEO and co-founder of Cashforce. “This investment also re-confirms our investors’ confidence in the leadership that Cashforce has established in the Treasury space, our continued rapid growth and the potential to re-define the category.”

Additionally, Cashforce announced that Michel Akkermans will become Chairman of the board. Michel Akkermans is a serial entrepreneur in fintech companies. Amongst others, he was the Chairman and CEO of successful companies such as FICS and Clear2Pay. After the global payment solution company Clear2Pay was acquired by FIS in 2014, he became an active investor and board member in several companies and private equity organisations, as well as a venture partner and Chairman of Volta Ventures.

Cashforce: The Leading Cash forecasting platform for the Modern Corporate

Cashforce is a next-generation Cash forecasting & Smart Treasury Management System, focused on automation and integration for corporates. It helps corporate finance/treasury departments save time and money by offering accurate cash flow forecasting, pro-active working capital management analysis as well as flexible Treasury reporting & automation.

Cashforce is unique because it offers full transparency into what exactly drives the cash flow of mid-size & large corporates with different complexities such as multi-entity, multi-bank, multi-currency and complex ERP(s). Smart algorithms are applied to generate highly accurate Cash forecasts. The intelligent simulation engine enables companies to consider multiple scenarios and measure their impact. Its intuitive user interface allows for extensive and tailor-made analysis & reporting possibilities. Unlike other enterprise software players, the platform is set up quickly, even in the most complex environments, and connecting seamlessly with any ERP system through its ‘plug-and-play’ connectors. As a result, finance/treasury departments can be turned into business catalysts for cash generation opportunities throughout the company.

“While we started off as a Cash forecasting tool, we have added Advanced Working Capital analytics and Smart Treasury functionalities, and are now operative as a comprehensive modular Treasury Management System (TMS). This makes Cashforce a one-stop-shop for the many analytical and operational practices that benefit Financial and Treasury departments,” says Nicolas Christiaen, CEO of Cashforce. “The endorsement we get from both industry experts and clients progressively confirms that our solution really does bring change into the Treasury market. We now see that potential customers compare the classical TMS providers to Cashforce with Cashforce ending up as the preferred solution! Then you know you’re on the right track. We therefore strive to continue our vision to further integrate and automate to provide our customers with an even more effortless experience.”

“Cashforce has brought a very compelling solution to the corporate Cash management market, which is clearly seen in its results. Since its last financial injection in early 2016, Cashforce has demonstrated a rapid growth, including well over 100% annually recurring revenue growth”, explains Michel Akkermans, the company’s recently appointed chairman.
“With a surge in employees to over 25, an increasing and global interest from the market and partnerships with leading corporate banks, private equity firms & Treasury consultants, Cashforce has been expanding both reach and product. We have heard back from multiple existing customers about their positive experiences with the solution and its impact on their business, and they strongly believe in its trajectory moving forward”.

“Cashforce set foot in the Netherlands this year and has been growing substantially, proving that the company can be scaled up relatively easy,” says Nicolas Christiaen. “This would not be the case without the help of Volta Ventures and Michel Akkermans, who not only provided funding, but also lent their vast strategic experience in our market. The plans for Western-Europe as well as the US are outlined, and this funding round will be valuable to accelerate the international roll-out.”

About Cashforce (www.cashforce.com)
Cashforce is a ‘next-generation’ Cash forecasting & Smart Treasury platform, focused on integration and automation. With its technology, Cashforce is helping Treasury departments from large capital-intensive businesses save time and money by offering cash visibility & pro-active cash saving insights. The platform is easy to use and install, and connects seamlessly with any ERP system. Cashforce is headquartered in Belgium with an office in Amsterdam and New York, serving customers globally such as TomTom, Hyundai and Greenyard among many others worldwide.

About Pamica (www.pamica.be)
Pamica is the investment company of Michel Akkermans.

About Volta Ventures (www.volta.ventures)
Volta Ventures Arkiv invests in young and ambitious internet and software companies in the Benelux. The fund has € 55 million under management and is supported by EIF and ARKimedesFund II.

