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“Systems om je bank buitenspel te zetten” – Verslag van mijn Financial Systems presentatie

| 23-5-2017 | Pieter de Kiewit |

Dit is een verslag en korte samenvatting van mijn presentatie die ik mocht houden op het Financial Systems evenement. Afgezien van een gênante vertraging door mijn gebrekkige Powerpoint skills was het een prettige sessie afgerond met een pittige discussie tussen experts in de zaal. Eerst een korte samenvatting:

Als Feyenoord fan ben ik dit jaar gelukkig en weet veel van voetbal, ook al speel ik het niet. Daarin ligt een parallel in mijn werk als treasury recruiter. Maandelijks krijg ik van circa 100 experts persoonlijk college en zie een veelvoud aan cv’s. Ik denk dat ik hierdoor inzicht heb in systemen die worden gebruikt om treasury processen te managen en ik zie de afgelopen decennia interessante ontwikkelingen die de laatste jaren in een versnelling zijn geraakt.

Zonder namen te noemen van leveranciers, ik doe geen software sales, heb ik een lijst gemaakt van diensten en producten die de gereedschapskist van de treasurer kunnen vergroten en afhankelijkheid van zijn bank verkleinen. Toen ik deze lijst opstelde, viel me op dat er tussen de vakgebieden cash & werkkapitaal management enerzijds en funding anderzijds interessante ontwikkelingen zijn zoals bankonafhankelijke betaalplatforms, crowdfunding en het bankkosten inzichtelijk maken. In het managen van risk zie je bijvoorbeeld trade finance in blockchain en partijen die FX transacties tegen ongebruikelijk lage marges bieden.

Banken daadwerkelijk buitenspel wordt lastig en is volgens mij ook niet het streven. Banken bashen vind ik een zeer onsympathieke hobby. Daarbij is de Fintech wereld ook nog niet volwassen met alle bijbehorende consequenties. Voor de drukbezette treasurer, voor de DGA en CFO die maar incidenteel te maken hebben met het vakgebied kunnen deze ontwikkelingen nogal onoverzichtelijk zijn. Helaas is er geen oplossing die snel inzicht verschaft. Wel denk ik dat er mooie kansen liggen voor degene die vooraan wil meelopen in ontwikkelingen.

De discussie die zich ontspon tussen financiële lijnmanagers en treasury experts ging, onder andere, over de vraag of bankkosten daadwerkelijk inzichtelijk zijn en wat de toekomstige rol van de banken zal zijn. De Powerpoint presentatie is onder dit artikel opgenomen. Ik verheug me op verdere events waar discussie rond dit thema kan worden verder gevoerd.

Pieter de Kiewit
Owner Treasurer Search

Klik hier als je de presentatie van de sessie wilt bekijken.

The IT Savvy Treasurer

| 9-5-2017 | Patrick Kunz |

We cannot switch on the news without hearing about technological advancements which, supposedly, make our lives easier, better or smarter. We all embrace these, get used to them and cannot do without them anymore. Sometimes we think back to the time before these advancements and cannot image how we lived without them. The same applies to treasury.

I am 35 years old; my experience in treasury was always linked to IT. I sometimes hear stories from older treasurer who worked without computers, later tabulating/punch cards and still managed to do a good job in their field. Of course times have changed; information is faster than in these days and also the need to process it. We all had to embrace the new technology. In this blog I will try to analyse the link between IT and treasury and try to make predictions about the future or at least where I wish the future would go (in treasury terms).

Payments

In the old days payments were a manual process with people entering them in the banking system or sending them to the bank via fax. Nowadays, we link our ERP system with the banking system and have a batch file automatically added to the bank. With bulk payments a payment hub can be used which will make the whole process bank independent, fast and cheap. If wanted and needed the whole process can be made straight-through by automating it from creating a payment to approving it.

The future will make payments even faster (instant payments should be possible in the sepa region from November onwards), cheaper and more bank independent (PSD2 regulation allows non banks to link with your bank and provide (payment) services). Maybe we will be using our facebook account for payments sooner or later. Bitcoin could be an alternative payment currency and/or be used to hedge non deliverable currencies (to achieve this the volumes need to increase significantly).

Risk management

An important part of the treasurers work is risk management. Hedging FX, interest rate, commodity prices are daily business for a treasurer. Doing the deal is easy, doing the right deal is more difficult. A treasurer can only hedge correctly if he knows what he is hedging: the exposure. To know the exposure information of the business is key. The reason for the exposure originates in sales (FX) or procurement (FX and Commodity). These departments need to be aware that the actions they take might have consequences for the treasurer and therefore the treasurer needs to have some information. I have been at companies where sales was daily generating a lot of USD exposure at a EUR company. They were supposed to let finance know about positions. Often this was done at day’s end or forgotten and done a day later. Result: an exposure on USD without the treasurer knowing it; a risky position. IT helped to fix this. Sales entered a deal in a program and the relevant FX exposure was automatically shared with the treasurer via an API to the Treasury Management System. The treasurer could decide directly whether he needed to hedge or not and even aggregated deals to get better rates at the bank. For small deals a link was set up with a FX trading platform to STP them at the best rate.

The future in risk management will be even more automation within the company (internal) but also with connections to banks and risk solution providers. Prices are becoming more transparent due to the fact that bank independent solutions are available which compare prices, in real time. Risk management sales is becoming less a bank business. Brokers are having less hurdles to enter the market, due to IT platforms in the cloud. Why pick up the phone and call your bank for a EUR/USD quote when you can compare prices via an online platform and directly trade it? Often you don’t even have to settle via your own bank accounts but you can have it directly sent to your customer or supplier.

