B2B Fintech: Payments, Supply Chain Finance & E-Invoicing ...

B2B Fintech: Payments, Supply Chain Finance & E-Invoicing Guide 2016INSIGHTS INTO THE B2B PAYMENTS, SUPPLY CHAIN FINANCE & E-INVOICING MARKET
B2B Fintech: Payments, Supply Chain Finance & E-Invoicing Guide 2016
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The Guide offers invaluable market insights for professionals in the B2B payments, e-invoicing and supply chain finance space
Friso Spinhoven | Senior Manager | Innopay
This guide, carefully documented, keeps readers informed about the latest developments and opportunities in Fintech, B2B payments, SCF, and e-invoicing
Michiel Steeman | Co-founder | SCF Community
Editors Mirela Amariei Tiberiu Avram Daniela Ciobanu Oana Ifrim Anda Kania Emil Juverdeanu Sebastian Lupu Madalina Mocanu Andreea Nita Adriana Screpnic Mihaela Mihaila
RELEASE VERSION 1.0 MAY 2016 COPYRIGHT © THE PAYPERS BV ALL RIGHTS RESERVED
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B2B Payments, Supply Chain Finance & E-Invoicing Market Guide 2016
INSIGHTS INTO THE B2B PAYMENTS, SUPPLY CHAIN FINANCE & E-INVOICING MARKET
3 B2B FINTECH: PAYMENTS, SUPPLY CHAIN FINANCE & E-INVOICING GUIDE 2016 | INTRODUCTION
Editor’s letter McKinsey started off its “Global Payments 2015: A Healthy
Industry Confronts Disruption” report by outlining the four
potential disruptions that will alter the payments industry during
the next years. First change: nonbank digital entrants will
trans¬form the customer experience, reshaping the payments
and broader financial services landscape. The pressure put on
banks caused by technology giants and innovative startups
reaches a whole new dimension. And although, generally
speaking, startups have not been a significant threat to banks in
the past, McKinsey believes things will be different this time “due
to the nature of the attackers, the prominence of smartphones
as a channel, and rapidly evolving customer expectations”.
The second change is reflected in the modernization of domestic
payments infrastructures. There are approx. 15 countries where
this modernization has already happened and many others plan
to do so in the near future. The third trend intently looks at
digitization in transaction banking. Retail banking has experienced
impressive progress in payments. However, the most interesting
transformation is currently happening in the B2B space as you
will discover in this Guide. Finally, the fourth potential disruption
comes in the form of cross-border payments inefficiencies.
These, in the minds of innovative companies, present themselves
as great opportunities.
To these four trends, I would add several others that have a
tremendous impact on the overall industry for those already
exploring them. For this, we looked at how parties are handling
the changes (and challenges) in technology, organizational
ownership, regulation, M&A, standardization.
• Technology: developing a sense of urgency towards ‘doing
something’ with the available financial technology is essential.
Fintech is already here, so companies must pass the testing
phase towards implementation and solving actual problems.
Fintech companies ‘attack friction’ and leverage innovative
technologies (e.g. mobile apps, application programming
interfaces (APIs), cloud technology, crypto technology, artificial
intelligence and data analytics) to address convenience, user
experience and functionality. They also ‘attack’ the limitations
that originate from traditional banking products and services.
In the case of blockchain, banks actively look for ways to
integrate this technology into their business. Yet, despite the
efforts of financial institutions to find out how much business
they can gain by adopting blockchain technology, it is still not
clear if it’s just a(nother) hype or if it corresponds to similar
interest from corporations.
Also, finally, banks & corporates are starting to make use of their
data and turn that into business profit. The financial services
industry is currently facing a wave of entrepreneurial disruption,
disintermediation, and digital innovation, so, how to face one
of the potentially biggest challenge ever – the information
management?
becomes top priority.
hierarchy, banks & corporations are trying to break down silos
and leverage conversation across departments with the ultimate
result of having ‘one version of the truth’, a ‘single agenda’, a
‘plan’. More often than ever knowing who owns the final decision
of implementing a (commercial) payments solution or a financing
service emerges as top priority. Questions such as “How to gain
management support for implementing certain programs?”,
“Who are the relevant stakeholders to make seamless
payments and finance a reality?” and “What are their role in the
programme?”, etc. are no longer left unanswered.
• Regulation (keeping a watchful eye on regulation & law is
also crucial, but keep in mind that regulation that supports the
growth of your business is already in place.
We often hear that regulation should level the playing field for
all market participants. If this is really the case, find out in this
report. Explore the Guide for up-to-date information about
the PSD2, Prompt Payment Code, Directive 2014/55/EU for
E-invoicing and Procurement, etc.
of value, some of the industry's largest deals during 2015
occurred in the payments segment.
4 B2B FINTECH: PAYMENTS, SUPPLY CHAIN FINANCE & E-INVOICING GUIDE 2016 | INTRODUCTION
The industry's highest value transactions include: Global
Payments' announced the USD 788 million acquisition of
Heartland Payment Systems, a provider of payment processing
services to merchants, PayPal acquired Xoom Corporation, a
digital money transfer provider, Optimal Payments bought Skrill
with USD 1,2 billion, Alibaba.com acquired Paytm for USD 680
million, BBVA acquired Simple for USD 118 million. One of
the most interesting moves, however, might be MasterCard’s
acquisition of VocaLink. 13 banks serve as shareholders
for VocaLink, which have reportedly approved the deal with
MasterCard to enter into the negotiation stage, several media
outlets reported. This deal is projected to be worth GBP 1 billion
(roughly USD 1.4 billion) and would involve the UK`s largest
banks — Barclays, HSBC, Lloyds Banking Group and Royal
Bank of Scotland, which collectively own 80% of VocaLink.
VocaLink processed 1 billion transactions in 2015, which
amounts to half of all UK payments and also processed 90%
of salaries and at least 70% of all household`s bills and state
benefits. The reason why MasterCard is interested in VocaLink
is the desire to scale internationally. So far, MasterCard captures
only 5% of the debit card payments in the UK, thus, it points to a
desire to compete with Visa abroad.
Furthermore, in 2015 we have seen a different dynamic in the
incumbents vs fintechs war. Payments & finance service providers,
banks and corporations are either investing in fintech players,
acquire them, partner them or build from scratch labs/hubs/
accelerators to spur innovation (more on this, later in the Guide).
• Optimisation, standardization: Last, but not least, it’s time to
optimise, standardise, revise.
There is almost a tangible feeling that ‘time is now’ for revamping
old infrastructure, honing processes, enhancing operations,
perking up data analysis, augmenting reporting, etc. You’ve
heard it before, certainly, but it bears repeating. The time for
innovation is now. But (sic!) not before the industry comes to
terms (literally) regarding what supply chain finance actually
means, what is meant by late payment, etc.
In the first part of the guide, we investigate the initiatives in
the field of B2B payments, supply chain finance & e-invoicing
describing various models for digital finance, as presented by key
industry players, either in the form of an exclusive interview or an
elaborate article.
In the second part, you can find in-depth company profiles
that map out key players in the global e-invoicing and supply
chain finance space. The company profiles section comes with
essential information about markets (target group, specialisation,
etc.), proposition (processes facilitated, pricing model, solution
description, etc.), services (dynamic discounting, legal compliance
tools, AP / AR management, standards supported), etc.
This Market Guide, carefully created by The Paypers, puts
together the most recent and relevant information in payments
& finance. The guide brings a fresh perspective about the
industry, puts in focus the potential impact of the latest industry
developments and opportunities, keeping the readers well
informed and always a step ahead.
This guide wouldn’t exist without all the people who matter most:
the authors, our media partners and you, our faithful reader. We
thank you all for your continuous support. This report has been
put together with the utmost care. If you discover that, despite
our efforts, it features information that is unclear or erroneous, we
very much appreciate your feedback using editor@thepaypers.
com email address.