Press Contact Information
Nicolas Christiaen – [email protected] – +32 479 65 52 95
Michel Akkermans (Pamica NV) – [email protected] – +32 3 202 40 30

 

Blockchain: Predictions for 2018

| 11-01-2018 | Carlo de Meijer |

2017 was a year of interesting developments in the blockchain area. Not all happened as was expected. Many, including me, predicted 2017 to be the year that blockchain would move from proof-of-concepts into real world production. Yes, we did see some great successes here, like IBM, R3CEV, … But the number of real world applications that entered the market was far less than anticipated. On the other hand there were some unexpected ones. This year the concept of blockchain started to capture also people’s attention. But that was triggered by the specular and unexpected rise of the Bitcoin and other cryptocurrencies. And also the ICO boom came out of the blue. Now we are nearing the new year, it is time to look forward. What will bring 2018 for blockchain and distributed ledger technology? How will Bitcoin and other cryptocurrencies develop. And how the acceptance of blockchain technology will evolve in 2018? In this blog I like to share my ideas and opinions on what trends and developments to look for in 2018. Let’s go!

1. Another chaotic year for cryptocurrencies

2017 was the year of the cryptocurrency hype. This is expected to continue for some time. 2018 will be another booming year for cryptocurrency yet, but with many hiccups. Bitcoin and cryptocurrencies as a whole will continue to experience great volatility though 2018 and may experience a significant correction. The main question is: where will Bitcoin’s floor be when it lack of utility becomes apparent to investors? We will see further widespread buying of Bitcoin and other cryptocurrencies. It has been primarily retail investors pushing the price of bitcoin and other cryptocurrencies. But with a futures market and options to reduce the risk profile, more institutional investors will finally be able to start jumping in. Private investors however should be aware. For Bitcoin to sustain its rally, scaling solutions must work in the real world. And that is not expected to happen overnight. None of these cryptocurrencies are suited to playing the most basic role of currency, as a relatively stable medium of exchange. We are therefore not going to see Bitcoin or other cryptocurrencies emerge as a payment network. It will just be used as a speculative asset and store of value.

2. Regulators are stepping in

2008 will be the year of increasing regulation in a growing number of countries. This year legislators and regulators worldwide already stepped in especially in the cryptocurrency area and ICOs. The South Korean government recently announced new rules to regulate the trade in Bitcoins. South Korea, an important hub for Bitcoins, aims to regulate the trade in Bitcoins, forbid anonymous Bitcoins accounts and wish to have the possibility to close trading houses. Earlier China announced the closing of a number of these trading houses. While British and American supervisors expressed similar warnings. Europe is still on the regulatory exploration phase. But there are increasing signs that they will also become more active. The Central Banks of Germany and France have expressed their wish to reign in cryptocurrencies. Also the European Commission has plead for “increased vigilance” towards cryptocurrencies. In 2018 legislators and regulators worldwide will intensify their watchdog role on both blockchain and cryptocurrencies. As a result we will see a growing number of regulators come with regulatory measures to close the gaps where blockchain and cryptocurrencies was violating existing law. Crypto exchanges will get audited and regulated. Some will even be taken down. This may cause heavy corrections in the Bitcoin and other cryptocurrencies rates.

3. Not the end of the ICO

One of the spectacular and unexpected developments in 2017 was the ICO boom and the launch of tokens. Regulators worldwide have started to reign in ICO’s in order to protect investors. And we will see further regulation tightening on ICOs in 2018 in a growing number of countries. Though this will not mean the end of ICOs, there will be a shakeout in ICOs and a capital flight to quality. ICOs will be cleaner and tighter, and investors will level for governance and put of their due diligence. It will be harder to get funding simply on the back of a white paper. Investors will demand sound business plans and high levels of transparency, with all that entails. Regulation will trigger traditional players to get involved. There will be a lot more institutional capital that will all go to the highest quality projects. We will also see the rise of securities tokens in response to increased regulation. Especial people with experience and expertise in the IPO world are expected to embrace tokenization as a technical platform. Despite an increase in regulation in the crypto space, it is expected that blockchain as a technology will not be hindered by heavy regulation. Based on this, we see even bigger achievements on the horizon for 2018, with blockchain becoming a more widely adopted mainstream technology not only in the financial sector but also beyond including retail, logistics and healthcare. We will increasingly observe a wider range of use cases for blockchain — across small and large-scale applications and across a wide range of industries within both the public and private sector.

