Unleash fintech’s potential in your treasury
Financial technology (fintech) continues to make rapid advances, no more so than in treasury management. How will this radical transformation play out over the next five to 10 years? Will most functions will be automated, digital and in real-time? And will China be a world leader in this field?
As Vincent Marchand, head of Fintech Lab, Global Cash Management, at BNP Paribas puts it: “The world of the treasurer has changed dramatically, with a significant increase of regulatory requirements since the 2008 financial crisis combined with the exponential development of new technologies in all of their core activities.”
While this will be undoubtedly disruptive, treasury managers recognise fintech’s potential in helping their digital journey and addressing the challenges of seeking more efficient methods to manage their cash flow, forecast working capital needs, mitigate currency risk exposure and improve reconciliation processes for their increasingly globalised operations.
CHINA TAKES THE LEAD
Nowhere is this potential truer than in the Asia-Pacific region, which leads the way in the adoption of fintech solutions. China has now leapfrogged the rest of the world, and leads adoption of fintech solutions with 69% of digitally active consumers using fintech services and products, compared to the average global adoption rate of 33%1.
Fintech has created significant change within China’s traditional finance industry, especially in relation to cash management. In Shanghai, 55% of corporate treasurers who attended a recent BNP Paribas fintech roadshow said they now have specific KPI targets to make their treasury more efficient – with a strong incentive to look at fintech solutions, given the much shorter time to market that they offer. This has led them to consider deploying new technologies like Robotic Process Automation (RPA) to automate processes and reduce human error, as well as to mine the valuable data they currently collect in isolated blocks through machine or deep learning.
The pace of technological change has had a profound impact on the treasurers’ roles as the nature of financial services businesses has changed rapidly, and much of it has shifted online. Payment systems, for instance, are being revolutionised.
“In an environment where payments are instant and delivery is near-instant, the onus is on the corporate treasurer to select which technology to adopt to keep the company relevant,” said Louise Zhang, head of transaction banking, China, BNP Paribas.
It was with this in mind that BNP Paribas and Lianlian Pay have signed an agreement to provide an integrated collections solution for e-commerce businesses in China. The solution streamlines the collections process by consolidating online sales and offline mobile collections onto a single platform.
China is the world’s largest market for mobile payments2 with a total amount of cashless payments expected to reach $45 trillion by 20213, owing to the booming e-commerce, digital payment has been emerging as an important payment channel around the world. As online payment and e-commerce continue to grow, consumers, sellers and suppliers are increasingly asking for a safer, faster and more-reliable platform with a global reach.
A CASHLESS SOCIETY
Fintech also means different things in different places. While Hong Kong still thrives on cash, credit cards and even cheques, digital payments have become an integral part of daily life across regions and generations in mainland China, to the point where cash has almost become an aberration.
This rapid and widespread adoption of fintech in China stems from the entry of tech giants such as Alibaba and Tencent into financial services as a growth strategy. Ant Financial, which launched Alipay in 2004 to support Alibaba’s e-commerce platform Taobao, has grown into the world’s highest valued fintech4. Similarly, Tencent has created a comprehensive financial services ecosystem over the company’s social network, WeChat. Today, Alipay and WeChat Pay are the world's second and third-largest mobile wallet providers5. China’s incumbent banks and financial institutions have also invested massively in new technology to stay relevant.
INNOVATION IS A MUST
While companies have embraced technology to win over retail customers, fintech solutions have only recently entered the corporate treasury world. This is mainly due to the speed of technological change. Treasury departments typically lack the resources to match in order to develop robust in-house solutions or even evaluate external ones. Complicating the situation further, companies also have to navigate constantly evolving regulatory frameworks and cybersecurity concerns that are an inevitable by-product of technological progress.
More importantly, it is challenging to build effective e-commerce applications with technological solutions that act as a bridge to link the speed, flexibility and diversity of online payments with a cautious approach at the back-end that prizes data security.
BNP Paribas’ Fintech Lab team, which was established in 2017, has been working with developers, digital operators and start-ups from around the world to accompany our clients in their digital journey, and help find the right answers and practical solutions6.
Looking at the fintech universe from our clients’ operational viewpoint, a number of solutions serve most corporate or banking functions.
These include ready-to-implement technologies such as cloud computing, chatbots and RPA; maturing technologies such as machine learning and advanced robotics; and those under development, such as deep learning and virtual assistants.
Such technologies will continue to push the more ‘traditional’ B2B industries to connect more directly with end-users, in much the same way as e-commerce has been a game changer in China. But corporate treasures need to be on the front foot.
“There is no one–solution-fits-all fintech-based solutions in the market, but if corporate treasurers do not embrace these emerging technologies, they risk being left behind,” Marchand warned.
More insights are available here:
1 EY FinTech Adoption Index 2017
2 Capgemini and BNP Paribas, World Payments Report 2018
3 Economic Times, 11 Oct 2018, In China, Cash is quickly becoming obsolete
4 What the Largest Global Fintech Can Teach us About What's Next in Financial Services
5 Alipay is world's second largest mobile wallet
6 Innovation: Our response to a changing world