Tag Archive for: TMS

What’s FinTech and how does it change the financial world?

| 22-2-2017 | Arnoud Doornbos |

FinTech is a term that is becoming popular in the financial world. Only one third of the financial experts know what this means  and understands  what consequences it has for their business. How this innovation is currently changing the ecosystem of money, is still relatively unknown.

FinTech is a contraction of the words financial and technology. In other words: it covers all innovative financial products and services that simplify and accelerates the way we handle money. For traditional banks FinTech is still an uncomfortable concept. Why? Because a large portion of the revolutionary financial concepts are derived from technology driven start-ups. These start-ups change the traditional ecosystem. This is enormously important in a country like the Netherlands where the majority of firms is financed by banks and personal finances of the people are predominantly held by financial institutions  which find it often difficult to modernize.

The emergence of ICT in the financial sector may also have different consequences. Those FinTech companies that focus on a single product or service can erode the business model of banks. At the same time the same technology also offers opportunities for traditional players to improve their service and reduce costs. Also, traditional players have a competitive advantage over new entrants based on their knowledge of regulations and access to information from relationship banking (also called soft information).

FinTech companies have greatly changed the rules of the sector. Today we can pay via our mobile phone, quickly apply for online credit and invest online with one click. The list of innovative ideas is endless and an enrichment for everyone.

FinTech VC investments

The explosive growth of the financial technology industry continued in 2016.

  • 2016 has seen 839 deals globally attracting $15.2bn of investment
  • Global investment is up 27% to Q3 2016 vs the same period in  2015 and has surpassed the 2015 total of $14.9bn
  • Global deal size is slightly ahead of 2015 Q3 levels, with the average increasing from $14.3m to $18.1m, partially attributable to large Chinese investments such as Alipay

 


Source: Pitchbook Innovate/Finance

Most money was invested in start-ups. Projections show that the amount of investment will continue to rise.

The power of this technology-driven financial services lies in the fact that it is fast, efficient, transparent and mobile. You can use these services as long as you have Internet access. Of course, this strongly contrasts with the discontent which experienced customers from traditional banks.

Looking ahead — the FinTech industry could experience even greater growth moving into the coming year. The future remains positive from an investment perspective. We may expect an uptick after relative slow growth in the second half of 2016 due to political risks such as the Brexit and the US elections which fueled great uncertainty across all emerging sectors. Along with increased attention, the industry could see a large number of fresh launches and FinTech could make its way into an even stronger growth pattern in 2017 as investors have become more certain about industry prospects.

The possibilities for FinTech in Netherlands

In the Netherlands, there is also a strong rise of FinTech companies. Companies like Paypal are rapidly gaining market share. The biggest and best-known Dutch company FinTech Adyen. This company was recently valued at more than € 2.3 billion.

The FinTech Top 100 announced in 2016 that there are eight Dutch FinTech startups are part of the leading European companies in the financial technology. The financial infrastructure and the international focus play an important role. In addition, capital and expertise is also necessary for innovation, two factors Netherlands as a European Member State meets. The Netherlands also rise in 2016 from the 5th to the 4th place in the ranking of most competitive economies in the world.

The infographic shows that, perhaps inspired by Adyen, payment providers constitute a large share of the pie. Also data startups and alternative financing (crowdfunding example) are well represented in the Netherlands.

Dutch FinTech awards 2017

FinTech startups are disrupting the financial sector. Innovative companies are eager to please millions of frustrated banking customers. Investors are fascinated by the phenomenal profits made by banks struggling with outdated technology. Today, more and more money is being invested in FinTech. The Uber of the banking sector has not yet emerged, but this is only a matter of time. On April 21 the Dutch FinTech Awards 2017 will be held in Utrecht at the Rabobank Headquarter. The panel of judges of this years event consists of seasoned investors, academics, marketeers, entrepreneurs with an extensive track record in finance and/ or technology.  (http://www.fintech.nl).  The author of this article is one of the judges

Future

What we see in practice is that components of banking products and services are being redeveloped by the FinTech Industry.
These FinTech solutions are smarter, faster and better.
As a result we now see that different FinTech companies will work together. The individual Fintech products often turn out to be complementary to each other.
FinTech companies now recognize that collaboration with other FinTech companies leads to high growth and a better product range.