Read the full article of our expert Carlo de Meijer on LinkedIn

 

Carlo de Meijer

Economist and researcher

 

 

Update Fintech Belgium Summit 2017

| 29-12-2017 | François de Witte |

On 14/12/2017, Fintech Belgium organized the 2nd Fintech Belgium Summit, a one-day conference to discover the deep innovation, technological and societal impact FinTechs have on our world.  There were over 500 participants, and this was a good opportunity to meet all the stakeholders in the Belgian Fintech ecosystem.

Main messages gathered from the workshops

The first stream has been focusing on the regulatory side. PSD2 and GDPR will have in 2018 a high impact on the market. There has been a request to better harmonize the legislation in this areas. Even in the PSD2 domain, the latest version of the RTS on SCA and Secure Communication still contains some blind spots. Another recommendation is that the authorities would set up a competence center to assist the FinTechs in the myriad of the regulatory framework.

The 2nd stream has been focusing on the innovation impact: How has the financial industry reacted to innovation? Make, Buy, Join or Break…. One of the main issues encountered by the banks is that the profiles of their people are not adapted to the innovation, and hence large HR and educational efforts will be required. Banks will have to adopt flat and member centric organizations to become more agile and data driven.

The testimony of Resolut clearly demonstrated the power of new entrants in the arena, enabling companies to drastically reduce the cost to access banks. However, some banks start also interesting initiatives in this area, with forefront runners such as BBVA, Nordea, Deutsche Bank, Hello Bank, ING (ylot) and Fidor.

In the afternoon, there was an interesting workshop on open banking with BNP Paribas Fortis, Baker McKenzie and Ibanity focusing on the new ecosystem, where some banks will position themselves as API Producers, focusing on their unique value propositions, whilst some others will position themselves as API consumers, offering aggregated services and acting as “matchmakers”. Marc Lainez, CEO of Ibanity, mentioned that FinTechs are not a threat to banks. The real competition for the banks are the GAFA. Hence  Banks and Fintechs need need to work hand in hand together to develop new solutions.

The conference finished with a stream dedicated to the technological impact. Blockchain and cryptocurrencies were high on the agenda. There was a clear consensus that Blockchain technology will be leading, also for Regulators. A lot of use cases were mentioned, e.g. in the area of trade finance and the document handling. Regulation will be key to further increase the adoption of this new technology. On the ICO (Initial Coin Offering) the opinions were more mixed, as there are quite some challenges to overcome, such as the setup of supervisory controlling institutions and the volatility of the cryptocurrencies.

Conclusion

This conference was a good forum to get an insight in the Belgian FinTech market. I saw a lot of interesting initiatives, and am a strongly believer of the increased cooperation between banks and FinTechs, the so-called Fin-Integration. 2018 will be challenging for all of them.

François de Witte – Founder & Senior Consultant at FDW Consult and Senior Expert – Product, Business development and sales manager at Isabel Group

 

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Bitcoin mania: what is it not?

| 20-12-2017 | Carlo de Meijer |

During our stay in South Africa I was reading an article in Die Burger (newspaper for Afrikaners) where a spokesman of Cape town-based PWC gave his ideas on the recent rise of Bitcoin and the future of Blokketting (Afrikaans for Blockchain). This inspired me to write this blog. Since I started writing about blockchain I categorically refused to use the term Bitcoin. But this time it is different. As Bitcoin nears the end of a record-breaking year, it seems an appropriate time to dive into this – by many traditional players said – over-hyped thing. Others describe this fascination for Bitcoins as a “speculative mania”. The broader public has discovered this phenomenon. I will not say it is (already) the end of the rise in Bitcoins or other crypto currencies. But let me be clear: Bitcoin is a lot not!

Bitcoin rate explodes

Since April this year the Bitcoin (but also crypto currencies like Ether and Bitcoin Cash) is showing a continuous rising trend and in the past few months it even exploded to unexpected levels. In one month time the rate of the Bitcoin almost doubled. In the meantime the Bitcoin rate increased further to reach almost 20.000 dollar, before falling back to 16.000 dollar. But now it is back at  19.000 dollar. At the beginning of this year the Bitcoin rate was not even 1000 dollar. The total market capitalisation of Bitcoin is now exceeding that of a company like Boeing and that of New Zeeland’s GDP.