For Trade Finance blockchain will become the new standard. The financing and shipping of commodities is a rather paper based process which is inefficient and slow. Blockchain could automate and improve the speed massively. The challenge to achieve this is big as there are many parties involved, but initiatives have started so the future is beginning now.

Information

As above examples show information is key to a treasurer. Even more so, as treasury is often a small team and most of the information comes from other departments. To get this information the treasurer can use several nice IT solutions. The ERP systems helps, but the treasury needs to know where to find the information. A treasury management system is often used to sort all treasury related information. TMS can link with ERP systems or other systems to gather information. The TMS will sort this information so that the treasurer is well informed and can make decisions. When I started in treasury 10 years ago the market for TMS was small; systems were expensive and limited in use (payments only, fx only etc). Nowadays a TMS does not have to be expensive anymore. A SME (Small medium enterprise) could use it to upgrade their treasury information. Most TMS can be used for all aspects of treasury (cash Management, risk management, corporate finance, guarantees etc). This will give the tech savvy treasurer an edge. The treasurer with most information can make the best decision. In treasury taking decisions while being well-informed often means either costs saving (e.g. better cash position, lower working capital) or lower risk. The IT savvy treasurer contributes to an optimally functioning company; he/she should be considered a business partner; he knows your cash position, your risk position and your balance sheet, hopefully in real time at all times.

Patrick Kunz

Treasury, Finance & Risk Consultant/ Owner Pecunia Treasury & Finance BV

Other articles of this author:

Flex Treasurer: The life of an interim treasurer

How much are you paying your bank?

Guide to Treasury Technlogy by ACT & AFP

| 1-5-2017| treasuryXL | ACT | AFP |

ACT and AFP have published a Guide to Treasury Technology sponsored by Bloomberg, which might be interesting for you.
Managing treasury tasks has become more complex due to globalization of markets and increasing uncertainty in business since the first AFP edition appeared in 2011. Since then treasurers faced multiple challenges to exercise control of treasury activities, especially group activities.

Managing treasury has become more complex during the years in the face of global change and increasingly uncertain markets. Treasury practitioners face magnified challenges, as they try to gain more visibility and exercise more control over group activities. Treasury technology developed quickly to help them to operate more efficiently and answer compliance requests with ever more stringent regulation. Automate processes was one of the biggest challenges. Technology can help treasury play a more strategic role, automate routines and be compliant with regulatory environment.

Joint AFP/ACT publication, sponsored by Bloomberg

This guide is the first joint AFP/ACT publication and aims to help practitioners to identify a cost-efficient solution.

The first chapter starts with a detailed introduction of the development of treasury technology, expectations towards this technology and how the evolution of the Corporate Treasurer took place. This chapter illustrates how the technology available to treasurers has developed over the last 15 years. A brief explanation of how dedicated treasury technology was first developed is followed by details of how a series of factors have moulded the treasury technology market into the one we see today. Three points are highlighted: that the treasury technology market has matured, tremendous improvements in the quality of connectivity and what the changes brought with them for Corporate Treasurers.

Why review technology?

In Chapter 2 the drivers for reviewing the technology and a case study are presented.
With the rapid changes in available technology, the increased opportunity for treasury centralization and the need for treasurers to be able to demonstrate control over activities, treasurers were reviewing how best to deploy technology in order to help them perform their various roles effectively. Given the different environments in which companies operate, the potential benefits from the deployment of a new technology solution can vary significantly. This chapter outlines some of the key drivers that are encouraging treasury practitioners to review their use of technology.

Purpose of technology

Chapter 3 deals with the purpose of technology and identifies the core roles of the treasury department. Also how treasury structure can affect the use of technology. When assessing a deployment of technology, treasurers need to determine their requirements of the technology. This chapter includes a series of questions to help treasurers clarify their existing operations and also identify how structures and processes might change with the adoption of new technology. A case study shows how a company uses a certain technology to improve process quality.

Technology solutions

Chapter 4 presents treasury technology solutions.
A wide range of technology solutions is available to support treasurers. Treasury management systems are able to support the majority of the work of most treasury departments. However, it is also possible to develop a technology solution that supports treasury departments, including those with complex operations, without adopting a treasury management system. This can be achieved by developing in-house solutions or by using tools offered by banks and other vendors. A range of potential solutions available to support treasurers is presented in this chapter.

Evaluation and building a business case

Chapter 5 is about the evaluation process and how building a business case can help to evaluate which technology fits best. How to build a business case and then how to develop a requirements definition is explained in detail. The requirements definition is a critical part of the process: it helps to set the scope for the project and is the core document in the selection process. The process of developing the requirements definition also helps to build support for, and awareness of, the project throughout the rest of the organization.

Selection, implementation and maintaining the solution

Chapter 6, 7 deal with the selection and implementation process, while chapter 9 tells you more about maintaining the solution over time.

Trends

Chapter 10, the final chapter describes some of the current trends in treasury technology and lines out how they might impact treasurers over the coming years. Some of the key areas of development in technology and also some of the market changes which might require a technological response are presented.

In the appendix of the guide you will find information on how to develop a request for proposal (RFP) , a checking list for this RFP and a very detailed country reports list.

Source: © Association for Financial Professionals, ACT (Administration) Limited and WWCP Limited (except articles by Bloomberg LP), 2016, ISBN 978 1 899518 47 0 book 978 1 899518 48 7 CD ROM, for the articles Bloomberg LP, 2016 | TMI

Our conclusion

A very detailed, valuable guide for all who want to learn more about treasury technology, want to find out more on how to select the best technology solution that meets the specific requirements of their company and what to focus on during the purchase and implementation process. You can find the guide on tmi, after registering for free.