Table of contents
41 42 44
Editor’s Letter Four Trends in B2B Payments and Financing Innovation | Mirela Amariei, Senior Editor, The Paypers
Thought Leadership
B2B payments Exclusive interview with Andrew P. Reid | Managing Director and Head of Cash Management Corporates, EMEA, Global Transaction Banking, Deutsche Bank Blockchain in B2B Payments | Enrico Camerinelli, Senior Analyst, Aite Group The Emerging Internet of Payments | Roger Bass, Founder, CEO and Principal, Traxiant
Blockchain B2B Blockchain-based Payments: Can it Beat the Banks? | Kris Wielens, Senior Consultant, Orchard Finance The Three-Phased Transformation of Supply Chain Finance with Blockchain Technology | Gys Hough, Consultant, Innopay
Innovation in payments & banking Exclusive interview with Wim Raymaekers | Head of Banking Market, SWIFT Exclusive interview with Markus Straußfeld | Head of International Cash Management Sales, UniCredit Making One-Click Finance Possible – Who Are the Relevant Stakeholders and How They Should Work Together | Susie West, CEO and Founder, sharedserviceslink Exclusive interview with Marten Nelson | VP Marketing, Token The Future of Banking Innovation and the Fintech Startups Journey | Falguni Desai, Founder & Managing Director, Future Asia Ventures
The power of data & traceability Track and Trace of Invoices for Working Capital Optimisation | Prof. Dr. Michael Henke, Director, Enterprise Logistics, Fraunhofer Institute Turning Financial Messaging Data into Business Profit – The New Challenge for Financial Institutions | André Casterman, Chief Marketing Officer, INTIX
Commercial payments Gaining Management Support for Your P-Card Programme | Terri Brustad, Manager of Content Services, NAPCP Commercial Payments under the Scrutiny of New Technology | Chris Holmes, Senior Vice President, KAE
Table of contents
70
72
89
Trade & finance Financing International Supply Chains: An Idea Whose Time Has Come | Alexander R. Malaket, Deputy Head of the Executive Committee, ICC Banking Commission Improving Access to Finance for SMEs with the Open RFI Project | Matthijs van Bergen, Researcher SCF, Windesheim & Steven van der Hooft, CEO, Capital Chains If Supply Chain Finance is Supplier-Centric, Financial Supply Chain is Customer-Centric | Magnus Lind, Co-Founder, The Talent Show Supply Chain Finance, Time for SMEs to Take Position | Anita Gerrits, Supply Chain Finance Specialist
E-invoicing Cross-border Invoicing – The Real Challenge for Multinational Projects | Bartomiej Wójtowicz, Product Development Manager, Comarch EDI Why ‘Openness' Should Be The #1 Selection Criteria for Any E-invoicing RFP Process | Jaap Jan, Project Manager, Simplerinvoicing
Regulation & law PSD2 XS2A – a Step Towards Open Banking | Brendan Jones, Evolution Payments Consulting Late Payment – A Perspective | Matthew Davies, Director of Policy and Communications, Asset Based Finance Association The Directive 2014/55/EU for E-invoicing and Procurement: How Public Authorities Should Respond | Charles Bryant, Secretary General, EESPA Regulation and Growth in Alternative Finance – A Contradiction in the Making | Tony Duggan, Founder and Director, IAAF
Part 2 – Company profiles
4 Trends in B2B Payments and Financing Innovation
Mirela Amariei, The Paypers
I lived to see the US electing its first black president, I watched
the 2008 financial crisis crushing many dreams, I witnessed the
creation of Anonymous and Wikileaks, two organisations that
changed the way we, the people (and the organisations) carry
ourselves online. Blockchain is being built right under my curious
eye by someone who’s identity is virtually unknown (or is it?).
I am a young business professional curiously watching how
things unfold and change my life and others forever. And I have
questions. Lots of them. What if one day I will be able to make B2B
payments from my mobile phone enjoying the same convenience I
have in my personal life? And without any fees? And cross-border!
Real-time would be nice, too. Could blockchain help? Are the
incumbent players ready to respond to my needs/requirements?
What do new companies offer? What is the risk working with
them? What can help me identify the best solution? Where are the
innovations heading? What are the use cases for blockchain?
In the sea of options, here are 4 trends that I picked up and that
will make a dent in my history and that of payments & financing
innovation.
Trend no. 1: Fintech One thing I learned while working at The Paypers as an expert on
B2B payments is that I should always ask these three questions:
what was, what is and what will be. And I first looked at the
current payments infrastructure.
to meet new payments needs unleashes new market innovations
but the reality is that they – both old and new infrastructure – will
have to co-exist for a while.
But first things first – how does the current payments infrastructure
stack up compared to the online sectors? For instance, in the UK
Fintech sector, EY experts believe the entire UK industry currently
generates GBP 20 bn in revenue annually. The payments
infrastructure alone accounts for GBP 8.1 bn while the online
sector for GBP 1.9 bln. The former is dominated by established
players (card schemes, issuers, processors, merchant acquirers,
national payment infrastructures) while the latter sees a huge
number of newbies and thus, remains largely fragmented.
What has changed? Everything and nothing at the same time.
Some established fintechs are seeking to deliver a step change
in legacy infrastructure and the need for faster payments has
visibly increased in the B2B segment, yet, Ardent Partners
research still points to ACH, commercial cards & wire transfers
as the fastest growing e-payment methods in 2016.
Also, if you look at a bank’s product portfolio, one will discover a
range of solutions in retail, private, commercial, investment and
transac¬tion banking, along with wealth and asset management
and insurance. However, if you look at the fintech landscape, one
will discover an increasing number of service providers that focus
on improving specific parts of this traditional broad portfolio by
using innovative technology. In other words, fintechs build and
execute specific parts of the banking value chain better, cheaper
and faster than what is currently on offer at banks. Cheaper and
faster sound compelling.
Investors seem to enjoy the show too. Globally, investment in
fintech ventures tripled from USD 4 billion in 2013 to USD 12
billion in 2014, with Europe being the fastest growing region in the
world, according to a report by Accenture.
How banks, corporates & payment schemes react to the inflow of new entrants? More than 90% of bankers expect that fintech will have a
significant impact on the future landscape of banking. Almost a
third believe that fintech will win an equal share or even dominate
the market.
Interestingly, this year’s Davos event was a lot about financial
technology (compared to previous years when it was much more
about banking) and what industry experts picked up was that
when it comes to big banks and payment schemes, they all
consider themselves part of fintech or driving it.
“Biggest Global Banks at Davos: We're All Fintech Innovators
Now” -Bloomberg
The way that is unfolding is that, for instance, big banks started
to consolidate their position in the fintech world through heavy
investments in startups, through acquisition and mergers, via
opening innovation labs/hubs, via high-profile partnerships, etc.
Some examples include: JPMorgan Chase and Banco Santander
announced an investment in ex-banker Blythe Masters’ blockchain
startup. Deutsche Bank invested in PayPal and OnDeck. Bank
of America has a USD 3 billion annual budget for investing in
technology and innovation, a figure that's doubled since 2010.
Visa has disclosed a 10% stake in the fintech unicorn Square
and alongside Nasdaq, Citi, and other industry players invested
USD 30 million in Chain.com, a blockchain developer platform
that serves an enterprise market.
What’s more, all big players – banks, payments providers, card
schemes – poured their money into innovation labs /hubs /
accelerators. The highlights of 2015 are as follows: Visa Europe
launched Visa Europe Collab, its new international innovation
hub and argued that the company is in a unique position to
help innovators develop and scale their ideas. MasterCard, on
the other hand, has selected in February 2016 together with
Silicon Valley Bank four startups to take part in the fourth class
of Commerce.Innovated., a virtual accelerator designed to help
commerce startups grow their businesses. The solutions that will
be built here range from mobile lending to instant authentication
and identity checks. As part of the program, the startups will
gain access to operational expertise from Silicon Valley Bank,
MasterCard, and their respective networks.
Wells Fargo is committed to “help innovative entrepreneurs
overcome challenges and seize opportunities” with investments
of up to USD 500.000 through its Startup Accelerator, a program
focused on startups that create solutions for financial institutions
and enterprise customers. Since its inception in 2014, the
Wells Fargo Startup Accelerator has received applications from
innovative companies in 23 countries.
Peeking through the corporate sector window, Future Asia
Ventures talks about 116 corporate accelerators being live
worldwide. Europe takes the lion’s share with 54 accelerators,
mostly based in the UK and Germany, however, companies are
increasingly launching and adding more accelerators in EMEA
and Asia Pacific locations as well.