Bitcoins traded on futures market

The recent firm rate rise of the Bitcoin has much to do with the launch of Bitcoin future contracts. Before that Bitcoins could only be sold or bought via internet platforms. Last week the trade of future contracts in Bitcoin started on the Chicago Options Exchange ( CBOE). These futures enable speculators (without having Bitcoins) to buy or sell Bitcoins by betting  via the leverage instrument on future increases of the Bitcoin or an eventual decrease thereby hedging against fluctuations. In total 500 contracts were traded on the first trading session. The rate of Bitcoins increased nearly 2.000 dollar to 18.700 dollar. On the American market place Coinbase the Bitcoin even reached 20.000 dollar, after having raised 40% in the two previous days. This indicates that investors do not (yet) expect a crash short term.

In the meantime also the Chicago CME, the world’s largest exchange,  started trading Bitcoin futures and the Nasdaq is also in the race to enable the trade in these future contracts. Many professional investors however did not yet enter this market because the difference between bid and offer rates is still much too large. This indicates there is too less liquidity in this market. There is also insufficient clarity of the required margins, trade limits, stress tests and clearing.

What is Bitcoin not?

Read the full article of our expert Carlo de Meijer on Finextra

 

Carlo de Meijer

Economist and researcher

 

 

Alternatives to banks – Is Fintech the answer?

| 14-12-2017 | treasuryXL |

With the steady rise of Fintech within the finance industry some people are already calling for the demise of banks as the historical financial partner of choice for corporates. Certainly, Fintech is showing itself to be very dynamic, offering many new products and solutions, and being a lot swifter than the banks. Banks seem to have grown too big and complacent, are being weighed down by new rules and regulations, are less prominent in the field of funding for corporates, and possibly have lost their focus on what used to be core businesses. But let us examine the relationship between bank and client.

The roles of a bank

Banks are, first and foremost, used so that clients can obtain and use financial services. Opening and maintaining accounts enable money to be received and paid – in this way the day-to-day financial operations of the client can be performed. Furthermore, banks offer additional services that compliment the needs of a client – business credit cards for key staff, sales services such as processing of credit card payments for goods, payroll services, online banking, loans and lines of credit.

What does a client want from a bank?

One of the main priorities is that there is an established history and a good working relationship – that the bank understands the client’s needs. A key indicator of a good relationship would be the ability and the willingness of the bank to provide funding to the client. If the bank wished the client to bank and deposit their money with them, then they should be prepared to extend credit where possible – if it meets the criteria of the bank. Running any business means there will be times when liquidity is scarce and a bank that refuses to extend credit runs the risk of losing the client. Other criteria can include the cost of banking services, support given, quality of delivery, credit rating and the overall efficiency of the services.

Fintech solutions

Fintech can provide genuine alternatives to existing banking services as they can compete with modern products – like giant ocean-going tankers, banks are large and very slow to turn around. Most bank services are still paper intensive and require many authorized signatures. By digitizing services, Fintech can reduce the transaction costs and the time taken to authorize a service. Fintech orientated lending services (like B2B) are entirely online and can be quickly approved. Through lending platforms, the risk can be spread out among many lenders.

Can the banks respond?

Banks have at their disposal very large existing customer bases and a wealth of proprietary data relating to the behaviour and patterns of their clients. This is a large untapped potential that does not need to be found or bought. If banks can utilize this data whilst offering a Fintech type of online service that is quicker and more efficient there is a possibility to fight back. The main option for banks would be to examine the Fintech companies and buy the ones that have the best products to compliment the requirements of the bank’s customers. As Fintech works in a different manner to traditional banking, this would require banks to develop internal incubators to discover new products and services that could be offered to customers. Alternatively, banks could look to design and implement their own solutions, but they appear to be behind the speed and knowledge of Fintech and might never be able to catch up.

One last word of advice

Realistically, Fintech offers attractive alternative solutions to banks. However, the power of the personal relationship should never be underestimated. We build relations slowly and by results – the cheapest offering does not get all the business. Having an account manager at a bank can be highly beneficial for a client – one point of contact, good understanding, a history. When things go wrong, you pick up the phone and call the account manager and he/she sorts out your problems. With Fintech, this could mean phoning numerous different companies to achieve the same result that can be obtained with just one account manager at a bank.