The Uber of the banking sector

 

The Uber of the banking sector has not yet emerged, but this is only a matter of time.

 

 

Arnoud Doornbos

Associate Partner

 

 

 

 

Payment fraud – how companies can protect themselves

|13-2-2017 | Joerg Wiemer | sponsored content |

Information about the opportunities and risks of digitalization is widely spread. In general, risks occur when there is a chance of losing a competitive advantage or falling behind.  However, one of the biggest risks is without doubt cybercrime. Attacks on IT systems worldwide increased yet again by 38 percent in 2015, according to the consulting firm PwC in their “Global State of Information Security Survey 2016”. If these attacks are aimed at the payment transactions of a company, the entire existence of the organization is easily threatened. Therefore, security measures in treasury and payments processes should be at the very top of the agenda. Jörg Wiemer, CSO of TIS, explains how companies can ensure increased security.

In general, when does a risk exist for companies during payment transactions?

JW: In principle, in any situation that involves a lack of transparency across bank relationships and activities. In these cases, cash positions and liquidity are not clear. Let’s assume that a branch transfers ten million dollars at the beginning of the month. If these bookings rely on manual processes and the balance is only checked once at the end of the month, it takes a full thirty days until the fraud is detected. Time is literally money.  By monitoring treasury in real time, it is possible to detect these procedures much earlier, thereby solving them in many cases.   

It can take a lot of time until the head office of the branch gains knowledge about such cases.

JW: This is the heart of the problem: The prevailing regional division of labor makes it easy for fraudsters. If the account statements in paper are collected locally in each branch, it takes weeks until those responsible in the head office notice that an account statement is missing, and with it, the positions written on it. This is exactly why a company should collect all account statements from every bank account worldwide automatically and assess liquidity positions in real time with a software like TIS.

What else facilitates frauds?

JW: Fraud can occur if there is no complete overview of the electronic signing authorities, if there is no dual control principle during payment transactions or during the administration of payment recipients and, in general, during every user administration, which is particularly prone to fraud. These are the typical gateways.

How can I detect that I am at an increased risk?

JW: One reliable indicator of a low level of security in payment transactions is a high amount of manual transactions. Normally, the assumption is that every payment has to be recorded in the accounting system according to the best practices – no booking without receipt, and no payment without a previous booking. Nevertheless, under certain circumstances, there are deviations and exceptions of this principle. The key term here is “exception handling”, which results in a manual payment. An exemption is necessary for these cases, which includes comprehensive process documentation. The possibility of recording and authorization of non-automatic payments should be restricted to certain recipients of the payment and internal user groups. Furthermore, the user should only be allowed to use unchangeable payment templates that have been approved in advance.

How can companies reduce risks?

JW:  A general rule is to standardize and and automate processes across the group of companies! Payment related tasks can be executed on local level, however, based on a standardized and automated process. A central directory of every existing account and a payment governance should be mandatory for every company. Security in payment transactions begins with the professional management of the bank accounts. Otherwise, those responsible run the risk of fraudulent payments through accounts that are not registered in the ledger. The next step is to centralize the payment transactions. Digital payment platforms like TIS pool the cash flow and standardize and automate it. This way, payment procedures and the cash flow are controllable at all times.

What has payment looked like in practice up until now?

JW: Heterogeneous and confusing. Companies have a lot of different systems in each part of their organization and they use different e-banking tools to connect to the banks. The SAP system then generates payments. This is complicated and complex and there are many different protocols and formats. This is the reason for high costs as well as increased fraud risk.

In light of this, which solution approach does TIS pursue?