Singing from the same hymn sheet

| 26-4-2017 | Hubert Rappold | Sponsored content |

Hubert Rappold from TIPCO Treasury & Technology, puts the case for a treasury information platform (TIP), which acts as an information hub for the treasury department and reduces companies’ reliance on “Excel-based monstrosities” that are doomed to fail.

A typical treasury department runs a number of systems: a treasury management system for day-to-day operations, a trading platform, a market information system, electronic banking software and so on. So why on earth would you really need a separate treasury information platform (TIP)? After all, the data already exists in a multitude of other systems. Well, that is certainly true but also part of the challenge. If there is no single place where all the data can come together to create your reports at the press of a button, you will most likely be forced into a mediocre data warehouse solution also used by other departments or into a ‘handmade’ spreadsheet-based solution with all its drawbacks.

On top of that, even in an ideal world, when all your data is in a single system, there are circumstances where it is almost certain that you will need to integrate additional data. Just think about acquisitions. lt usually takes years before the systems are harmonised. So what do you do in the meantime?

Requirements of a TIP

A TIP needs to fulfil a range of requirements in order to satisfy the needs of treasury departments.

lt needs to be easy to use
lt needs to integrate existing data sources
lt needs to have a flexible reporting engine
lt needs to be easy to maintain
lt needs to be extensible

What happens if these requirements are not fulfilled is quite easy to imagine. Your reporting will be cumbersome, error-prone and data quality will be poor. Ultimately, the reporting project will fail and a new generation of interns will develop yet another Excel-based monstrosity doomed to failure.

Let’s look at these requirements in greater detail:

If it is not easy to use, it will not be accepted by your users, resulting in poor data quality and frustration. The benchmarks are spreadsheetbased solutions. If the handling is as easy as in these systems, then your users will be happy.
If it does not integrate existing data sources, you force users to duplicate entries, resulting in frustration and hence in poor data quality. Of course this is not a one-way street. Think about the FX exposure captured by your subsidiaries as part of the forecasting process and locally contracted FX transactions. Your risk manager will be more than happy to have this information in his or her treasury management system. Think about payment advices. Collect this information and you can use it to optimise the funding of your cash pools. Your TIP will act as an information hub for the treasury department, passing data back and forth between various systems.
If it does not provide a flexible reporting engine, you will not be able to react to everchanging requests from internal and external sources and will essentially resort to timeconsuming, cumbersome and error-prone spreadsheet reporting. Flexible not only means that it covers all functional aspects. lt also means that even without being an IT guru you should get meaningful information out of the system. However, be on your guard if you are told that you will be able to create sophisticated reports within minutes without any training. That only works well in promotional videos. Invest some time in proper training and be the master of your reports.
If it is not easy to maintain, you will be frustrated by the administrative overhead of the system instead of working straight on the analysis of the data. lt needs to be straightforward to add new users, companies and company groups. Whether via manual input or interfaces, the data needs to end up in your reporting solution without delay, without reprogramming, and without any external expertise.
If it is not extensible, you will be forced to install even more systems if a new function is required, such as cash flow forecasting, bank relationship management and guarantees. Therefore, think ahead. Before selecting a system, clearly state what you want it to do now and in the future.

Outline of system architecture

Below, I have outlined how such a system could fit into your existing system environment and what the interactions are between these components.

The TIP acts as the information hub between the various systems. lt receives and passes on data to and from other systems. Based on this data, all the reports are created without any need for manual consolidation.

Benefits of a TIP

The TIP receives the data from other systems and passes it on to other systems. This reduces the number of interfaces between systems and hence the overall complexity.
The reports are created from a single common data source. There will never again be any more mismatches between different reports as they are all created from the same set of data.
lt becomes less costly and less risky to replace components of your system architecture. If you need to replace one of the components, you can be sure of having a minimal impact on the overall system architecture. If you use a new treasury management system (TMS), you only need to replace a few interfaces between the TIP and the TMS. If you switch to a new market information provider – no problem, just replace the interface to the TIP. lt will pass on the data in the established way to all the other systems involved.
lt becomes easier to add new functionality: If you require a new function, for example, cash flow forecasting, it is also easier to update or extend a lightweight TIP instead of relying on the next release cycle of your TMS provider.
lt becomes easier to add acquisitions: Even if newly acquired companies are not integrated into your system infrastructure, they can use uploads or simple screens to provide their data.

Selecting a TIP

Usually, a TIP is selected because there is one burning issue that needs to be solved, for example, a group-wide overview of bank accounts or cash flow forecasting. If you select a TIP for any of these functionalities, always ask yourself what could be the next burning issue. These are usually identified by analysing the existing spreadsheet-based solutions. Any of these is a good candidate to be replaced by the TIP.

With this list in mind, look at the existing providers and make sure that they cover all your needs and not only the one that currently causes most of the pain. Also make sure that the system provider has treasury experience. Just think about cash flow forecasting. Most system vendors will tell you that planning is part of their system. However, a closer look will show you that basic functionality is missing; for example, the connection to the financial status as the starting point of the forecast or the display of credit facilities according to their maturity structure. Basic things, if you are treasurer, but a different world for the average system provider.