Choice is personal, but preference is normally determined by experience.

R3CEV Corda Platform: the blockchain app store

| 04-12-2017 | Carlo de Meijer |

App Store In May this year, fintech start-up R3 raised $107 million from a consortium of the world’s top banks. The New York-based blockchain company that works in collaboration with more than 90 banks and other financial organizations world-wide, plans to use the money to invest in further developing the Corda platform (see my blog: Corda: distributed ledger ….. not blockchain! April 6, 2016) as well as “encouraging entrepreneurs to start building on the platform though training videos and hackathons”.  

Fundraising

R3 gained momentum when it achieved this record distributed ledger technology funding in its last funding round. This figure that was raised by 40 institutions from more than 15 countries across the world (including names like Barclays, SBI, UBS, Bank of America Merrill Lynch, HSBC, ING, and Wells Fargo), is known as the largest single investment in a blockchain company to date. This is also seen as a signal that R3, with their Corda Platform, is moving in a right direction, according to many in the banking industry. This notwithstanding some of the early members left.

“R3 will use the funding to: [A]ccelerate technology development and expand strategic partnerships for product deployment. The company’s efforts will be focused on Corda, R3’s DLT platform for regulated financial institutions, and its infrastructure network, which will support a vast range of partner-built financial applications that interoperate seamlessly with each other, existing systems and networks.” R3’s press release

New members

Notwithstanding a number of early partners left the R3 consortium including JP Morgan, Goldman Sachs and Santander, it still attracts new members showing their viability in the blockchain arena. Like the Bahrain based Bank ABC (Arab Banking Corporation), Abu Dhabi Global Market and the International Trade and Forfaiting Association (IFTA). The latter will be involved in the various trade finance projects. Recently also the Banco de la Republico Colombia, the Colombian central bank, joined the R3 consortium. The partnership with various central banks is part of R3’s plan to diversify its consortium membership by the addition of financial regulators and government agencies.

Read the full article of our expert Carlo de Meijer on LinkedIn

 

Carlo de Meijer

Economist and researcher

 

 

The impact of blockchain technology on central counterparty clearing houses

| 23-11-2017 | Treasurer Development | Minor Treasury @ Hogeschool Utrecht | Frans Boumans |

Today’s blog has been written by Youri Toepoel, Romy Steegwijk & Dirk Heesakkers , who are 3 students studying for the minor Treasury Management at the University of Applied Sciences in Utrecht. We welcome their contribution – it is good to see the youth engaging in Treasury matters! Here is their opinion on Blockchain technology and its impact on central counterparty clearing houses.

A central counterparty clearing house can reduce counterparty risks associated with doing business with unfamiliar counterparties in unfamiliar markets. When businesses lack the capabilities, resources and expertise required to reduce counterparty risks, a central counterparty clearing house might be the solution. In recent years new disruptive technologies have been developed. Cryptocurrencies are becoming more known worldwide and the underlying technology, the blockchain, might be able to decentralize current services offered by financial institutions like banks.

Counterparty risk

Counterparty risk is the possibility that someone you do business with is unable to meet his/her obligations with you. Events during the recent credit crunch, particularly with Lehman Brothers, showed that banks and businesses had put too much trust in the credit ratings formed by the credit agencies. Corporates based creditworthiness of counterparties mainly, or even only, on the credit ratings given by credit rating agencies, expecting those ratings to be accurate and trustworthy. This has proven to be wrong and since the credit crunch many businesses started to measure and control counterparty risk based on other factors beside the credit rating received from the credit rating agencies (Treasury Today, 2014).

The counterparties

For the treasury function the counterparty risk is mainly associated with the banks and other financial institutions since these are the parties the treasury function is mostly dealing with. Additionally, also governments are important given they supply the “risk free” government bonds, but as seen with the government of Greece even governments show the ability to get into financial problems. The treasury function will often deal with these parties to attract or repel liquidity, derivatives or long-term loans to support the business’s day-to-day operations. In the end, exposure to suppliers and customers are also important to the counterparty risk.

Central Counterparty Clearing House (CCP)

A central counterparty clearing house (CCP) is an organisation that exists in various European countries to help facilitate trading done in European derivatives and equities markets. These clearing houses are often operated by the major banks in the country to provide efficiency and stability to the financial markets in which they operate. CCPs bear most of the credit risk of buyers and sellers when clearing and settling market transactions (Investopedia).

