Searching for the right fintech partner

How banks are playing a larger role offering fintech solutions to clients in solving their treasury operational problems

Striving for operational efficiency and increased automation, treasury professionals are looking at their banking partners to come up with new solutions to old problems.

The use of technology is now a major part of the dialogue in treasury management with CFOs and treasurers hopeful that new platforms in the market today can make it easier to improve account reconciliation and liquidity optimization among a number of tedious tasks.

Most banks, however, are still having a difficult time meeting the growing request from clients as their decades-old legacy systems hamper them in making the necessary upgrades to their systems. The answer? Collaboration or more specifically seeking partnerships with the growing list of fintech (financial technology) companies out there who are looking to solve specific treasury pain points.

Already we have seen a number of partnerships between incumbents and fintech firms either through white labeling or direct investment. For example, banks such as Standard Chartered and Deutsche Bank have bought stakes in payment focused companies such as Ripple and ModoPayment respectively over the past several years.

Moreover, institutions such as BNP Paribas have worked on a cash forecasting platform with Cashforce while Bank of America Merrill Lynch sought the help of HighRadius in being able to offer their clients a 90% straight-through reconciliation.

The ability to offer treasury professionals these specialized fintech solutions has required banks to become more nimble in their connectivity relying on application programming interfaces (APIs) to create a technological link to fintech company.

Citi for instance recently announced that it had significantly enhanced its API connectivity abilities across the bank, claiming to have moved US$26 billion worth of transactions for clients since it initiated its treasury API strategy in 2016. Regional banks such as DBS have also been proactive in pivoting their firm to easily connect with fintech companies as the Singaporean-based bank launched the world’s largest API platform with 155 APIs at the time of launch in late 2017.

“There is a lot of learning going around treasury teams across the board. Most of our dialogue is focused on educating our clients. There is a growing conversation within corporate treasury around APIs,” shares Tom Durkin, managing director, global head of digital channel, global transaction services at Bank of America Merrill Lynch. “Essentially an API is another way a client can interact with banks. However, most clients are quite unsure on how to deploy it at the moment.”

For treasury professionals, the bank’s focus on finding fintech solutions can be a relief, as it would alleviate fears of cybersecurity or risk of a treasury professional going directly to a fintech with a potential vulnerable technology setup. “Cybersecurity is definitely top of mind for clients in corporate treasury,” highlights Durkin.

In addition, banks can also act as quality control for fintechs partnering with those that have the capability and vision to be scalable in the future.

“The challenge for us regarding fintechs is implementation and the time it takes to commit to it. Last thing you want to do is commit to implementing a system and then the fintech isn’t around in the next two months,” explains the treasury general manager of an international contractor about the concerns regarding a direct company fintech partnership.

Nevertheless, there are still companies that opt to work with a fintech directly as opposed to going through the bank’s channels particularly in working capital financing. This has given peer-to-peer (P2P) lenders space to expand their presence in regions such as the Asia-Pacific where firms are not only offering companies instant financing, but also higher investment returns for individuals.

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