No matter what the approach is, the consensus is that there is
a huge need to reduce costs, to align with a digital strategy, not
merely upgrade the IT systems.
“The state of corporate banking IT in the digital business world is
precarious.” – Gartner & BCSG
of digital technology, lack adequate staff, and resources, and are
mostly ignoring nonbank disrupters.
Although concerned, some banks do not appear to be stepping
up to the challenge. A majority of bankers (54%) believe that
banks are either ignoring the issue or that they “talk about
disruption, but are not making changes.”
Make no mistake; banks are actively engaged in digitalization,
and most firms have an IT strategy that is aligned and integrated
with an attendant technology roadmap for implementing a digital
business. However, although 62 % of institutions reported that
they have already started deploying a digital banking roadmap,
only 53% of them have not appointed an executive to define and
lead implementation. This suggests several significant road bumps
are likely to appear during the digital transformation journey.
What’s more, if you look at the relationship between banks and
corporates, things have a different shade of gray. In a 2014
report from EY, 63% of corporates reported product and service
innovation to be a critical part of their relationship with banks.
Mirela Amariei, The Paypers
Yet, those respondents suggested that only 40% of banks
have satisfactory performance levels. Moreover, a more recent
report (September 2015) from Total Solutions and Innopay shows
that only 14% of corporates make use of B2B FinTech solutions
(survey among large corporates in the Netherlands). Another 70%
of the corporates are following the B2B fintech market, but have
not engaged yet. According to the survey, the two main reasons
not to engage are: a lack of sufficient knowledge about and
insight into the impact of using finTech solutions and concerns
about the continuity of the finTech company. Only 12.5% of the
questioned companies state that they do not want to jeopardise
their bank relation.
Trend no. 2: Cross-border payments & B2B commerce 80 % of cross-border payments revenues are B2B, according to
McKinsey. Emerging Asian and Eastern European economies are
set to experience the greatest growth.
So, if the contribution of cross-border payments to total payments
revenue growth will climb from 5 % in 2013-2014 to 14 % in 2014-
2019, there is money to be made and fintech is the front-runner to
help remove some of the frictions.
"As nonbank players increasingly encroach on the traditional
cross-border turf of banks— moving from consumer-to-consumer
to B2B cross-border payments—they will force many banks to
rethink their longstanding approaches to cross-border payments".
– McKinsey
In this scenario of ‘unbundling of the full-service model of banks
into bits and pieces’, the market depicts new names: Traxpay,
Align Commerce, Payoneer, Transpay, Ripple, eeDOCS, Earthport,
Kontox, to name only a few.
Good news though; major banks around the world take action
to improve the customer experience in cross-border payments
dramatically by signing up to SWIFT’s global payments innovation
initiative, announced at the end of December 2015. The +45
participating firms include major transaction banks from Europe,
Asia Pacific, Africa and the Americas.
The goal is to enhance cross-border transactions by leveraging
SWIFT’s messaging platform and global reach.
Trend no. 3: Blockchain Blockchain is the technology underpinning Bitcoin, and one of its
biggest advantages is that it allows two parties to transact without
making use of a central authority of third party intermediaries.
Oversimplifying a bit, it removes huge costs and adds transparency,
speed, and security. Ripple, Ethereum, Monero, Lightning Network,
Amiko Pay, Bitfury and others act as agents of disruption in the
B2B payments world by using blockchain rails.
“Banks foresee benefits for corporations by virtue of the
applications running on the blockchain that will ripple down to
the banks’ corporate clients. Consequently, before launching
any blockchain-related program, a bank must be very clear and
extremely convincing about what is in it for its corporate clients".
- Enrico Camerinelli, senior analyst at Aite Group
Other players ‘rewiring’ the way payments are processed through
the use of blockchain include GoCoin, Blade, GemPay, Gazeebo.
io, etc. as depicted by William Mougayar, author of the book ‘The
Business Blockchain’.
Trend no. 4: Alternative financing According to the ‘2016 UK Alternative Finance Industry Report’
by Nesta and KPGM, the UK online alternative finance industry
grew to GBP 3.2 billion – an 84% increase compared to the GBP
1.74 billion of 2014. In 2015, almost 20,000 British SMEs raised
alternative finance through online channels, receiving GBP 2.2
billion in business funding. The online alternative finance industry
is pushing the needle of market growth, business models, public
awareness, corporate partnerships, institutional funding, product
innovation, international expansion as well as further regulatory
support and policy acceptance.
Among all models, peer-to-peer business lending and invoice
trading are the largest models by volume of the UK online
alternative finance market.
B2B FINTECH: PAYMENTS, SUPPLY CHAIN FINANCE & E-INVOICING GUIDE 2016
In total, nearly GBP 1.49 billion was lent to SMEs in the UK
(a 99% year-on-year growth rate and 194% average growth rate
between 2013 and 2015).
being forged between alternative finance platforms with the likes
of Virgin, Amazon, Uber, Sage, and KPMG. This has certainly
pushed boundaries – merging the traditional corporate world
with the disruptive models of alternative finance.
Invoice trading, the second highest model, continues to be a
popular financing tool for small and medium-sized enterprises
wanting to trade their invoices or receivables at a discount,
in exchange for the speedy procurement of working capital.
However, while the GBP 270 million market size in 2014 grew by
178% compared to 2013, growth from 2014 – 2015 was more
modest, with a 20% growth rate to GBP 325 million.
Zooming in on the strategies banks (and alternative finance
providers, for that matter) use to better position themselves, we
identify a lot of partnerships. Banks teaming up with online lenders.
This is a different dynamic – instead of trying to displace banks,
online lenders decided to strike partnerships. For instance, On
Deck teamed up with JP Morgan Chase and said it will help speed
up the process of offering small business loans to the bank's 4
million customers. Lending Club, another online lender, tied-up
with Citi. Moven partnered marketplace lender CommonBond.
In a game of tongue twisters, American Banker said that fintechs
team up to become more like a bank. I would argue that banks
team up with fintechs to become more like a fintech.
Also, another question arises: what if a corporate want to expand
into more countries? That may mean to establish a physical
presence in each location that is relevant to their client. Could
banks satisfy that need too?
The industry is dynamic, and some companies leapfrogged some
steps, but although the developments are innovative and exciting,
the road ahead is paved with many bumps.
About Mirela Amariei: Crafting large-scale industry reports, carrying out interviews and writing about innovation in payments and fintech are Mirela’s daily treats. As the Senior Editor at The Paypers, she speaks frequently with key thoughts leaders to identify trends and trendsetters. She can be reached at [email protected] and via Linkedin: www.linkedin.com/in/amarieim
About The Paypers: The Paypers is the leading source of news and intelligence for professionals in the payment community worldwide. Our products are aimed at merchants, payment services providers, processors, financial institutions, start-ups, technology vendors and payment professionals and have a special focus on all major trends and developments in payments-related industries including online and mobile payments and banking, ecommerce, e-invoicing, supply chain finance, web fraud & security and many others.
www.thepaypers.com
B2B Payments
13 B2B FINTECH: PAYMENTS, SUPPLY CHAIN FINANCE & E-INVOICING GUIDE 2016 | THOUGHT LEADERSHIP
B2B payment innovation: the beginning of exciting times
Deutsche Bank
Why should banks and corporates invest in real- time payments? For corporates, the benefits stem from the capability for executing
time-sensitive transactions – such as High-Value, critical vendor
or M&A-related payments – while receiving close-to-immediate
proof of execution instead of waiting for the specific entry to be
documented by standard intraday reporting.
For banks to serve client needs, they need to be involved in these
developments, which is why Deutsche Bank and others are helping
develop a Pan-European Instant Payment Solution. For large
banks, involvement in establishing such future payment/collection
platforms is a "revenue loss avoidance" tactic rather than a
"profit creation" one, as they will otherwise lose market share to
disruptors. And, while urgent payments can currently be more
expensive, there may be a regulatory push for banks to provide
real-time payments with no extra charges in the near future.