Blockchain versus central counterparty clearing house

A CCP offers a good solution to the counterparty risk that most companies face when doing business with counterparties. But this service, as it basically provides a settlement between two parties, might be a prey for decentralization by technology based on the Blockchain.

The Blockchain is often simply described as a distributed ledger and has the capability to replace services being provided by central service providers like banks. The unique part is the absence of a trusted third party (a bank that we visit or to which we log in with a key, an Amazon.com, eBay or whoever you know and trust…) (Servat, 2015).

Currently, the only obstacle seems to be regulation since the blockchain already shows numerous application possibilities. Lots of banks and other financial institutions are currently investing big money in the blockchain technology to find out in which way they can use it (or save themselves with?) (Scuffham, 2017).

Whether the blockchain totally replaces or gets integrated by financial institutions like the CCP, these innovations are surely interesting to follow and keep track of (Treasury Today, 2014).

Sources/bronnen/aanvullend

https://medium.com/@colin_/central-counterparties-ccps-in-decentralised-blockchains-f2cf671f5787

http://www.investopedia.com/terms/c/ccph.asp

http://treasurytoday.com/2016/05/blockchain-technology-ttqa

https://www.treasury-management.com/article/1/354/2920/blockchain-%96-disruption-or-hype-.html

http://treasurytoday.com/2017/09/the-rise-and-rise-of-blockchain-tttech

https://www.reuters.com/article/us-rbc-blockchain/exclusive-royal-bank-of-canada-using-blockchain-for-u-s-canada-payments-executive-idUSKCN1C237N

https://fd.nl/beurs/1222842/nieuwkomer-ripple-provoceert-betaalbedrijf-swift-op-eigen-terrein

Minor Treasury Management

More information about the minor Treasury Management at the University of Applied Sciences?
Please contact Frans Boumans.

 

Frans Boumans

Manager Minor Treasury Management @ University of Applied Sciences in Utrecht

 

 

 

Uitgelicht: ECB strenger voor fintechbanken

| 31-10-2017 | Peter Schuitmaker |

 

Recentelijk lazen we een artikel over de verhoogde toezicht dat de ECB wil toepassen op Fintech-partijen die bancaire diensten aanbieden. (bron: FD ) De ECB schrijft in zijn eerder uitgebrachte gids Guide to assessments of fintech credit institution licence applications dat fintechs zorgen voor unieke risico’s in het financiële systeem. De ECB zegt “Fintechbanken moeten aan dezelfde standaarden voldoen als andere banken.” treasuryXL vroeg een van onze experts, Peter Schuitmaker, om zijn mening:

Is er een fintechzeepbel?

Peter SchuitmakerRegistered Advisor for Business Transfer and Succession

Door de opkomst van ICT, met name de mobiele platforms (telefoons en tablets) en de gebruikte software (apps) is de bancaire dienstverlening ook in een innovatieve stroomversnelling gegaan. Waar traditionele banken de nieuwe ICT gebruiken om hun diensten te vereenvoudigen en te verbeteren, deels ook om operationele kosten te drukken, zijn een groot aantal fintech bedrijven die juist -denkend vanuit de ICT technologie- producten en diensten aanbieden. Het zijn vaak niche producten of een producten met een beperkte functionaliteit die juist wel aansluit bij een zekere doelgroep.

De ECB heeft dat geconstateerd en wil op die fintech dienstverlening enige grip krijgen. Dat lijkt vrijwel onbegonnen werk, omdat het aanbod, zowel de functionaliteit als de onderliggende ICT, zeer divers is. Hoe dan ook, geen richtlijnen waarbinnen fintech bedrijven zich op de markt mogen begeven en ontwikkelen, lijkt ook geen optie. Vandaar deze eerste voorzichtige poging “Guide to assessement of fintech credit institutions”. De motivatie is nobel: men wel gelijke monniken, gelijke kappen. Maar hoe zaken zich zullen ontwikkelen en binnen welke termijn aanvullende of nieuwe richtlijnen nodig is laat zich lastig voorspellen. Maar erg optimistisch daarover ben ik niet!

 

Peter Schuitmaker

Registered Advisor for Business Transfer and Succession