Treasury's greatest challenges and opportunities in 2018



Do cryptocurrencies have a role to play in the future of treasury management?


As one all-time high in its value rapidly succeeds another, bitcoin’s rise in value has been nothing short of meteoric this year.  On August 17, the digital currency charged past the $4,400 barrier, meaning that its total value went above that of payment giant PayPal.

The currency is moving out of the realms of the dark web and into the light as it becomes increasingly accepted in the mainstream. There are several benefits to treasurers using cryptocurrencies. These include avoiding paying large transactions fees to banks, immediate payments and the ability for transactions to be kept open or private, so the business interests can be still followed. If cryptocurrencies are to enter widespread usage by businesses they must demonstrate superiority over current payment technology, such SWIFT, in security, speed or scalability. But as new cyrptocurrencies and blockchain systems, the technology cryptocurrencies rest on, are being brought to market at a rate of knots, it seems like this is could soon be a reality.

Cryptocurrencies will gradually creep into corporations as finance departments receive inquiries from suppliers or partners asking, “Can we pay your invoice in Bitcoin?”, predicts Gabriel Dusil, co-founder of blockchain technology incubator Adel. “As Bitcoin moves into the mainstream in the next three to ten years, then inquiries will follow. Bitcoin will be just another method of commerce to settle transactions,” he argues. Cryptocurrencies provide businesses with the ability to move assets outside of the normal banking regulatory framework, explains David Putts, chairman and managing director of Billon, a Polish fintech that encrypts everyday currency. You can see the benefit of this when it comes to foreign exchange. “Cryptocurrencies can definitely help treasury manage foreign exchange (FX) risks. You can use blockchain to do real time hedges in FX,” Tim de Knegt, treasurer and manager of strategic finance and treasury, Port of Rotterdam tells bobsguide.

We are reducing bank transfer costs to 0%. This means those that were previously financially excluded can now be included

Gabriel Dusil, Co-Founder of Blockchain Technology Incubator Adel

“Some banks are enticed by the potential operational benefits of using the secure messaging technology behind a cryptocurrency, but as the technology is linked to the cryptocurrency, banks have to trade off the operational benefits that the technology may provide against the added cost of needing to buy and sell a cryptocurrency to make a transaction,” says Putts. “Therefore, the benefits are low when dealing with efficient ‘corridors’ such as USA and Europe, but higher when transacting with Zimbabwe,” he adds.

A threat to the status quo

There is something undeniably anarchistic about cryptocurrencies, which has made some financial institutions reluctant to embrace them and adds to both the bitcoin opportunities and risks. This is not because it has a reputation for being used by criminals, it is due to transactions being anonymous. The anonymity of cryptocurrencies is a common misunderstanding. The technology they are based on – blockchain – permanently retains all information attached to any transaction. If law enforcers have adequate technical expertise, the associated data can create a forensic trail that can suddenly make a criminal’s entire financial history public information. This is how the Federal Bureau of Investigation (FBI) arrested Ross Ulbricht in 2013, a 31-year-old American who created Silk Road, a bitcoin cryptocurrency market facilitating the sale of $1bn in illegal drugs. There are other ways that the use of cryptocurrencies challenges the status quo – businesses no longer need to use mainstream financial regulatory frameworks. “Some aspects of blockchain (the technology that cryptocurrencies are built on) ideology conflicts with corporate culture,” says Dusil. “[It] advocates decentralised governance where corporations want to centralise that function,” he adds. Blockchain technology also brings up questions of open source versus proprietary solutions; public versus private data; open versus encrypted data. “It’s all about finding a niche where blockchain can shine. If the leaders of corporations can address the cultural challenges and effectively implement change management, then their world opens to a paradigm shift in thinking,” argues Dusil.