Also make sure that the system has an intuitive user interface, especially where large amounts of data are captured, for example, for the cash flow forecast. lt should be as easy as a spreadsheetbased solution in order to gain the acceptance needed. Interfaces should exist to all relevant standards and systems. Last and definitely not least, a large customer base that happily acts as references is a must. If this does not exist, the chances are high that the system provider will develop the system at your expense.

Look at your current treasury reporting. If you encounter lots of spreadsheet-based solutions, if you see files transferred via e-mail, if a lot of manual work is needed to create reports and if you find yourself tracking down differences between different reports time and again, you should consider a treasury reporting solution like TIP.

For more information please refer to TIPCO Treasury & Technology

Hubert Rappold – CEO at TIPCO Treasury & Technology

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Blockchain and the Ripple effect: did it ripple?

|24-4-2017 | Carlo de Meijer | treasuryXL

Our expert Carlo de Meijer has published an interesting article about a blockchain initiative that we want to share with you. We have slightly shortened the original article about Ripple.

Who is Ripple?

Have you ever thrown a stone in still water of a river or a lake. I did! The effect is rippling the water in a way that can be followed outwards incrementally. It might be this effect that the founders of Ripple, the payments blockchain network had in mind when choosing the name for their project. Did it ripple?

San Francisco based Ripple is seen as one of the most advanced distributed ledger technology (DLT) companies in the industry, which focuses on the using of blockchain-like technology for payments.

In just four years, Ripple has established itself as a key player in the fast-growing distributed ledger technology world. Since 2013, the Ripple Protocol has been adopted by an increasing number of financial institutions to “[offer] an alternative remittance option” to consumers. Especially the years 2015 and 2016 marked the expansion of Ripple, with the opening of an office in Sydney (April 2015) and the opening of European offices in London (March 2016 ) and in Luxembourg (June 2016).
In June last year, Ripple obtained a virtual currency license from the New York State Department of Financial Services, making it the fourth company with a BitLicense. As of 2017, Ripple is the third-largest cryptocurrency by market capitalisation, after Bitcoin and Ether.

What is Ripple?

Ripple is a financial real-time gross settlement solution, currrency exchange and remittance network using distributed ledger technology. Released in 2012, it purports to enable “secure, instant and nearly free global financial transactions of any size with no chargebacks”.
Ripple is built upon a distributed open source Internet protocol, consensus ledger and native currency called XRP (ripples) enabling (cross-border) payments for retail customers, corporations, and other banks.
The Ripple Protocol, described as “basic (settlement) infrastructure technology for interbank transactions”, enables the interoperation of different ledgers and payment networks and brings together three aspects of modern payment solutions: messaging, settlement and FX management. It allows banks and non-bank financial services companies to incorporate the Ripple Protocol into their own systems, and therefore allow their customers to use the service.

The protocol enables the instant and direct transfer of money between two parties. As such the protocol can circumvent the fees and wait times of the traditional correspondent banking system. Any type of currency can be exchanged including USD, euros, RMB, yen, gold, airline miles, and rupees.
“Ripple simplifies the [exchange] process by creating point-to-point and transparent transfers in which banks do not have to pay corresponding bank fees.” Chris Larssen, former CEO Ripple

The Ripple company also created its own form of digital currency dubbed XRP in a manner similar to bitcoin, using the currency to allow financial institutions to transfer money with “negligible fees and wait-time. One of the specific functions of XRP is as a bridge currency, which can be necessary if no direct exchange is available between two currencies at a specific time. For example when transacting between two rarely traded currency pairs. Within the network’s currency exchange, XRP are traded freely against other currencies, and its market price fluctuates against dollars, euros, yen, bitcoin etc.

Did it Ripple?

Growing adoption by banks
Ripple has experienced a growing adoption by banks. Many financial companies have subsequently announced experimenting and integrations with Ripple. The first bank to use Ripple was the online-only Fidor Bank in Munich, which announced the partnership early 2014. Fidor Bank would be using the Ripple protocol to implement a new real-time international money transfer network.
Since then a host of major banks have adopted Ripple to improve their cross-border payments, and many have completed trial blockchain projects. These banking institutions – including Santander, UniCredit, UBS, Royal Bank of Canada, Westpac Banking Corporation, CIBC, and National Bank of Abu Dhabi, among others – view Ripple’s payment protocol and exchange network as a valid mechanism for offering real-time affordable money transfers.

Some recent developments in the Ripple network

The real uptake of Ripple however started to take place in 2016 and continued during the first quarter of 2017.

National Bank of Abu Dhabi (February 2017), Axis Bank (January 2017), SEB (November 2016), Standard Chartered (September 2016), and National Australia Bank (September 2016) are the latest banks to join Ripple’s blockchain-powered network for cross-border payments. And more banks will get on the Ripple bandwagon during 2017. Ripple says its network now includes 12 of the top 50 global banks, ten banks in commercial deal phases, and over 30 bank pilots completed.
“Banks and their customers have been hearing about the promise of blockchain technology to enable real-time cross-border payments. Now, some of the most innovative and successful banks like NBAD are making this a reality by offering Ripple-enabled payments to their entire customer base, and in doing so, paving the way to make 2017 the year we see broad commercialization of blockchain take hold globally.” Brad Garlinghouse, CEO of Ripple

Further Rippling: enlarging the network

Global Payments Steering Group
Last year September Ripple created the “first: interbank group for global payments based on distributed financial technology. Bank of America Merrill Lynch, Santander, UniCredit, Standard Chartered, Westpac, and Royal Bank of Canada have joined as founding members of the network, known as the Global Payments Steering Group (GPSG). CIBC will also join the GPSG as a new member.
“The creation of GPSG is significant because this represents the first time that major banks have formulated policies to govern the transfer of money across borders using blockchain,” Donald Donahue, GPSG chairman.