What are the benefits and challenges of implementing pay-on-behalf-of/collect-on-behalf-of structures? POBO/COBO structures help corporates consolidate cash
flows and rationalise account structures, as well as increasing
purchasing power when negotiating cash management terms
with banks. POBO/COBO simplifies liquidity management, as
cash is centralised through domestic and cross-border cash
concentration. It also allows for streamlined cash management
activities across subsidiaries, as payments and receivables
are bundled in one place (such as a Shared Service Centre)
for execution out of the central account. Improving cash and
liquidity management in these ways reduces credit need and the
operational burden on subsidiaries.
Deutsche Bank’s experience and feasibility studies on POBO/
COBO in Europe over the past four years have shown four kinds
of challenges; market-specific practices, and legal, tax and
operational considerations. In addition, POBO/COBO structures
differ in the status of the underlying account. For POBO, the
ordering account can be a normal operating account in most
jurisdictions but, since funds collected within COBO structures
often relate to different legal entities, the underlying account is
often considered a trust account. This has further implications.
For instance, depending on regional Anti-Money Laundering laws,
an account can contain either own funds of the account holder
or funds that belong to third parties (trust accounts) – not both.
That in turn may require corporates to separate some incoming
transaction flows from the entities flows’ part of the on-behalf-of
structure.
What main friction points in B2B cross-border payments will disappear in the next five years? Developments, driven by regulatory change or facilitated by
technology and solution-based improvements, will ultimately
allow for more frictionless and cost-effective transaction
processing. For example, the Payment Services Directive (to be
updated soon by PSD-2) affected cut-off times and value-dating
habits, and a shift will likely take place in this area to align cross-
border payments in different currencies with the same value-
dating as SEPA payments.
to automated conversion services, such as Deutsche Bank’s
FX4Cash, which offers client ease-of-use, real-time FX rates
and enhanced transaction data. And solutions such as Virtual
Accounts will improve reconciliation and accounting (through the
rationalisation of physical bank accounts across a region).
Retail banking has experienced futuristic leaps in the payments space – now is the time for the same level of transformation and convenience in the B2B space
The industry is poised to apply such innovation to the B2B space – but only through collaboration will this be possible.
Share this story
What bank-core competencies foster innovation and growth through fintech partnerships in the B2B payments space? We have witnessed the effects of the first wave of digitalisation
on daily activities, particularly through smart devices and apps.
Peer-to-peer and C2B processes have already experienced
radical transformation and the industry is poised to apply such
innovation to the B2B space – but only through collaboration
between incumbents and new players will this be possible.
Fintechs have the technical skills and understanding of consumer
behaviour, fail-friendly mindset and regulatory freedom to be
innovative – but in an increasingly competitive landscape that
will see market consolidation over coming years, they need more
than that to survive. Banks, conversely, experience internal and
external obstacles to innovating independently, including legacy
systems, internal siloes, a cautious culture and tighter regulatory
restrictions. But by offering the strength of their established
reputation, global infrastructure, existing client-base and expertise
regarding risk, regulation and treasury needs, banks can support
fintech growth, bring new products to market through such
strategic alliances, and successfully scale-up new offerings.
What are the Bank’s plans for blockchain? Distributed Ledger Technology is not new, but interest around its
potential applications is rising, and opportunities for blockchain
– from fraud prevention and risk reduction to quicker and more
transparent payment flows – cannot be ignored. We are at the
beginning of the blockchain journey, and the ways it will change
business models, processes, and ecosystems, are yet to be
seen, but we predict immense potential up and down the value-
chain. Participants – for example, it was one of the first banks to
test smart contracts for corporate bonds, which was conducted
in-house in collaboration with the DB Labs. Deutsche Bank
recently opened innovation labs in London and Berlin, with a third
just opened in Silicon Valley, which will help the Bank best utilise
new technologies and deepen relationships with start-ups. In a
decade, there will be myriad different blockchain technologies, and
interoperability will be crucial. The Bank is an initial driving member
of blockchain consortium R3 CEV and participated in trials of five
distinct blockchain technologies with other member banks.
About Andrew Reid: Appointed to his current role in 2013, Andrew has been with the Bank for 17 years, within corporate cash management and trade finance. Andrew supports and advises clients in adapting to the new regulatory environment and optimising their treasury operations.
About Deutsche Bank: Deutsche Bank provides commercial and investment banking, retai l banking, transaction banking and asset and wealth management products and services to corporations, governments, institutional investors, businesses, and private individuals. Deutsche Bank is Germany’s leading bank, with a strong position in Europe and a significant presence in the Americas and Asia Pacific.
gtb.db.com
Managing Director and Head of Cash Management Corporates, EMEA, Global Transaction Banking
Blockchain In B2B Payments
out how much business they can gain by adopting blockchain
technology. This hype on the bank side does not correspond
to similar interest from corporations, nor it’s clear whether
blockchain technology creates similar business opportunities
for each side. Yet, a significant roadblock must be removed.
That is, the extremely poor understanding corporate people
have about blockchain. In a January 2016 survey, 95 corporate
executives—66 of whom were supply chain and treasury
managers, with the remaining coming from IT, legal, and sales—
were asked if they were familiar at all with the term “blockchain”.
Over 80% answered “no”. The first step of the journey is thus to
align on terms and definitions. Consider blockchain as a “secured
spreadsheet” that sits in the cloud that multiple parties can review.
Each of the transactions that are a part of it is guaranteed by a
set of cryptographic keys and all transactions are stored in one
database. The blockchain is essentially an enormous database
that runs across a global network of independent computers.
Main characteristics of blockchain Irrevocability: There is an irrevocable trail (i.e., time-stamping)
of all the transactions that have ever been made, which makes
attempts at hacking or fraud unsuccessful.
Title transfer: It allows property whose ownership is controlled
via the blockchain (i.e. physical property such as cars, phones
or houses).
Distributed: The ledger represents the truth because mass
collaboration constantly reconciles, without having the need to
trust because that’s built into the mechanism.
Smart contracts: Perhaps the most relevant blockchain feature,
smart contracts are self-executing contractual states, stored on
the blockchain, which nobody controls and, therefore, everyone
can trust. The code can control and restrict how the data is
accessed and used.
Where do we go from here? A bitcoin that transfers ownership of title of a crypto-currency
can be applied between two parties that exchange goods for
money in business-to-business (B2B) transactions. B2B partners
would best benefit from blockchain-based applications in the
increasingly global B2B payments. There are complexities with
foreign payments that are not experienced in domestic payments,
such as foreign exchange, value-added taxes in certain countries,
interfaces with many clearing and settlement networks, and
the need to understand and apply specific country laws with
regard to payments processing. Knowledge about the status of
payments can be even more important than settling the payment
itself. The status of payments may affect the ability of a buyer
to make a purchase from a seller, depending on the amount of
credit extended by the seller to the purchaser. It may also impact
future pricing provided by the seller to a buyer. For time-critical
payments, knowing the location of a particular transaction in the
payment process allows the payer to take action if the payment is
delayed. The more corporate treasurers know about outgoing and
incoming payments, the better their cash forecasts.
Blockchain and B2B payments This article examines which blockchain drivers best apply to
current B2B payment process elements and intermediaries
– e.g., banks, network providers, clearing and settlement
structures. Rather than revolutionary, the analysis determines
how blockchain supports, improves, and- eventually- replaces
current B2B payments processes (see Figure 1).
Figure 1: Blockchain Features Applied to B2B Payment Process Elements
Source: Aite Group
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instruction from its accounts payable to the bank. This initiates
the transfer of title of currency and a time-stamp makes the
transaction irrevocable. The intermediary bank may enjoy
blockchain’s irrevocability and title transfer to secure the
uniqueness and traceability of the transactions underpinning
the cash transfer. The distributed nature of the blockchain
ledger avoids any delayed centralized control of AML screening,
checking of availability of funds, and clearing, billing, and
reporting activities. All executed operations are validated within.
The ledger offers the extra capability to the bank to swiftly handle
format translations from the client’s accounting system. A smart
contract on the blockchain provides the bank with the capability
to charge transparent and auditable service fees.
The distributed ledger operates as the connectivity software
that the clearing network provides to all trading parties and
intermediaries. The network is also capable of offering time-
stamping services as well as detect transactions that may trigger
the execution of smart contract applications. Format translations
can be easily offered as a value added service.