Banks are shedding their reservations

Some banks are leading the way in this shift. In the last month, several of the world’s central banks are overcoming their reservations and have recently come out in favour of the cryptocurrency. In its latest budget in May, the Australian government agreed that bitcoin would be treated as money in Australia instead of an intangible asset from July 1, exempting the virtual currency from goods and services tax and ending the double taxation of bitcoin trading that was previously imposed during transactions, firstly on the product being bought and then on the bitcoin itself. The Czech National Bank outlined its attitude to bitcoin and other digital currencies on its website. It argued that bitcoin was “negligible in its size and scope” and that banks have no reason to fear either.

A relentless advance

Whether this currency will continue to be negligible in size remains to be seen. Bitcoin’s relentless advance hasn’t been upset by a new version of the cryptocurrency – dubbed bitcoin cash – being spun off earlier this month in reaction to plans for speeding up trade execution times. The so-called ‘bitcoin fork’ – an ideological clash that saw a subset of the currency’s community breaking away from the software it employs – was expected to detract from bitcoin’s value. Fat chance: it seems only to have provoked its further dramatic expansion. The fast-paced tech world is seeing a high-level amount of innovation around digital currencies and the blockchain technology they sit on, meaning the scope of cryptocurrencies is expected to grow. One example of this is Ardor. It is a cryptocurrency built on a new a blockchain-as-a-service platform that bypasses a lot of the common issues when creating a blockchain ecosystem as well as securing it with enough nodes. It uses features such as decentralised phasing, voting, and trading. Not only can this currency be bought and sold but it also operates as a scalable blockchain platform that can be used by businesses. “Ardor can be easily adapted to support any blockchain based application. Being written in Java makes it especially corporate-friendly and simple to extend,” Lior Yaffe, Ardor’s core developer and senior developer and managing director of tech firm Jelurida, tells GTNews.

One of the key benefits to making business payments using cryptocurrencies is that it cuts out banks in the transaction completely, avoiding large transaction fees. Payments can also get transferred immediately anywhere in the world. While transactions are generally free, conversions between fiat and cryptocurrency are not. These are often not included in the bitcoin exchange rates shown on bitcoin exchnage rate charts. As of March 21, 2017, Coinbase, a mainstream digital asset exchange website, announced conversion fees will be paid by customers. “Fees will be assigned dynamically based on the current network conditions and will be paid by customers when they send an on-chain transaction. Transactions between Coinbase accounts will continue to be off-chain and free,” states the cryptocurrency exchange website. The base conversion fee when using a debit or credit card is 3.99% for North America, Australia, Europe and the UK, for example. Putts is the chairman of Billon, a Polish e-money transfer start-up which allows customers to transfer money, withdraw cash from a cash machine and pay bills by mobile. He argues Billon has a solution more cost-effective than bitcoin cryptocurrency. “We are reducing bank transfer costs to 0%. This means those that were previously financially excluded can now be included,” he tells GTNews. “When using cryptocurrency, people haven’t completely eliminated the costs. They have reduced it. With a cryptocurrency system, you can directly move money around the world which is great but the fundamental challenge is that you need a whole ecosystem built to manage cryptocurrency,” he argues. For example, bitcoin has hundreds of computers around the world that are “bitcoin mining” and all of them require bitcoin mining hardware.


Can robots and data stop banks terror financing?


Buying a new printer from ISIS is probably not how many people envision their stationary shopping proceeding. But it was only a month ago that the FBI announced that it had found a senior Islamic State (ISIS) official sent money to an alleged operative based in the US via a global financial network that used fake eBay sales to mask payments. US citizen Mohamed Elshinawy allegedly pledged allegiance to the Islamic terrorist group and received about $8,700 from the organisation through PayPal under the cover of fake computer printer sales, it was reported. This is a timely reminder about how vulnerable businesses can be to terrorist financing. Terror financing is moving clean money to a criminal destination. Whereas money laundering is moving criminal money to a clean destination.