JW: We provide a payment transactions platform especially for medium and large-sized companies in any industry. The platform connects their accounting system with the respective bank. It then operates between the core systems – which the client does not have to change –  and the bank. Therefore, the platform is the single point of contact, allowing all automated and standardized payment transactions to be combined in a uniform way for the entire company. This makes the management, monitoring and assessment of payment transactions tremendously easier.

The TIS solution runs completely in the cloud. What about the topics of control and secure data storage?

JW: A server as such is either secure or not secure, no matter if it runs in the cloud or in your own house. It is also possible to dial into an in-house server with the banking tools of a company from anywhere as long as the person has the appropriate authorization or the right amount of criminal energy. This is why the server has to be permanently protected from non-authorized access with a high level of modern technology. The big data centers, with which TIS also cooperates, have totally different possibilities than a single company. Let me say a few words regarding the topic of online banking:  the idea that banking tools on a private notebook which runs offline are somehow more secure is an illusion. This computer provides a much bigger gateway for viruses and Trojans than any e-banking solution that runs in the cloud. It speaks volumes, that the Swiss Reporting and Analysis Centre for Information Assurance (MELANI) has recently started receiving a much higher amount of reports from the general public regarding e-banking frauds.

The right software is one part, but what can be done to ensure risk is handled correctly and that the right methods of payments processing are put into place?

JW: Good governance must be established and implemented. Companies need globally valid rules for their payment transactions with detailed guidelines on the following: how accounts are managed, who can open new accounts, who must give permission for this, and the documentation necessary to do so. There are always bad examples for what can happen if the company does not follow the guidelines. Remember the case of the automotive suppliers Leonie mid-2016? Cybercriminals acquired documents and assumed somebody else’s identity. They were then able to divert 40 million euros from accounts of the company to accounts abroad.

My advice on how to minimize risk? Establish governance guidelines and use a central platform for the management of bank accounts and payment transactions. Through automated and standardized processes, companies can protect themselves against manipulation and fraud and, ultimately, the loss of money.

If you are interested to read more about this topic please click on security in payments

joerg wiemer

 

Joerg Wiemer

CSO and Co-Founder of  Treasury Intelligence Solutions GmbH ( TIS)

 

 

 

How about these Fintechs?!

| 9-2-2017 | Pieter de Kiewit | treasuryXL

In August 2016 our expert Pieter de Kiewit wrote an article about Fintechs and we thought it might be interesting to publish it on treasuryXL. Since then Fintechs have become a major subject in the financial world. What has changed since the article was written? Are the new solutions a reality now? What further developments do you see? Please feel free to share them with us.

 

In the late ’70s Sony introduced the Walkman. My marketing professor told me that, without market surveys, Sony hit the jackpot. Everybody wanted to have one. Snapchat, my niece, who is 17, understands what they offer, started in May 2012, the company was recently valued at $22 billion. This is beyond what my headhunter brain can digest.

Yahoo was bought by Google for a fraction of what the company was valued at a few years ago. In august 2016 Randstad Holding bought Monster (Monsterboard in The Netherlands) for €400 million. A decade ago Monster, then a multi billion $ company, told everybody they would dominate the recruitment industry forever and they tried to buy every available recruitment company.

How about these Fintechs? The market potential is huge, new solutions will pop up that will change our everyday life. In my opinion it is an extremely diverse group of companies. This market is extremely fragmented and in my perception many Fintechs have, in my perception, a hard time reaching their potential clients. What I notice is that the language of the Fintechs is not the language of the clients they want to sell their business to. The language they do speak is the capital raising language. When this capital staff is hired, product offerings are developed as well as marketing material. The banking industry observes, invests, initiates and wonders what to do. Companies like Google, Facebook, Amazon and others join in this Fintech jungle. Who will dominate in a few years, I can not predict.