The beneficiary bank receives notice of an irrevocable transfer of
cash title that the distributed ledger renders valid and immediately
executable. The ledger also streamlines all necessary account
management verifications to validate the payment data. The seller’s
account is immediately credited, and all subsequent regulatory
and accounting reporting is made auditable and irrevocable.
Bank services can be charged via smart contract applications
agreed between the parties. The blockchain enables the seller-
i.e., the B2B payment receiving party- to update the accounts
receivable database with a payment confirmation that becomes
an auditable transaction.
Blockchain is certainly not the panacea for all problems, but the
frequency of applied features to the B2B payment processes
tells, however, that all parties involved could strongly benefit
from this technology without the need for anyone to be removed.
About Enrico Camerinelli: Enrico Camerinelli is a senior analyst at Aite Group specializing in wholesale banking, cash and trade finance, and payments. He brings a strong European focus to Aite Group’s Wholesale Banking practice. Mr. Camerinelli has been widely quoted by publications ranging from American Banker to the Financial Times.
About Aite Group: Aite Group is an independent research and advisory firm focused on business, technology, and regulatory issues and their impact on the financial services industry. With expertise in banking, payments, wealth management, capital markets, and insurance, Aite Group's analysts work with clients as partner, advisor, and catalyst.
www.aitegroup.com
The Emerging Internet of Payments
Traxiant
New offerings have been proliferating in B2B payments, not
to mention financing solutions of various kinds. Their growth,
however, and the shift from paper to electronic, has long been
stymied by a lack of interoperability. Most industry actors see the
need for an industry-scale solution to this problem and believe it
will happen eventually. But fewer are clear on the path to get there.
In the USD 700 trillion of B2B payments globally, connecting
the many buyers, sellers, and providers of payments, financing
and software solutions might seem an impossible task. And
yet, we have the example of the Internet. A framework for
such payments interoperability would also almost inevitably be
standards-based and global. So it’s reasonable to use the term
the “Internet of Payments” (“IoP”) to talk about this. The naming
of such a phenomenon, however, is of course less important
than questions such as “whether”, “what”, “how” and “when”.
Unlike most industry actors, we believe that the conditions for
the IoP to emerge have recently been falling into place. Tactical
business needs are aligning with cloud-based technology
platforms and solution options. And alignment with standards
frameworks, notably around ISO 20022, offers the potential for
faster and wider scaling of such solutions, with lower investment.
The payments solutions that account for most B2B volume
today such as cheque and ACH are commoditized. Their
transaction revenue models don’t support much investment
in next-generation solutions. Basis point revenue streams
from receivables/trade financing, forex and card models, by
contrast, can support such investments. Buyers nowadays don’t
pay much for those services; most, rather, expect to receive
discounts or rebate payments. Thus, a critical driver of revenue
in such businesses is the ability to get suppliers enrolled and
agreeing to pay the relevant fees. This supplier onboarding
process is invariably hard work, especially as you get further
out on the “long tail”. Most new “solutions” being promoted to
suppliers offer benefits of earlier or faster payment. But they are,
from the supplier’s perspective, typically exception processes
and thus, value-subtracting.
solutions are now relatively widely adopted – as indeed are
supplier networks. Increasing competition from financial
institutions but also fintech players makes it ever more important
that providers optimise for adoption and value also on the
supplier side of the equation. Strategically, the requirement here
is for an extensible standards framework and platform that can
connect suppliers globally, across both commodity payment and
value-added trade and financing scenarios.
Tactical solutions, however, are also needed: more narrowly
focused but aligned with the larger strategic goals. One essential
element of such tactical solutions is enabling suppliers to
connect using their existing payments and software solutions.
For “long tail” suppliers, their ability to do so via a low friction,
“consumerized” experience will also matter. In recent years,
cloud solutions and APIs to enable this have become available
for some widely-used financial solutions. No silver bullet will
work for every supplier, instantly. And yet solving the problem for
supplier systems one by one is clearly an approach that won’t
scale. However, by aligning with – and shaping – a standards-
based IoP framework, early movers can start to build network
effects that do scale. Proprietary network effects can and will
drive competitive advantage, especially for early movers, even
when built on top of standards. A broader network effect will
come from the technical openness of the growing IoP ecosystem.
As that happens, industry actors of all kinds will invest in
solutions based on IoP standards so as to get connected.
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to play an important role. How the various “not-Bitcoins”, with
their technical and regulatory benefits, will fare against Bitcoin
itself remains unclear. Standards, such as the “Interledger
Protocol” could play a role, perhaps enabling an “Internet of
Value” layer for the IoP. That said, in global B2B payments,
the “chicken-and-egg” challenges that are inherent in any
new network technology clearly exist. Blockchain adoption as
a purely “back office” or inter-bank technology seems likely
to happen first within narrowly-defined early use cases and
communities. Adding value to pre-existing end-user (buyer-
seller) interactions, like Skype did, may be one plausible early
adoption scenario. “Piggy-backing” on another network layer or
use case, like Paypal’s initial use for eBay payments, is another
way to think about this. Combining all of these may work best:
end user demand can be effective in driving adoption by solution
providers, notably banks in this case.
An Internet of Payments, as it emerges, will reshape the B2B
payments industry, and much more besides. It will likely develop
quite suddenly as a mass phenomenon, much like the Internet in
the mid-nineties. It will create winners and losers. Those who move
early to test, learn, and shape the emerging Internet of Payments
ecosystem and framework will be best positioned to win.
About Roger Bass: Roger Bass is Founder, CEO and Principal of Traxiant. Previously with Intuit for eleven years, he recently led a Network Payments initiative. Other instrumental roles included: the launch of Intuit’s European operations, first online banking solution, SMB Internet group, and the QuickBooks platform. Reach out via: roger@ traxiant.com
About Traxiant: Traxiant provides software and consulting solutions to help financial and technology providers grow their B2B Payments and Financing solutions, and profit from the Internet of Payments. Solutions and areas of expertise include card e-payables, global payments, receivables financing and supplier networks.
www.traxiant.com
B2B Blockchain-based Payments: Can it Beat the Banks?
Orchard Finance
there is an increasing amount of articles about blockchain.
For those who are not yet familiar with this term: it is the
underlying technology behind Bitcoin. The starting point for this
technology was to allow two parties to transfer a token of value
(Bitcoin) from one to another, in a cheap, reliable and fast way.
Three main criteria for it are: the two parties can be anywhere in
the world, there should not be a central authority processing a
transaction, and the same token (Bitcoin) cannot be spent more
than once.
To meet all these criteria, the solution proved to be a distributed
ledger containing all transactions, visible for all participants in
the network. A transaction is approved by consensus, which is
reached by cryptographic encryption. This technology is called
blockchain. Many articles about blockchain are focused on the
way it works (hence, are very technical), but because of the
complex terminology being used, it causes more confusion than
clarity. Perhaps the authors of these articles have been inspired
by former American president Harry S. Truman when he said: ‘If
you can’t convince them, confuse them’.
Instead of focusing on the technology, it is far more interesting to
understand what it can do for businesses. The technology itself
is very powerful and it has the potential to radically transform
how businesses work and how payments are done. If a Bitcoin
can be transferred in such a cheap, fast, reliable manner, why
not a Euro or a Dollar?
The current situation of a ‘real-time payment’ is still depending on
cut off times of banks. The party that initiates the payment sees
the amount deducted from their bank balance, then the receiver
will get the amount some time later. Depending on the sending
and receiving bank this can range from a couple of hours up to
a couple of days. What happens is that the bank of the sender
updates its ledger (the bank balance of the sender), sends the
transaction via (most likely) the SWIFT network to the receiving
bank. Afterwards, the receiving bank receives the transaction,
and updates its ledger (the bank balance of the receiver).
Blockchain payments; how real-time are they? As said before, blockchain is a distributed ledger; a shared
database. All parties involved have access to this database
thus, the participants that are allowed to participate, see the
same version of the truth. This means that if one party wants to
send a token of value to another party, it updates the distributed
ledger. When this update is agreed by the participants, the ‘new’
state of the ledger is accepted. With Bitcoin, the acceptance
is done by miners, validating the transaction via sophisticated
cryptographic encryption. A transaction is fully validated in
approximately 8 minutes.
however, might not be the best blockchain for B2B payments.