It’s now less than a month until the UK’s Criminal Finances Act comes into force on September 30. The regulations give the UK’s tax, payments and customs authority, HMRC, a global mandate to pursue the possible facilitation of terror financing, money laundering and tax evasion anywhere in the world should it involve a UK tax liability. “The Criminal Finances Act is extremely far-reaching and will put the spotlight on a huge range of businesses, meaning many people have a lot of work to do in less than a month to ensure their firm is compliant,” says Marie Barber, managing director of tax consulting and accounting services at Duff & Phelps. “This new legislation is not dissimilar to other legislation designed to influence corporate behaviour, such as the Bribery Act and the GDPR, and as such requires a similar approach to assess risk and put measures in place to prevent the targeted activity from occurring,” she continues. Corporations already face a host of anti-money laundering regulations which vary by jurisdiction. Key legislation includes The Patriot Act 2001 in the USA, and the Money Laundering Regulations 2017 in the UK. Companies risk facing heavy penalties and restrictions for any breaches.

Terrorist atrocities are now being conducted with barely any capital; transactions for the hire of a van or purchase of a knife, for example, would not normally raise alarm bells

High tech terror

As the eBay case shows, groups like ISIS are increasingly using advanced technology to accomplish their goals. ThetaRay is an algorithm-based anomaly detection company, established to allow financial institutions to uncover previously undetectable threats in large amounts of unstructured data. James Heinzman, ThetaRay’s executive vice president of financial services solutions, explains that one way terrorists are funding their activities, for example, is by hacking into tens of thousands of online bank accounts and transferring small amounts into their own account. These amounts are so small that they are difficult to detect or trace, but when taken in aggregate they can amount to large sums. In addition, increasing cases of ‘lone wolf’ terrorists and dormant sympathisers are also a growing challenge as their financial transactions can be much more difficult to identify as terror related, says Michael Harris, director of financial crime compliance and reputational risk at LexisNexis Risk Solutions. “Terrorist atrocities are now being conducted with barely any capital; transactions for the hire of a van or purchase of a knife, for example, would not normally raise alarm bells”. “Geopolitical conflict and uncertainty intensifies these issues, leaving financial services with the challenge of monitoring people’s international movements when, for example, displaced ISIS members return to the UK,” Harris explains. The way in which terrorists conduct their crimes has evolved significantly too. “Terrorist atrocities are now being conducted with barely any capital; transactions for the hire of a van or purchase of a knife, for example, would not normally raise alarm bells, but unfortunately, as recent news has shown, these items are now utilised to perpetrate significant terrorist events,” says Harris.

It is difficult to detect terror financing because it’s hard to separate legitimate activity such as migrant workers sending money home from terrorist financing activities. It is difficult to find the needle in the haystack – it’s really more like a needle in a needle stack

Jim Heinzman

An improvised explosion (IE) device may cost about €5,000, which is relatively small in a western country but in some high-risk countries, this is a huge amount of money. Terrorist and criminal organisations know that they can’t just sell oil and receive a lump sum of $10m – it would be identified as money laundering and intercepted by law enforcement agencies. But through a flood of micro transactions, they can escape detection, acquire the necessary funds, and continue their terror operations. “We have seen cases where a few customers were acting in concert, using multiple channels, payment methods and low dollar amounts” “They use credit cards to take cash advances from an ATM in a foreign country, but in small amounts as little as $100. Terrorists then pay off the credit card in a different country with a cash equivalent payment (CEP) such as a traveller’s check or money order, effectively moving money between two countries. We have seen cases where a few customers were acting in concert, using multiple channels, payment methods and low dollar amounts. In total, they might move as much as $15,000-20,000 in this way,” says Heinzman. In the recent eBay case, the terrorists were using multiple channels in small accounts. From a data analysis perspective, financial services face three significant challenges when identifying threats, according to Harris. These are firstly ensuring the reliability of the information or media content used. Second is possessing the resources and operational capabilities available to conduct extensive research. Thirdly, financial services must have the capabilities to monitor lower value transactions and identify those that may be related to terrorist activity, argues Harris.