Perhaps I am cynical, but I do not see any Snapchats or Yahoos. I hope this will change, because I think, next to banks, there is room for more innovative financial services companies. There are many good ideas out there. I wait for a finance Monster to step up and change market dynamics. Later on we will see if a Randstad will step in and if they will have a sustainable future. Time will tell…

Pieter de Kiewit

 

 

Pieter de Kiewit
Owner Treasurer Search

 

 

Do you want to read more articles about FinTech on treasuryXL?

B2B Fintech: Payments, Supply chain finance & E-invoicing guide 2016

Uitgelicht: Fintech – investeringen in financiële innovatie fors toegenomen.

Will the European banks strike back?

 

Blockchain and Central banks: a Tour de Table (Part I)

| 27-1-2017 | Carlo de Meijer | treasuryXL |


Our expert Carlo de Meijer, distinguished blockchain specialist, has published an article that is worth sharing with you. This is Part I and Part II will follow soon. May we invite you to comment or share your experience with this intriguing topic:

In April last year I wrote a blog on blockchain and monetary policy. In this blog I went into a number of still unanswered questions posed by the European Central Bank around blockchain technology. There was a big uncertainty about the impact of this technology on the future role of central bank money and on monetary policy.

 

While at that time many financial institutions and startups already paid a lot of attention to this technology, only a handful of central banks were interested in blockchain with the most vocal being the Bank of England. Since than a lot has changed with a growing number of central banks around the globe starting to recognise the potential for blockchain to help them in obtaining their key objectives: stable financial system and efficient financial markets. In the first part of this blog I will try to answer why there is nowadays so much interest amongst central banks in blockchain technology, what are the main benefits and what are remaining concerns. In the second part a Tour de Table will be given, looking at the various initiatives of the central banks.

Central banks are experimenting with blockchain

Several central banks are or have been experimenting with different versions of blockchain-backed systems. A growing number are questioning the point of creating digital currencies, such as the Danes. But they are not alone. Also the central banks of Sweden, Japan, China and Russia have launched similar efforts. Others such as the central bank of Singapore and Canada have already tested blockchain-based currency systems for internet payments, while also the Reserve Bank of South Africa has expressed their optimism towards the blockchain technology and its potential impact on finance. The European Central Bank recently announced a new research undertaking in partnership with the Bank of Japan. Earlier last month the US Federal Reserve released its first major research paper on blockchain.

Why is there so much interest?

But why are so many central banks now embracing blockchain, seriously exploring their potential.

The turning point was a three-day event in Washington , hosted by the World Bank, the IMF and the US Federal Reserve where representatives from more than 90 central banks worldwide expressed broad interest “in how the technology might impact both the banks they regulate as well as their own regulatory practices”.

Central banks’ interest in deploying a blockchain “comes in step” with moves by the big banks to use the technology to ease cross-border settlement transactions and overhaul antiquated back-office infrastructure. Experiments by banks with distributed ledgers as a way to settle trades and record data and transactions, have clearly shown its potential to reduce costs and increase the efficiency of its operations. The distributed ledger and its potential to simplify the record keeping, tracking and accounting process makes it hard to ignore by central banks.

Central banks and public stances: some quotes

Over the course of the past half year many central banks representatives have taken a public stance on their potential use of distributed ledgers and digital currencies. Here follow some of the most interesting quotes.

 “Innovation using these technologies could be extremely helpful and bring benefits to society. The technology has the potential to transform multiple aspects of the financial system” Janet L. Yellen, Chairwomen Federal reserve

 “We are paying close attention to distributed ledger technology, or blockchain recognizing this may represent the most significant development in many years in payments, clearing and settlement” Lael Brainard, Federal Reserve Board

Other interesting quotes include:

“The conditions are ripe for digital currencies, which can reduce operating costs, increase efficiency and enable a wide range of new applications” People’s bank of China

“A state-sponsored digital currency is still on the agenda, and if adopted, the technology could deliver a range of benefits” Russian central bank

 “The technology could be worth using for central banks because it would make for a financial system that does not go down even if the central bank’s computer systems are temporarily taken offline” Mark Carney Bank of England

What are the potential benefits for central banks?