There are providers in the market that are building new types
of blockchains that are specifically developed to facilitate
payments within a Supply Chain. This means that payments
can be done, real-time, worldwide, at low cost. Next to the fast,
low-cost payment processing there is another interesting aspect
to blockchain-based payments. By using so-called ‘smart
contracts’ payments can be made conditional.
There are a wide array of situations this can be applied to:
• A payment can be executed in case certain criteria are met.
For example: a container with bananas arrives in the Port of
Rotterdam at an agreed time and by using special scanning
equipment, the quality and quantity are checked and approved.
When these criteria are met, a payment is executed automatically.
• A budget can be allocated and this budget can only be spent
on predefined parties. For instance: a government provides
a rental allowance for individuals with a minimum income.
This allowance can only be spent at a pre-approved landlord.
In case it is not used before a certain moment in time, the
allowance is cancelled.
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• Various parties in a supply chain can all be paid when the end
consumer purchases the product. For example, a consumer
buys a song online. At the moment of purchase, the amount
paid is distributed amongst the band, the producer, the studio
and the record label. All parties are rewarded based on their
added value.
Blockchain-based payments open up many possibilities.
Not only is it possible to trade easier and cheaper, but also
payments can be made smarter. Banks are particularly interested
in this new technology and are closely investigating the potential
it may offer to them. It is exciting times for banks and payment
institutions as with blockchain the real disruption is knocking
on the door. The disruption here is not that things are done a
bit smarter, more efficient or faster. The disruption in payments
is that there is technology available that makes banks, PSPs,
credit card companies redundant. Cutting out these middlemen
by making use of technology that provides the same trust and
robustness (or perhaps even more) will increase the speed of
payments, increase the possibility to trade with each other while
significantly reducing costs.
About Kris Wielens: Kris Wielens is Senior Consultant with Orchard Finance. He has more than a decade experience is (corporate) payments with various fims. He has been active as Head of Strategic Partnerships, EMEA Business Development Manager, Sales Manager and Credit Analyst.
About Orchard Finance: Orchard Finance is a leading independent consultancy and staffing company specialized in the areas of Finance and Treasury. Tailoring to our clients, we offer advisory services, project management and staff ing support. Our professionals have a long standing reputation based on operational and project experience in banking, corporate finance and treasury management & control.
www.orchardfinance.com
The Three-Phased Transformation of Supply Chain Finance with Blockchain Technology
Innopay
At Innopay we saw the early discussions around Bitcoin in 2010
transforming into a discussion about blockchain technology
by 2015. When blockchain was eventually seen as a promising
technology, the discussions transformed to: “So where can we
use it?” Although many contexts for the usage of blockchain
concepts have been discussed, this article specifically discusses
the use of blockchain concepts as a transformative force in
Supply Chain Finance (SCF). SCF, as we broadly define it, is the
management of financial flows in the supply chain which includes
financial processes (transaction processes, data processing,
invoice matching, etc.) and SC financing techniques.
We believe blockchain concepts could fundamentally change
how we organise SCF in the nearby future, but it will take time
before involved stakeholders will have gained the desired
level of common understanding needed to make it a reality.
The fundamental reason behind this is that the benefits of
blockchain only get realised within the context of a network and
the level of usage of a technology within a network is largely
dependent on users’ collective level of understanding.
We predict that the collective understanding comes in phases (as
it is currently unfolding in the banking and insurance industries)
namely: shared database, transactional network and automatable
transactional network. This development of the collective
understanding provides a tidy framework in which we can
describe the abovementioned transformation of SCF.
Phase 1: Setting up shared databases (0-3 years) One of the fundamental e-business process challenges has
always been how do companies cross each other’s organisational
boundaries to allow a secure, dependable and synchronised flow
of goods and transactional data. The most logical means would
be by using a shared database. Currently, blockchain technology
is the de facto instrument for shared database where all the
involved parties can read and write on the database while the
state of the database can be trusted without the involvement of
intermediaries. As the communal understanding – and subsequent
use – of blockchain as a shared database gains traction within the
context of SCF we will see fundamental improvements in essential
processes such as:
• Deducing the current state of invoices;
• Invoice double spending when it comes to financing;
• Insight into goods flows (ownership and arrivals);
• Less administrative steps for goods receipt to activate invoice
sending and subsequent payout;
• Cheap and transparent dispute resolution.
Phase 2: Transactional network (3-5 years) In the development of an understanding of blockchain technology,
the knowledge that a transaction is nothing more or nothing less
than an accepted change to a database is an essential step.
Although this insight may sound straightforward it is counterintuitive
based on the ubiquitousness of the traditional banking payment
and escrow services for transactions in SCF. Their role is seldom
questioned or re-examined. As soon as this insight becomes
common knowledge, the potential of blockchain technologies
within transactions for both financial and ownership of goods
purposes will be understood at a more innovative level.
With blockchain-based transactional networks, any type of
transaction can be directly executed without the need for third
parties. As soon as this functionality becomes part of the collective
understanding of the SCF community, the community can take
advantage of this by reducing complexity, by coordinating
financial information, monetary flows and goods movements into
one transactional network.
the coordination of different transactional flows are limiting
scalability and international breadth of SCF networks. Blockchain
technology can provide elegant solutions to these impediments
and unlock value at an international level by further linking small
SMEs to global corporates and financiers.
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Phase 3: Automatable transactional network (5-7 years) As soon as the SCF community gains communal understanding
of blockchain as a transactional network then the next natural
line of inquiry could be the nature of transaction initiation. During
this inquiry the following components of blockchain technology
will be discovered and the third phase might commence:
• Multi-signature capability – a means of separate entities to
safely and securely state whether an event took place or not;
• Smart contracts – agreements that automatically execute the
change of ownership of funds or goods based on whether an
event took place or not;
• Cryptocurrencies – a set of tokens of a variable but crypto-
graphi cally verifiable amount, which is used for efficient value
transfers.
existing e-mandates or cryptocurrencies, the automatic payment
of invoice amounts or other types of collateral could be initiated
and executed instantaneously and automatically. This will open
the path towards an international SCF network that automatically
creates investment grade financial instruments as a seamless
part of the supply chain process.
Conclusion Although history shows us that we can only have so much
foresight, we see a clear match between the features of blockchain
concepts and SCF: we believe that at some point blockchain will
be a prominent part of SCF. The speed at which SCF will evolve
and innovate will depend on the creativity of its stakeholders
and how fast the common understanding on how to use the
technology will develop. Seeing that blockchain technology has
something compelling to offer at each phase of understanding, we
see rapid developments taking place sooner than later.
About Gys Hough: Gys Hough follows the development of blockchain concepts since 2012 and was involved in shaping several business ideas based on blockchain concepts in the field. He is also involved in the facilitation of various discussions surrounding blockchain applications in the financial industry.
About Innopay: Innopay is an independent consulting company, specialised in online payments, digital identity and e-business. We help our clients, including financial institutions, governments and corporates, to develop the compelling strategies and digital services for consumers and companies that are key for successful competition in a rapidly digitising world.
www.innopay.com
SWIFT
Launched in December 2015 to much anticipation in the industry,
the initiative has received strong backing with more than 50
leading banks already signed up. The Paypers spoke to Wim
Raymaekers, SWIFT’s Head of Banking Market and programme
manager of the global payments innovation initiative, to find out
more about this exciting move.
We often hear that B2B payments are opaque, complex, and risky. Why do you think that is, and where do you think that improvements can be made? Yes, currently when a corporate treasurer sends a request
for a cross-border transaction to his bank, he typically has no
sight on what actually happens with that demand. They often
liken this to a ‘black hole’, saying they have no view on when
payments occur or their final costs. This can lead to problems
with suppliers or end-customers, not to mention increasing
financial risks resulting from payment delays or non-compliance
with regulatory requirements.
I think improvements can be made in three main areas: firstly,
the speed of payments; corporates want fastest payments, so
banks need to be able to guarantee that they are made within
certain timeframe. Secondly, corporates want to know the
exact payment amount that will reach their counterparty – here
banks need to provide transparency on the fees involved and
the amount credited to the creditor. And, thirdly, they want to
be able to track payments; banks need to let corporates know
when payments have been initiated and credited to the creditor's
account to avoid delays in the supply chain or frictions between
supplier and seller.
