Will treasurers burst the FinTechs' bubble?

Jul 13th 2017 |

SWIFT, in conjunction with EuroFinance, recently surveyed nearly 300 large corporates worldwide to understand the key pain points they face when making cross-border payments and what areas they would like to see developed and improved in the future. The results of this study will shortly be released as a white paper, but we can give you a sneak preview of one surprising finding.

Arguably the most significant trend in corporate treasury of the past few years is the rise of technologies with the potential to solve the most enduring treasury problems: those of scattered data, slow transactions and poor visibility. Nowhere has technological development been more evident than in “payments” – in all the meanings of that word, from underlying bank infrastructure, to e-Commerce platforms to payment channel aggregators. There are mature but new digital platforms; there are initiatives from the core providers like SWIFT, and of course there are dozens and dozens of new so-called FinTech players offering their version of “payments” to particular client and market types.

So treasurers taking part in the survey were asked, “Are you using or investigating alternative providers other than your current bank(s) to make cross-border payments?”. They were given four possible answers:

• We have no plans to use alternative provider(s)

• We are considering to use alternative provider(s)

• Currently actively investigating alternative provider(s)

• We are already using alternative provider(s)

• Don't know

And much to everyone’s initial surprise, 56% replied that there had no plans to use alternative providers. Just 22% were considering alternative providers – but not currently and actively. A mere 8% were currently and actively considering them and another 8% were actually using an alternative provider today. A slightly worrying 7% didn’t know (the total exceeds 100% because of rounding).

This looks like bad news for FinTechs and good news for incumbent banks and infrastructure providers. And talking to treasurers raises the same suspicion. When interviewed, treasurers tend to have the same view of technology as the rest of us: I don’t really care what it is called or how it works as long as it gives me what I want. Today, most of us don’t care how our cars work, but decades ago, we had to know. It was the same with computers.

So yes, treasurers need to understand the problems that need to be solved, and these can be technical issues of messaging protocols and data formats; and yes, they need to have an overview of innovations in their areas of expertise to ensure that they can help their companies make the right choices.

But ultimately, treasury does not want to be managing a “solution stack” of different software packages, it just wants a faster, cheaper and more transparent transaction system. Ideally, for simplicity’s sake, that comes through their relationship banks, or plugs into them, does not require much in the way of re-development of their own internal systems, and works.

Right now, the treasury space is witness to an explosion of new technology providers, each with their own software solution. Most are tiny, most will disappear through consolidation or failure. Treasurers know this. At the same time the banks are responding with their own initiatives in conjunction with new tech players, SWIFT (with GPI and beyond) and in some cases each other with the creation of new payment banking networks, like PayCommerce and Earthport.

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