Central banks are now exploring the potential of blockchain and distributed ledger technology. As banks experiments have shown blockchain networks may lead to safer and better payments and securities systems..

  • Make money more easily traceable

The inherent property of immutability and transparency associated with blockchain makes it easier for the central banks to trace the money that is in circulation. It would allow them to track every euro, pounds, dollar or renminbi on every step through the financial system in real-time.

  • Build single shared record

Central banks are also interested in blockchain technology as a way to build a single, shared record of all transactions among several institutions. The central banks hope they can use the decentralised method of record-keeping to complete and record transactions in the real economy more effectively, quickly and transparently. The creation of a standardised way of recording transactions would allow all the players in the system to communicate more seamlessly. That could leave much less money sitting idle while banks reconcile their different ledgers, as now happens.

  • Simplify the settlement process

It has also the potential to create efficiency. Blockchain or the distributed ledger technology has the potential to simplify the settlement chain around securities transactions. The resulting cost reductions, speed of settlement and enhanced transparency may all contribute to more efficient and safer payments and capital markets.

  • Reduce transmission costs

It may also drastically reduce the transmission costs and time associated with cross border transfers, by enabling instant transfers between branches both within and outside the country.

  • Reduce operating costs

The use of blockchain-based digital fiat currency will reduce the amount of banknotes and coins that are in circulation. This will, in turn, reduce the operating costs associated with printing and distribution of currency notes by the central bank.

  • Fight money laundering

The wide spread implementation of blockchain based fiat currency will also help the central banks (and government’s) fight money laundering while eliminating the issue of counterfeiting.

  • Other advantages

The blockchain technology provides a tool to measure leverage in the system and counterparty exposure, and can monitor compliance in real time. It can also answer questions about collateral ownership.

A blockchain could untangle the spaghetti structure of central swap bank lines, which would improve crisis response capabilities.

  • Reach the unbanked

Digital currencies may eventually benefit the developing world too. Because they are low-cost and easy to use on electronic devices, digital currencies may enable greater access to financial services for the billions of the world’s unbanked.

  • Stable financial system

This all should make the financial system more transparent, fast, efficient and secure. According to a Bank of England research paper produced last year, the economic benefits of issuing a digital currency on a distributed ledger could add as much as 3 percent to a country’s economic output, thanks to the efficiency it could offer.

 Remaining concerns

There are however still a range of questions and all sorts of security and regulatory concerns where central banks will need answers for before blockchain technologies are to become a key part of the future central banking landscape.

Questions such as: How may it impact monetary policy?; What are the implications of issuance of central bank digital money?; What is the impact on physical cash?; How would it impact on central bank seigniorage?; What are the implications for the integration of the European capital market?; and What is the impact on exiting projects such as T2S?

In previous blogs I already tackled some of these issues. See: “Could blockchain bring the EU Capital Market Union forward?” November 6, 2016; “Blockchain: What about T2S?” June 30, 2016; and, “Blockchain and Monetary Policy” April 29, 2016.

There are also a number of concerns that are already highlighted, such as assurance around scalability, data integrity, resilience and resistance to cyber-attack. A big concern is regulation of digital currencies. This is a looming challenge that will require cross-border co-operation. Monetary authorities must come together to start thinking about the necessary regulation of digital money that will be flowing around the world.

See my blog: “Blockchain and Regulation: do not stifle innovation!” April 4, 2016.

When can we expect central bank-operated digital currencies?

When a move to official digital currencies might occur is hard to estimate. Central bank-operated digital currencies could be ‘decades away’ according to the more pessimistic (or realistic?). But what is sure is that it will take a number of years before any central bank issues its own currency onto a live distributed ledger. Research is still at an early stage and many puzzles still have to be worked out.