What are the opportunities for a corporate to leap forward through the use of the cross-border payment industry? Corporates are not in the business of payments, they just want
to buy and sell. Yet they do have to manage their treasury to
make those payments – so a better, faster, more transparent
payment solution is important to them. On top of that, having
a good payment infrastructure benefits your supply chain.
Because if the money does not get to the supplier in time, the
credit line will go up, causing delays on all fronts. So the better
your payment infrastructure is, the stronger and more reliable
your supply chain is.
Designed for the corporate treasurer, SWIFT’s global payments innovation initiative offers an ambitious roadmap for reinventing the correspondent banking model as we know it today. With ever increasing competition from new entrants offering same-day, or even real-time payment facilities, SWIFT is uniting the banking industry to provide corporates with a cross-border payment service that offers greater speed, transparency and predictability.
Correspondent banking rejuvenated
SWIFT is uniting the banking industry to provide corporates with a cross-border payment service that offers greater speed, transparency and predictability.
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What can you tell us about the global payments innovation initiative (gpii), and what are SWIFT’s plans in regard to this initiative? As part of the initiative, SWIFT is working in close collaboration
with the largest transactions banks in the world to enhance
their corporate customers’ cross-border payment experience.
Together we will strive to provide a faster service with upfront
clarity on costs, confirmation of delivery and richer remittance
information data.
We are now working together with the banks to commonly
agree service level agreements (SLAs) to which all the initiative
member banks must comply. The new service will be designed
to address end-customer needs, without compromising banks'
abilities to meet their compliance obligations, market, credit and
liquidity risk requirements.
What is the role of blockchain in this initiative? SWIFT is devoting significant resources to instigate the
opportunities and challenges of deploying blockchain, and
distributed ledger technologies more broadly, on our platform.
While the initiative aims to first make improvements based on the
existing infrastructures, in parallel, we are building a gpii vision
for cross-border payments. This will set out how we will adopt
new technologies in order to ensure corporate customers receive
the best possible payments experience in the near future.
Wim Raymaekers
Head of Banking Market SWIFT
About Wim Raymaekers: Wim Raymaekers leads SWIFT’s banking initiatives worldwide, and is responsible for developing and driving value propositions across the banking community. In this capacity, Wim’s mission is to help banks grow their business, particularly in view of changing customer and market requirements.
About SWIFT: SWIFT is a global member-owned cooperative and the world’s leading provider of secure financial messaging services. We provide our community with a platform for messaging and standards for communicating, and we offer products and services to facilitate access and integration, identification, analysis and financial crime compliance.
www.swift.com
Moving payments into the digital era
UniCredit
Which are UniCredit’s strategies to remain competitive in the B2B cross-border payments space? UniCredit is taking a number of steps to ensure that it offers a highly
competitive portfolio of payments services, including a number of
tools for simplifying cross-border transactions.
In particular, UniCredit has invested considerably in the
Bank Payment Obligation (BPO) – a settlement tool which
enables firms to execute secure transactions, mediated by
partner banks, through a quick and efficient digital process.
When carried out properly, BPOs combine the risk mitigation and
financing advantages of Letters of Credit (LCs) with the digital
speed of open account settlement. This makes them particularly
advantageous for cross-border transactions – especially with
unfamiliar counterparties or those concentrated in a particular
region or industry. Thanks to bank mediation, the risk of non-
payment in such cases is drastically reduced – allowing firms
to take on more business and sell their receivables more easily.
UniCredit has worked hard to bring these benefits to clients in
the most efficient and convenient format possible – offering vast
improvements on LC processing times, which are only set to
increase once the process is fully digitalized. This principle of
fully digitalized processes is also reflected in UniCredit’s virtual
accounts services, which enable clients to consolidate their
bank accounts in a given currency into a single “parent” account.
This can then be divided internally into as many “virtual”
accounts as required – with each account given its own allocated
funds, account number and permissions. Already available
for affiliates’ incoming and outgoing transactions in nearly 50
countries, including the SEPA zone and six CEE markets, this
system generates huge benefits to efficiency, scalability and
transparency – eliminating the need for cash pooling, expediting
the process of opening and closing accounts, and providing a
comprehensive overview of cash flows without sacrificing detail.
Going forward, UniCredit intends to remain at the cutting edge
of B2B cross-border payments with new initiatives such as the
integration of big-data analytics into existing payments services
– offering clients insights based on payments data and other
relevant information.
With increased customer demand to install real- time payment infrastructures, what trends do you see happening right now? The demand for instant payments is part of a wider trend towards
greater speed and efficiency in the industry. This is particularly
notable in ecommerce, where firms are looking to provide
increasingly rapid delivery services – with next-day and even
same-day delivery now possible. The use of digital technology to
expedite routine processes is becoming more and more prevalent,
with clients increasingly basing their expectations on their
experiences in the retail sector. UniCredit is keen to play its part
in this development, and is already implementing real-time rates
for instant payments – including for cross-border transactions –
ahead of the November 2017 implementation date.
How has UniCredit adapted to the digitalisation of the transaction banking industry? UniCredit has established itself as a frontrunner in the
development of key advances such as the BPO and virtual
accounts, and continues to search for new and innovative ways
to leverage technology for the benefit of its clients. To this end,
it has taken a number of steps to ensure continued innovation
– with product development teams harnessing the expertise of
traditional banking experts and technology specialists, along
with a wide range of external perspectives.
This has already seen blockchain technology become a reality
for custody services clients, while virtual accounts technology
is being supplemented by CAMT messages – enhancing
standardisation, even beyond the SEPA zone, with automated
reconciliation between banks and corporates.
The field of payments is undergoing a period of transformation as digitalisation paves the way for greater speed and efficiency
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including its IT solutions provider in client meetings. This enables
UniCredit to adapt its solutions to clients’ individual technological
requirements, rather than expecting them to adapt to accommo-
date the solution.
How do you support your CEE-based clients in their efforts to optimise working capital? UniCredit offers its CEE-based clients a full range of support for
their working capital optimisation programmes – having been the
first in Russia, Bulgaria and Croatia to offer classic services such
as cross-border cash pooling. UniCredit also offers unrivalled
BPO coverage, with the instrument already available in Bulgaria
and Romania. In terms of approach, we encourage firms to avoid
the ‘silo’ mindset of asking how they can benefit from individual
tools, such as receivables finance or approved payables finance
– instead promoting a focus on overarching short-, mid- and
long-term goals. Mostly it turns out that short-term liquidity
generation is not corporates’ main concern – especially given the
abundance of liquidity in today’s market. Other factors, however,
such as risk mitigation, supply-chain stability and balance-sheet
optimisation, almost always figure in their plans – demanding
a holistic programme for working capital optimisation. This, of
course, also means being prepared for the eventuality of liquidity
suddenly or gradually drying up.
In the face of fintech disruption, which areas can banks capitalise on? Fintech companies certainly bring new impulses to the transaction
banking sector, but banks almost always excel by capitalising
on their existing strengths – drawing on their holistic financial
expertise and their status as trusted and highly regulated
partners to corporate clients. These strengths can, to a certain
extent, be amplified through digitalisation within banks –
translating greater efficiency into greater convenience for clients.
Even more promising, however, is the potential for co-operation
between banks and specialist technology companies, with banks
combining their core strengths and broad client base with fintech
independence and nimbleness to create the ideal conditions for
innovation.
About Markus Straußfeld: Since 2005, Markus Straußfeld has been Head of International Cash Management Sales at UniCredit, responsible for cash management and eBanking sales to large and multi-national organisations in Europe, the US and Asia.
About UniCredit: UniCredit is a bank with a substantial footprint in Europe and an extensive international network of branches, representative offices, and correspondent banks – enabling it to follow its clients wherever they go. Its payments services come under the Global Transaction Banking (GTB) unit.
www.gtb.unicredit.eu
Making One-Click Finance Possible – Who Are the Relevant Stakeholders and How They Should Work Together
sharedserviceslink
There are 6 stakeholders in your supplier financing programme
(SFP). This article examines each of the groups and what their
contribution to the SFP is.