Banks are struggling

“Globally, the banks realise they are struggling to catch all that they can,” says Heinzman. “Many banks have a rules-based approach, where they have to define different rules in order to identify specific problems. But it is very difficult to write a rule about how someone uses a selling platform like eBay, for example. It is difficult to write something that no one has thought about before. “The people who write these rules are smart, but they can’t keep up. The banks’ systems and processes can also be very slow to respond. They often use behaviour models to identify these risks,” he adds. ThetaRay has been working with many large global banks, using its data analysis technology to improve the companies’ terror financing protection, Heinzman says. By analysing all possible transaction data (amount, IP address, telephone number, operating system in use, and thousands more) as well as the relationships between them, ThetaRay can warn banks of potential criminal activity. The company claims its data analysis can spot false positives as well to prevent muddying the waters. “Many of the rules for the banks’ criminal detection processes, embedded in their legacy systems, are published on the dark web.”

“Dark web experts have told us that many of the rules for the banks’ criminal detection processes, embedded in their legacy systems, are published on the dark web. So, if someone wanted to circumvent them, they could find the rules and develop schemes that go around them,” explains Heinzman.

Finding the needle in the needle stack

“It is difficult to detect terror financing because it’s hard to separate legitimate activity such as migrant workers sending money home from terrorist financing activities. It is difficult to find the needle in the haystack – it’s really more like a needle in a needle stack” he says. One example of this is a medical aid worker who was gathering donations for a charity organisation and was therefore moving funds from low risk countries to high risk countries. The activity was not captured by the bank’s rules-based system, but was brought to the attention of the bank by a regulator, according to Heinzman, who claims ThetaRay identifies cases like this immediately. “Terrorist financing is by its nature a random threat,” notes Harris. “Traditional rules based transaction monitoring systems find it hard to detect terrorist financing activity and the financial services industry is rapidly turning to predictive and advanced behavioural analytical systems to assist with the task,” Harris adds. ThetaRay claims it can take alerts from banks’ legacy systems and reduce the false positives. “If a system generates 10,000 false positives a month, a bank needs to hire a lot of analysts to review them and determine which are true positives. ThetaRay rapidly and accurately predicts which of the 10,000 anomalies are likely to be true,” says Heinzman.

Another well-known method for transferring funds without the detection of banks is using cryptocurrencies, such as bitcoin. However, the anonymity of cryptocurrencies is a common misunderstanding. The technology they are based on – blockchain – permanently retains all information attached to any transaction. If law enforcers have adequate technical expertise, the associated data can create a forensic trail that can suddenly make a criminal’s entire financial history public information. This is how the Federal Bureau of Investigation (FBI) arrested Ross Ulbricht in 2013, a 31-year-old American who created Silk Road, a bitcoin cryptocurrency market facilitating the sale of $1bn in illegal drugs. ThetaRay can monitor funds in cryptocurrencies – including those using a distributed ledger (such as bitcoin) – to detect potential illicit activity, claims Heinzman. “The cryptocurrency markets are something we are very interested in. One thing that is happening at the moment is that, as cryptocurrency comes more and more mainstream, the practitioners want to know that the market they are participating in has controls and integrity. “That is why they are coming to us. I am certain that none of these institutions wants to have their systems used to facilitate terrorist financing or other illicit activity,” Heinzman says.


The future is mobile, regardless of regulations.


PSD2 heralds a new dawn for mobile payments, as the regulatory technical standards around the upcoming European open banking regulations are expected to put mobile devices at the heart of new payment techniques.

Strong customer authentication required by PSD2 is key as well as initiating, and authenticating, transfers directly from bank accounts to payees. However, PSD2 will restrict some mobile payment methods at the same time as serving up innovation across the industry.
“PSD2 will encourage a new wave of innovative and integrated payments services companies that do not need to rely on established card-based infrastructure. As well as this, we are likely to see an acceleration in the use of mobile payments at physical point of sale, not just in ecommerce scenarios,” says Lu Zurawski, practice lead for retail banking and consumer payments at ACI Worldwide.

But despite the regulatory environment nudging markets towards certain payment types, it is not easy to predict exactly how consumers will adopt the technology.