It has become clear that central banks are set to take a much more active role in the development of blockchain technology. But how active that will be is not yet clear. The Fed’s preference at this stage is still to take a fairly hands-off approach and allow banks take lead the way – “as long as they remain within defined guidelines and best practices”. A switch could happen within the next 5 to 10 years. When large parts of the financial system are using blockchain for financial transactions, so will central banks!

 

Carlo de Meijer

Economist and researcher

 

We overschatten de snelheid waarmee de financiële wereld kan veranderen

| 7-12-2016 | Olivier Werlingshoff |

bankgebouwen‘We overschatten de snelheid waarmee de financiële wereld kan veranderen’ is de titel van een interessant artikel in het Financieele Dagblad van woensdag 30 november.

‘Grote financiële instituten omarmen massaal technologische vernieuwingen. Fintech is geen bedreiging maar een kans. Volgens fintech-goeroe Chris Skinner is dat vooral marketing. Traditionele banken hebben geen benul van wat er op ze afkomt en onderschatten de impact van nieuwkomers op de markt.’ Chris Skinner zegt vervolgens: ‘Tegelijkertijd onderschatten we de impact van fintech. Dat komt niet omdat er geen vernieuwingen zijn, maar omdat er een grens is aan de hoeveelheid start-ups en wat zij kunnen bereiken.’ Het volledige artikel is te lezen via deze link.

Wij  hebben onze expert, Olivier Werlinghoff, gevraagd om commentaar te geven en dit is zijn reactie:

Mijn mening is dat op het vlak van cash management heel veel fintech bedrijven gaan samenwerken met gevestigde banken. Het goede van fintech is dat ze met vernieuwende ideeën komen. Het grote voordeel inderdaad van banken is het vertrouwen, het kapitaal en niet onbelangrijk: een enorm klantenbestand!

Nadeel van fintech bedrijven is dat klanten overspoeld raken met nieuwe mogelijkheden en tussen de bomen het bos niet meer zien. Vaak hebben vooral de kleinere en mid-corporate klanten niet voldoende kennis in huis om een gefundeerde afweging te maken van het nut en de toegevoegde waarde van een fintech oplossing. Door te gaan samenwerken met banken kan vertrouwen worden verkregen en een enorme afzetmarkt.

Olivier Werlingshoff - editor treasuryXL

 

Olivier Werlingshoff

Managing Consultant at Proferus

Why seems TMS market leadership to be a relay race?

| 23-11-2016 | Pieter de Kiewit |


geen-naamThe number of treasury management software brands I read about in resumes since 1996, the year of my first treasury placement as a recruiter, has continuously grown. In other markets market dominance has been more stable, BMW, Microsoft and Calvé have been able to keep long market leadership. What is so different in the TMS market? Without comprehensive research I can think of the following reasons.

TMS technology reasons

Technology is moving forward very quickly. Solutions are often based upon the possibilities new technology offers and not developed based upon client needs. Different backbone technology often comes with other providers, hence other TMS suppliers.

Integration after take-over

There is a number of small solutions that grew to be successful over time. The founders of the companies that offer these solutions often choose to sell after a number of years. This because they are technology driven and cannot handle the marketing and operational hassle. Or the other way around: after successful sales they have to build a better product and do not have the technological staff. Or they just want to cash. The bigger companies that take over are not capable to absorb the smaller without losing the warm connection with the clients. Service and flexibility go down, prices go up. Sales staff is demotivated after a setback in remuneration. Support does not know the application. The clients go to the next supplier.

Marketing reasons

Last but not least, successful start-ups that work with partners in various countries are not able to share the wealth of success. Discussion over equity, profit sharing and ownership are often deal breakers. In this market there is not one dominating expansion strategy that has been the success formula: own staff is not strong enough or too expensive, partner sales is often not based upon enough commitment or lacks a proper contractual basis.

What do you see in the market of TMS suppliers?

Pieter de Kiewit 

 

 

Pieter de Kiewit
Owner Treasurer Search