GPSG aims to use Ripple’s technology to slash the time and cost of settlement while enabling new types of high-volume, low-value global transactions. The group will oversee the creation and maintenance of Ripple payment transaction rules, formalised standards for activity using Ripple, and other actions to support the implementation of Ripple payment capabilities.

R3CEV
Last year October R3 and twelve of its blockchain consortium member banks – including Barclays, NAB, Nordea, Royal Bank of Canada, Santander – have trialled Ripple’s Digital Asset XRP, to tackle the costs and inefficiencies of interbank cross-border payments. Ripple says XRP has the “fastest” settlement speed, settling in about five seconds or less.
“The prototype paves the way for a major overhaul of how banks process and settle cross border payments”. David Rutter, CEO of R3

Banks traditionally provision liquidity for cross-border payments by holding various currencies in local accounts with correspondent banks around the world. But these ‘nostro’ accounts are costly because banks have to fund them, trapping capital. Ripple argues that this can be fixed by instead using a digital asset – such as its XRP – which provides liquidity on demand.
Ripple’s network was trialled in R3’s lab and research centre, making markets for fiat currencies using XRP and then completing authenticated payments without multiple nostro accounts. The trial introduced XRP to test the feasibility of reducing or retiring the use of current nostro accounts for local currency payouts.

Ripple Innovations

In the meantime a number of important innovations were announced in the Ripple offering.

Ripple Validator Node
Global IT company CGI announced it is the first commercial enterprise to implement the Ripple Validator Node. Ripple validators are servers that confirm Ripple’s distributed financial technology transactions on the network. The CGI-hosted Ripple Validator Node provides banking clients with a trusted network partner for Ripple’s distributed financial technology that settles international and domestic transactions in real-time.

Smart Token Chain
Smart Token Chain (STC), a blockchain specialist in the FinTech sector, has completed its first full Smart Token transaction across the Ripple Network. Using Ripple gives STC universal access to a wide range of partners and customers without having to physically craft a digital relationship with each one. STC is leveraging Ripple’s open, neutral platform, called “Interledger Protocol” to move payments globally across different ledgers and networks.
Leveraging the Ripple platform with new Smart Token solutions is accelerating the move toward the launch of a truly useful blockchain and smart contract implementation, which has great potential for making global exchanges of value fast, affordable and highly secure. It also provides a well-documented audit trail that will make dispute resolutions more efficient and less frequent.

Ripple’s new cost model

Ripple created a cost model, designed specifically to help banks understand their cost structure and how Ripple can help them overcome current inefficiencies. With Ripple’s new cost model, banks can easily enter transaction volume and operational metrics to receive a custom cost analysis. The cost analysis breaks down cost to a per-payment level, for both a bank’s current system and if it were to use Ripple. By using this model banks can easily estimate the efficiency gains it could achieve using Ripple for international payments.
XRP Incentive Program

The XRP incentive program is designed to accelerate the use of XRP as a universal bridge currency by creating deep and liquid markets at the outset of being listed on digital exchanges. The program is funded by Ripple and will be operationally managed by exchanges for their liquidity providers.

Global financial institutions are increasingly looking for solutions to consolidate the liquidity tied up with the nostro accounts required to fund their overseas payments. Digital assets such as XRP allow for banks to fund their payments in real-time, and in the process, cut down their dependency on nostro accounts.
As a bridge currency, it can enable liquidity concentration around fewer currency pairs, making cross-border payments more efficient. As evidenced by R3’s trial with XRP for interbank cross-border payments, the use of Ripple and XRP can enable both cost-cutting and revenue opportunities for participating institutions.

BitGo makes XRP more accessible
Ripple’s efforts to build an active ecosystem around its XRP digital asset has been boosted by a deal with virtual currency processor BitGo. Under the programme, BitGo will provide multi-signature security, advanced treasury management and additional enterprise functionality for XRP, which will be integrated into the BitGo platform this year.

The Rippling goes on!

Ripple plans to enlarge the number of exchanges trading XRP. Working with a greater number of exchanges to list XRP is an important step to serve the growing demand for global payments in major and exotic currency corridors. Ripple has previously commented that by using its network and XRP as a bridge asset, banks can save up to 42% on interbank international payments.

“This cost-saving frees up capital to generate revenue opportunities, including new product offerings for high-volume, low-value payments and access to new corridors”, claims Ripple.

The Ripple effect goes on!

Carlo de Meijer

Economist and researcher

Interesting apples and oranges a.k.a. the Dutch Fintech Awards

|18-4-2017 | Pieter de Kiewit

One of my friends who works in human capital development and is a psychologist, explained me once how we can increase our creative output. One of the elements he mentioned was mixing up the way information comes to you and how you digest it. For example, if you are used to create business plans sitting behind your desk and writing, a multi-person brainstorm session might tap into your undiscovered creative potential. And the other way around: if you are talker/listener, try writing for a change.

Bearing this in mind, I always try to combine personal meetings, with calls, with reading, events and so on. For the people who know me: I am always behind on my reading. So much to read, so little time! Events and personal meetings get my creative juices flowing. Today I trained MBA students of RSM in their labour market approach, very inspiring. And I look forward to the Dutch Fintech Awards that are organized shortly.

