Flying the Fintech Kite
By Helen Sanders, Editor
Technology innovation has always been intrinsic to the changing role of treasury, and been instrumental in creating opportunities for enhanced efficiency, control and capacity building. In some cases, such as electronic banking, technology has been delivered by banks while others, such as treasury management, payment, collection systems and some trading portals, have been developed by third party technology companies. As Bruno Mellado, Head of International Payments & Collections, BNP Paribas comments,
“Fintech is not new for treasurers, although the name has been coined relatively recently: treasurers have benefitted from innovations by banks and technology vendors and the partnerships between them, over many years."
If you were to believe much of the rhetoric that has circulated over the past three years or so, however, you would think that financial technology was invented in around 2014, discarding two or more decades of treasury technology evolution to gaze starry-eyed at new ‘fintech’ companies with their ‘disruptive’ technologies, edgy branding and designer casual dress code. Today, however, the rhetoric is starting to wane, with more sensible conversations now taking place about the role and potential of new technologies. In reality, these conversations are far more exciting than the somewhat vacuous claims of a brave new technology world in which the ‘little guys’ break down the ‘establishment’ (a direct quote from a fintech CEO).
Rejection of disruption?
‘Disruptive’ is the term most frequently applied not necessarily to new technology, but new deployments of technology, of which Uber is often given as an example. In payments technology too, PSD2 (the second payment services directive) seems to promise a new generation of competitive payment offerings to challenge existing players and practices. However, as Uber’s experience illustrates, with the recent (and possibly temporary) decision not to renew Uber’s license to operate in London, the window during which a company can play outside the status quo is short, and soon enough, it becomes clear that everyone, emerging or incumbent, needs to play by the same rules. Similarly, there are undoubtedly new payment technologies and models emerging which are creating significant new opportunities, particularly in regions such as Asia and Africa where mobile solutions in particular are proliferating and the pace of innovation is fastest. However, these solutions are typically not destroying an existing model, but creating a new paradigm without the hindrance of legacy technologies. Corporate treasurers and finance managers’ objectives are not looking to be ‘disrupted’, with its implications of uncertainty and fundamental change, but instead to fulfil their roles more efficiently, cost-effectively and securely. Paul Camp, Global Head of GLCM-FIG & GTRF-FIG, and Global Head of GLCM Business Transformation, HSBC outlines,
“Two of the key drivers of innovation are: evolving customer demand coupled with the arrival of significant new technologies. Corporate treasurers and finance managers are always looking for ways to improve efficiency, increase revenues, enhance information flows and optimise risk management. These demands have become particularly acute over the past decade, particularly given the promise of new technologies.”
Luc Belpaire, Director of Product – Payments, FIS suggests,
“The continuing era of cyber-crime, the growth in demand for simpler, easier to use technology, and the desire for real-time information have been a few of the primary factors driving the introduction of new solutions. Organisations are placing a higher value than ever on secure and powerful, yet easy to implement technology – that combination, while conceptually straight-forward, hasn’t always been easy for solution providers to deliver.”
So how should we perceive ‘disruption’ in a corporate treasury and finance context, and what could it mean in practice? Bruno Mellado, BNP Paribas says,
“There is a great deal of talk about the disruptive potential of new technology, but it can be quite difficult to define what this means in practice. In my mind, disruption in this industry is really in the combination of a new culture, new technologies, new money and evolving regulation, which is accelerating innovation and change at a far faster rate than we have seen in the past.”
“Triggered by the global financial crisis and to some degree an element of complacency in the industry, we have seen a far more rapid pace of change, new financing for fintech ventures, and a growing culture of entrepreneurship which has been less apparent in transaction banking in the past.”