Accounts Payable: In recent years, the AP function has nudged its way to the front
of the crowd, becoming the owner of most SFPs. This is an
interesting development, as the owner in the past was Treasury.
This shift has come because of the evolution in invoice
processing technology. Ten years ago, AP’s focus was to (slowly)
pay paper invoices. Since then, most multi-nationals have
implemented e-invoicing. Sizeable volumes of invoices are now
received electronically, meaning invoices are processed, posted
and paid quicker. And whether or not AP realised it at the time,
the scene was being set for something greater to unfold: early
pay programmes.
Accounts Payable’s contribution: AP teams have become experts in onboarding suppliers. This
expertise was established during earlier e-invoicing or P-card
programmes. Supplier onboarding is complicated but after a
few rounds of reaching out and asking suppliers to change
something, you soon become proficient in onboarding. AP has
been driven to become expert in supplier onboarding, as the
financial gain relies on supplier engagement. This positions AP
to own the supplier onboarding process for your SFP.
Procurement: Whereas AP owns the onboarding process, Procurement
will own the actual relationship with suppliers, which means
owning the message contained in the supplier communication.
Suppliers listen to Procurement and see it as the key point of
contact. Procurement can help make the SFP more successful
by drafting, and signing off on, clever messaging.
Procurement’s contribution: Procurement also owns the assessment of supplier risk –
assessing each supplier’s financial risk, year-end, and the
suitable rate that should be applied (given their credit history,
etc.). Forensic research into each supplier will further your
understanding of the opportunities and risk, and the effect on
the return.
IT: You may decide to use your own cash or a third party’s cash.
Either way, technology will be involved. You will want IT brought
into the project early to understand macro considerations
like security, connectivity and compatibility. IT will likely leave
business, process and functional requirements to AP, Treasury
and Procurement.
IT’s contribution: SFP technologies have been on the market for years. They are
developing, and becoming more varied. It’s likely that someone
in the IT team has installed a SFP tool before. Make sure this
person sits on the team. Also make this program a priority. SFPs
will not drain IT (wo)man days, so it need not compete with more
demanding IT initiatives. Work with someone in IT that ‘gets’ this,
and can approve on security, etc., at a quick pace.
Treasury: Although Treasury was historically the owner and leader of SFPs,
it has taken on the role of collaborator in recent years, offering
crucial perspective regarding the larger levers that should or
shouldn’t be pulled, given the company’s cash position.
Treasury’s contribution: Treasury understands the flow of cash and its real cost and
opportunity to the business. Because of this, it is well placed to
regularly assess which approach to take – is it better to use the
company’s own cash, use a third party’s cash (and if so, which
party), or to stall on early payments altogether. Treasury has a
360º view of the company’s strategic aims, the balance sheet,
the bank account, real-time rates, and alternative rates through
alternative methods, as well as what's most important given
where the company is in its financial year. Treasury is the brains
behind the SFP.
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C-Suite: The CFO needs to back your project, and this support must
be visible. It is important to educate them on the SFP early by
presenting them with relevant case studies you have gathered
and the possible business case.
C-Suite contribution: They will need your direction, but the CFO and CPO will add
panache to your SFP. The ‘signature’ on the comms piece sent to
suppliers should be theirs. If any buyer in the business becomes
concerned about this programme, the C-Suite needs to have
a response at hand. To realise the significant savings that can
come from your SFP, your C-Suite must be ready to provide the
required PR.
Suppliers: Buyers rarely push back against SFPs because a) it’s optional
for suppliers and b) it’s attractive for suppliers. However, getting
the suppliers to engage is instrumental, and makes the supplier
a key stakeholder.
Supplier contribution: Success. Without their participation, your business case is a flop.
So make sure they understand what the SFP is, what’s in it for
them, what they need to do, who they can reach out to with
questions or concerns, and that participation in SFP inevitably
qualifies them as a preferred supplier.
Conclusion: Get the first five stakeholders onboard early, at concept stage,
so they feel supportive of the SFP’s direction and purpose, and
ask them how involved they would like to be, given their role.
About Susie West: Susie West is the CEO and Founder at sharedserviceslink, and proudly labels herself as a shared services geek. She has been in the shared services industry since 1998. In 2007 she set up sharedserviceslink, a leading global business community for professionals looking to improve performance in shared services. Her central aim is to help individuals, companies and the market mature through the sharing and consumption of (mostly peer generated) best practice information.
About sharedserviceslink: sharedserviceslink is a business community for professionals working in shared services. sharederserviceslink is viewed as trusted advisors to this market because it offers exceptional content, connection, insight and overall value.
www.sharedserviceslink.com
About the company Token provides digital payment solutions for banks and their clients to deliver instant, end-to-end secure and frictionless payments worldwide. The solution addresses the key concerns of PSD2: security, disintermediation and lack of revenue.
www.token.io
Token
The next generation of payments infrastructure will, first of all, help banks open up.
What drives real-time payments infrastructure adoption in the US vs EU? A number of valuable business cases drive the adoption of real-
time payments infrastructure. Both consumers and businesses
expect funds to be instantly available during a payment
transaction. 25 years ago, the invention of the Worldwide Web
allowed us to share data instantly and globally. Exchanging value
should be just as easy and fast as moving information, but for
a number of reasons this hasn’t yet happened. While there are
regional real-time payments solutions, the US and many parts
of Europe are still lagging. But there is hope – the Feds in the
US and the ECB have launched real-time payments initiatives.
Why did Token choose to leverage the bank’s existing ledger instead of using blockchain? The main reasons were that we found the bank’s ledger to
perform pretty well in most cases and to leverage existing
infrastructure typically reduces the complexity of deployment
and, therefore, cost. It was simply a cost-benefit analysis.
There are many interesting use cases for distributed ledgers
and for some of our functions and in some situations it makes
sense. That’s why we designed the solution with distributed
ledgers being optional.
What is the value proposition for European banks by integrating Token? Token solves the main issues banks are facing in terms of
PSD2: security, disintermediation and the economics. First, you
can think of Token as a PSD2 firewall that protects the bank
infrastructure from poorly behaving third parties. Second, Token
retains the bank’s customer experience even when accessed by
third parties. Last, we allow banks to offer value-added services
that generate incremental net revenue.
The Future of Banking Innovation and the Fintech Startups Journey
Future Asia Ventures
The financial services sector has become the poster child for
corporate innovation. Over the last 5 years, banks have been
investigating and experimenting with several new financial
technologies in the crowd funding, trade processing, lending,
and wealth management areas. These experiments have come
in different shapes and sizes. Based on our research, we know
21 banks that have launched accelerator programs around the
world. Other banks have launched pre-accelerators, incubators,
and labs.
As a research & advisory firm, we regularly speak with many
corporations, startups and venture investors. We are constantly
learning about the landscape. Here are 5 perspectives we would
like to share:
1. Fintech is old, but the market conditions have never been better Most experienced financial sector professionals understand that
this recent wave of fintech startups is just that – a wave. Fintech
is a new term that captures a large category of existing and
growing technologies which involve transaction processing, data
and record keeping. Fintech companies have been innovating
since the 1950s. The last 60 years produced ATMs, credit cards,
online banking and online stock investing, to name only a few.
Innovation in fintech is nothing new. What is new is the explosion
of startups in the last six years. There are now approximately
6,000 fintech startups. The playing field is crowded and that’s
because the opportunity to innovate has never been greater.
The combination of cheap capital, a dry period in bank innovation
and a credit crisis, followed by heavy regulation, created the
right environment for startups to rise. There has never been a
better time to be an entrepreneur.
2. Regulation matters It might sound obvious, but regulatory rules and compliance are
a very important part of the startup journey for fintech founders.
This makes fintech different from other startup sectors.
Founders in fintech are generally a decade or more experienced
than their peers. Regulation is often an entry barrier because
you need to be licensed by regulatory bodies to do business in
each jurisdiction. For startups that want to expand, compliance
is mandatory and expensive. The financial system, for good
reason, doesn’t tolerate risk. As a result, founders need to
cooperate with regulators, budget for long waiting periods, find
strategic partnerships that help their growth efforts and be in this
for the long haul. Fintech is marathon, not a sprint.
3. Innovation can’t be measured When speaking

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