Dutch FinTech Awards

Being a recruiter with a focus on corporate treasury, I have tried to find the Fintech Awards contenders with a relevance for the corporate treasury community. This is not as obvious as it seems, only a few are. I do not envy the jury of this event. Categorizing the contenders is almost impossible, let alone judging them. Comparing blokchain insurance with video financial services sales and a crowdfunding platform with easy on-line payments, is comparing apples with oranges. One thing is clear: some of the potential award winners are very good at attracting social media attention.

Despite their diversity, each of the companies tells a different inspiring story. Some of them are about cutting edge technology, some of them are about understanding potential clients, others are about smart entrepreneurship. One thing I am sure of is that the level of creativity of the entrepreneurs will be extremely high. I am ready to be inspired and will inform you in my review blog afterwards.

On 21 April the Dutch FinTech Awards will take place in Utrecht. A day with many international keynote speakers, provoking master classes and pitches by the Dutch FinTech 50. Make sure you register today and join this unique opportunity to meet 300 International FinTech stakeholders. Via treasuryXL you can get a discount on the regular ticket. More information

Pieter de Kiewit
Owner Treasurer Search

Treasurers to be the strategic super-heroes for their CFO

Treasurers to be the super-hero for their CFO? We found this article headline on GTNews.com so intriguing that we asked our experts Lionel Pavey and Udo Rademakers to comment on it. According to the article the role of the treasurer has to be re-evaluated due to the fact that deal-making (figures of mergers and acquisitions have increased) is high on the global agenda. Traditionally treasurers focussed on informing the C-Suite and the board and integrated systems and processes after decisions about a deal were made. Treasurers started to address this issue, which led to a new role of the treasurer, in fact a much more strategic role. The treasurer was no longer a risk manager, but also a ‘business change enabler ‘. GTNews states: ‘The treasurer who opens this door is truly aligning themselves to the needs of the chief financial officer (CFO).They’ll be a superhero.’

Expert Lionel Pavey added some valuable information on the 4 different stages of a M&A proces.

Targeting

Examine the different methods of payment – cash, debt, equity
Discretely ascertain interest rate levels if using debt
What are the effects of additional debt on the existing bank covenants and financial ratios
Complete takeover or just buying a business unit or division?

Negotiating

Examine the cashflow forecast of the target
Examine any documentation on outstanding loans
Existing pledges – Letter of Credit, Bank Guarantees, financial contracts, contingent liabilities
Outstanding debtors, creditors, taxes etc.

Closing

Detailing the bank accounts
Either merging the bank accounts or creating new accounts at the time of closing
Agreeing all bank balances and outstanding claims
Receiving detailed cashflow forecast for the first 2-3 months after closing date
Combining the new cashflows with the existing forecasts
Arrange any agreed financing

Integration

Close all existing facilities and services that will be no longer used
Ensure the new data is present in the book keeping system
All counterparties are informed of new bank accounts
All authorized personnel have access to new banking systems

Expert Udo Rademakers states:
The posting at gtnews.com points out where treasurers could add value in M&A activities. Unfortunately, in too many cases, treasurers had been brought into M&A transactions rather late: at a stage where the acquisition already had been concluded and where the treasurer only gets involved in “getting the deal done”.

As pointed out in the article, this is often a missed chance for the company and also for the treasurer of not adding more strategic value. Apart from that, the sooner the treasurer gets on board, the better the company can prepare for this kind of rather complicated transactions. It enabled the treasurer as well to act on a tactical level in order to support the M&A transaction in a cost efficient and well documented way.

What strategic value could the Treasurer bring?

value the target company or the combined entity as a whole based on CF projection models
evaluate the capital mix (cash, debt, equity)
evaluate borrowing capacity/credit lines (low risk, best price)
evaluate the country risk
creating the funding flow overview and analyze this (timing of transactions)
evaluate credit- and forex risk (natural hedging possibilities, consider to pay as much as possible from “restricted countries” in order to decrease your restrained cash)

If the treasurer has been on board for the strategic part, he is well informed and able to manage the tactical part systematical as soon as the effectuation of the transaction takes place.

The treasurer needs to arrange (if applicable):

temporary limit increase with banks
forex transactions (increase of in- and external limits if needed)
time critical payments to agencies, funding parties, seller, capital injections etc. : validate account information, prepare correct timing of the flow (cut off times, correct payment details and descriptions, etc.)
documenting of all transaction in a systematic way and liaise with all in- and external parties involved.

Especially in high demanding environments where one transaction takes place after the other, mistakes will be made and processes might not be well documented. Obviously this could lead to higher risk and additional costs and lots of additional (correcting) work afterwards. Having a well prepared, skilled treasurer on board could avoid this.

Hence the comparison with a superhero…

Conclusion

Involve the treasurer from the first step
Draw up a detailed project plan for M&A and ensure that it is signed off by Board of Directors
Implement project plan for every M&A
Identify all costs linked to M&A
Highlight any cost savings and/or efficiencies

Lionel Pavey

Cash Management and Treasury Specialist

Udo Rademakers

Independent Treasury Consultant & Interim Manager

Instant payments for treasurers

| 31-03-2017 | Alessandro Longoni |

Building on the ideas shared in a previous article about Cash Conversion Cycle on treasuryXL, this piece focuses on the developments that new European laws will bring in the areas of Instant Payments and how this will affect Treasury.

As part of further standardization within the union, European regulators mandated the industry to develop an “instant payments” product aimed to making the funds available on the receiving side “within a maximum execution time of ten seconds”. The SCT Inst scheme has been developed to allow for consumer payments (C2C, C2B) in Euro for the SEPA and will be an optional scheme – meaning that PSPs and Banks are not obliged to join.

Practical Use Cases

From a cash management perspective, Instant Payments open an array of new possibilities for merchants, especially for those operating eCommerce operations. Currently if a customer places an order on a friday late afternoon, the funds are made available (earliest) on monday evening, while the order is most likely processed and delivered by Saturday afternoon. With SCT Inst, if the order is placed on friday at 21:00, the funds will be received (maximum) at 21:00:10 and already available to pay suppliers if needed.

From a treasury perspective, Instant Payments will also allow for more transparency on transactions and easier reconciliation, but time needs to be devoted to update the current tools to facilitate for this. As Instant Payments will gain customer adoption, the incoming payments cash account will be filled with hundreds or thousands of transactions per day, as opposed to one per day coming from your Payment Service Provider. Having direct access and insight in each single transaction will make it easier to reconcile it with the relative order, check the amount and book it in the general ledger, but the sheer number of lines in the system requires current tools to be updated to cope with the increased volume and speed.

Pros and Cons

There are several benefits this new payment method brings to the table, including a strong reduction of working capital trapped to fund operations, however, in order to extract all the benefits, ERP systems need to be updated to check the status of transactions in real-time instead of intervals. Without investing in developing the current tools further, companies risk missing out on the new opportunities to deliver better customer service and create additional efficiencies in cash management.

Alessandro Longoni

Managing Consultant at Proferus

How to combat Payment Fraud

| 29-3-2017 | Mark van de Griendt | sponsored content |

Payment Fraud is one of the biggest threats to a treasurers’ reputation and career path in an organization. One of the most common ways to reduce payment fraud is to reduce human intervention and to increase the levels of automation in payment structures. With cyber-attacks and payment fraud regularly making headlines, treasurers must be vigilant in safeguarding financial assets. Only 19% of treasurers list cybersecurity as a critical concern. By contrast, 45% of CFOs name cybersecurity as a priority, pointing to a significant misalignment in CFO and treasury agendas in this regard (PWC Global, 2017).

That is why it’s really important for treasurers to know what they can do to reduce payment fraud. There are two ways to lower the risk of payment fraud in payment processing:

Increase the level of Straight Through Processing
Implement a Payment Hub

Higher level of Straight Through Processing
Corporates sometimes have hundreds of banking relationships and thousands of bank accounts, all managed manually on spreadsheets. Redesigning these treasury processes based on STP creates an integrated treasury workflow that streamlines processes effectively and provides treasurers with timely access to financial information. No more manual entries, no more errors.

Implementing a Payment Hub
A centralized payment platform combats payment fraud while also ensuring treasurers of having the money they need to manage day-to-day business obligations.

Some key benefits include:

Centralized monitoring and control
Flexibility and efficiency in payments
Reduced banking costs
Global Visibility
Easy access and more transparency

Please refer to our company page on treasuryXL or contact Mark van de Griendt if you’d like to receive more information about reducing payment fraud by a corporate payment hub.

Mark van de Griendt

Cash Management Expert at PowertoPay

Blockchain regulation in the securities industry: Still many unanswered questions!

| 24-3-2017 | Carlo de Meijer |

One of the obstacles for massive adoption of blockchain technology is the lack of clarity from regulators. Regulators world-wide have long time taken a wait-and-see attitude towards blockchain and distributed ledger technology (DLT) (see my Blog “Blockchain and Regulation: do no stiffle …. April 4, 2016). But that is changing. Regulators across the globe have turned their attention and are now considering how existing regulations may (or may not!) accommodate the development of new distributed ledger technologies. This growing interest shows that it is becoming all the more serious for regulators in the securities industry that blockchain is coming to reality and that this asks for a more closer look a this technology.

Since the start of 2017 a number of regulatory organisations including ESMA (EU), FINRA (US) and IOSCO (Global) have launched reports asking for answers to meet the various challenges of blockchain or distributed ledger technology in the securities industry.

“Regulators prepare to address perceived weaknesses or potential risks relating to blockchains in their regulatory frameworks, and be ready to voice any concerns to, or discuss potential DLT benefits with the relevant authorities”.

What have regulators been doing up till now

To keep pace with the developments in the DLT space some regulators have already established dedicated Fintech offices, contact points and hubs. Others launched regulatory sandbox frameworks that enable innovators to experiment with Fintech solutions for financial services (see my Blog, “Blockchain: playing in the Sandbox September 7, 2016”). And there are regulators that have set up labs and accelerator programs to explore how new technologies including DLT can help them better achieve their regulatory objectives.

To give some examples:

Regulators, such as the US Commodity Futures Trading Commission (CFTC) and the US Securities Exchange Commission (SEC), have attempted to incorporate DLT innovations into existing legal and regulatory frameworks. Also, the French Parliament last June approved a law that lets some securities vouchers be issued and exchanged on a DLT.
Others, such as the UK Financial Conduct Authority (FCA), the Swiss Financial Market Supervisory Authority (FINMA), and the Monetary Authority of Singapore (MAS), have created regulatory sandboxes for companies utilizing innovative technologies.

But, as FINRA, ESMA and IOSCO all note in their recent reports, integrating novel DLT products into existing regulatory regimes may prove challenging as DLT continues to develop.

FINRA Report

Early January this year, the US Financial Industry Regulatory Authority (FINRA) published a report titled “Distributed Ledger Technology Implications for the Securities Industry. The FINRA report provides, while structured as only a “request for comments”, an overview of DLT, highlights applications and gives a detailed review of how blockchain technology may impact existing securities regulations affecting dealers and marketplaces.

The report thereby gives a clear picture of the many regulatory considerations for broker dealers that (it says) “market participants may want to consider and regulators will want to have worked out before such infant technologies can be allowed to leave their sandboxes.
US regulatory considerations include issues such as governance, operational structure, network security and regulatory considerations, customer data privacy, trade and order reporting requirements, supervision and surveillance, fees and commissions, customer confirmations and account statements and business continuity planning.

This report is intended to be an “initial contribution to an ongoing dialogue with market participants” about the use of DLT in the securities industry. Accordingly, FINRA is requesting comments from all interested parties regarding all of the areas covered by this paper.

“FINRA welcomes an open dialogue with market participants to help proactively identify and address any potential risks or hurdles in order to tap into the full potential of DLT, while maintaining the core principles of investor protection and market integrity”. FINRA Report

More questions than answers!

The FINRA report doesn’t provide specific guidance for many questions, but it does represent something of a practical checklist of issues that will need to be addressed by regulated securities businesses considering implementing DLT networks more broadly.

To give an idea of the many questions raised:
How would the governance structure be determined? Who would be responsible for the business continuity plan, addressing conflicts of interest? How would errors or omissions on the blockchain be rectified? What type of access will be provided to regulators? In the event of fraud, who covers the cost? How will regulated entities deal with DLT transactions? Who is the custodian? Does the DLT network itself affect the market risk or liquidity of the digital asset? How is access to the data controlled? Which entities are playing what roles. Would dealers become clearing agencies? How is customer information updated for changes? How is the process supervised and tested? And many, many more!!

Possible implications for existing US regulation

Many FINRA rules, as well as some rules implemented by other regulators, such as the Securities and Exchange Commission (SEC), that FINRA is responsible for examining or enforcing with respect to broker-dealers, are potentially implicated by various DLT applications.
For example, a DLT application that seeks to alter clearing arrangements or serve as a source of recordkeeping by broker-dealers may implicate FINRA’s rules related to carrying agreements and books and records requirements. The use of DLT may also have implications for trade and order reporting requirements to the extent it seeks to alter the equity or debt trading process.

Other FINRA rules such as those related to financial condition, verification of assets, anti-money laundering, know-your-customer, supervision and surveillance, fees and commissions, payment to unregistered persons, customer confirmations, materiality impact on business operations, and business continuity plans, also may to be impacted depending on the nature of the DLT application.
The head of the US Commodity Futures Trading Commission Christopher (CFTC) Giancarlo recently said that US fintech policy should take a “do no harm” approach. He added that US regulators should coordinate to “avoid stifling innovation”.

ESMA Report

Early February 2017, the European Securities and Markets Authority (ESMA) published a report regarding distributed ledger technology (DLT). In this report named ”The Distributed Ledger Technology Applied to Securities Markets” ESMA summarizes its position on DLT, with a note that it will continue to monitor this “dynamic” technology and consider whether a regulatory response may become a necessity. It sets out ESMA’s views on DLT, its potential applications, benefits, risks and how it maps to existing EU regulation.
ESMA concluded that regulatory action is premature at this stage, but may not be in the longer term. The report anticipates that early applications of DLT will focus on optimising processes under the current market structure, particularly less automated processes in low volume market segments.

ESMA “has not identified any major impediments in the current European Union regulatory framework that would need to be addressed in the short term to allow for the first applications of DLT to securities markets to emerge in a scenario where DLT would be used to optimise processes within the current market structure”.

Longer term, and based on industry responses to the discussion paper, ESMA in its report notes the potential of the technology to support clearing and settlement activities. Potential risks outlined in the report include cyber-attacks, fraudulent activity, operational risk if errors are disseminated, fair competition issues, and market volatility.

Also ESMA “appreciates that broader legal issues, such as securities ownership, company law, insolvency law or competition/antitrust law may have an impact on the deployment of DLT”.

IOSCO Report

The “IOSCO Research Report on Financial Technology”, also published in February this year by the International Organization of Securities Commissions (IOSCO), highlights the increasingly important intersection between financial technology (Fintech) and securities market regulation. It describes a variety of innovative business models and emerging technologies that are transforming the securities industry including the application of the blockchain technology and shared ledgers.

Risk assessment

The IOSCO report analyses both the opportunities and risks that these new technologies present to investors, securities markets and their regulators. Though the risks differ depending on the technology, certain risks are recurring across the Fintech sector, such as those arising from unlicensed cross-border activity, programing errors in the algorithms that underlie automation, breaches in cyber security, and the failure of investors to understand financial products and services. Another risk is the failure of financial firms to “know-the-client” for reasons of anti-money laundering and fraud control.

“Financial technology regulators may need to develop “highly automated” surveillance and hire technology experts if they want to closely monitor risks posed by blockchain and other distributed ledger technologies” IOSCO Report

Cross border challenge

And there is the cross-border challenge. While tech firms operate globally, regulation is conducted largely within national or sub-national borders. The local nature of regulation may create challenges regarding cross-border supervision and enforcement, whereas regulatory inconsistency across jurisdictions increases the potential for regulatory arbitrage.

“The global nature of Fintech therefore creates challenges that regulators should address through international cooperation and the exchange of information”,according to the report.

DLT and blockchain Regulation: not today!

Regulation of blockchain and distributed ledger technology in the securities industry is not to be expected short term. There are still more questions than answers. Before regulators will be able to address the various issues raised, they must better understand their impact. And that takes time. It is in the securities industry’s interest that they remain in an ongoing dialogue with regulators to get the best of both worlds.