WeChat Pay beats plastic

China’s WeChat Pay highlights the difficulties that lie in predicting how customer demand evolves, for example looking at how uptake of a clunky user experience based on fiddly scanning of QR-codes can eclipse commonly accepted traditional bank cards.
In China, debit card penetration is surprisingly high – over three per person – and yet WeChat Pay and Alipay have become the predominant ways to make a payment, with roughly 600 million payment transactions per day handled by Tencent, the platform of WeChat’s parent company.
“The key lesson of Chinese-style mobile payments is to see how they evolved quickly because of integration within social media and digital commerce platforms. This allowed smaller traders and consumers to exchange value in the course of normal ‘conversations’, with payments being treated like simple attachments to a text message exchange. As the network effect took off, bigger retailers rushed to support the new ways to pay,” Zurawski tells GTNews.

While payment methods such as ApplePay and other mobile wallets are expected to skyrocket under the new legislation, this does not mean there isn’t regulatory clamp down in other areas. Direct carrier billing (DCB), where a customer can charge items to their mobile phone bill, is one such mobile payment method that faces stricter requirements.

What does the future hold for direct carrier billing?

PSD2 has tightened the rules on direct carrier billing, meaning consumers who are accustomed to buying digital content via their mobile phone and charging it to their phone bill will see their options curtailed. Under PSD2, single DCB transactions will be capped to a maximum of €50 per transaction with a maximum monthly limit of €300. However, PSD2 continues to allow Electronic Money Institutions (EMIs) to extend the scope of DCB from digital content to the purchase of physical goods. Until now, the EU’s initial version of the regulation, PSD1, restricted what goods, such as ringtones, music downloads and eBooks, could be billed to a mobile phone user’s bill after purchase. This regulation was holding back the market for carriers and retailers, so there is plenty of reason for optimism in the DBC market, despite more stringent regulations. Based on 2016 Juniper Research data, the average transaction value for billing digital content via carrier billing in Western Europe was over €4 in 2016, much higher than the €1.50 achieved in Central Eastern European countries. Developments in carrier billing solutions now mean that it can be offered as a subscription model as well as for one-off purchases on a multitude of devices and contexts. The potential value of digital content in Europe via carrier billing is predicted to rise from just over €2.6bn in 2015 to nearly €14bn in 2020 according to Juniper Research.

“We anticipate that some operators will conclude that the tighter restrictions imposed on them by PSD2 – for example new transaction value limits, above which requires registration and compliance activities that will have been exempted under PSD1 – makes this business line impractical,” comments Zurawski. “Others may use the clarity of new regulations to double-up on payments and authentication services,” he adds. Several mobile operator driven payment initiatives have collapsed over the past few years, for example the ‘Weve’ joint venture between EE, O2 and Vodafone ended in late 2014. On the other hand, operators working in the GSMA (a mobile industry umbrella group) are working hard today with the ‘Mobile Connect’ initiative, launched in 2015, which is aimed at convenient access to secure log-in and authentication services. While some DCB providers may leave the space, the competition within mobile payments will remain rampant. “We expect to see many variants of “retailer pay” – branded mobile apps and wallets launched by retailers or by digital “platform” providers, where the ability to pay comes from direct access to bank accounts,” predicts Zurawski. There is also likely to be a greater awareness of faster payments, at least in the UK, or immediate payments more generally, as retailers chase the promise of lower payment service fees enabled by PSD2, according to Zurawski. The 2017 Ovum retail banking whitepaper also found that one the top areas banks are investing in is mobile payment capabilities, as more forward-thinking banks look to capitalise on “trusted” status combined the opportunity for new mobile services to provide revenue sources.

‘Mobile first’ is obvious

Regardless of new regulatory nudges like PSD2, ‘mobile first’ is an obvious approach for current socio-economic trends. Mobile wallet adoption is on the rise globally and consumers in the US and Europe are catching up with those in fast-growing economies in Asia and Latin America where mobile wallets have already become the dominant payment platform, according to recent research from the Global Consumer Survey: Consumer Trust and Security Perceptions published by ACI Worldwide. The study found that 17% of US consumers now regularly use their smartphone to pay, up from 6% in 2014 when the survey was last conducted. In Europe, Spanish consumers are the most active users of mobile wallets, with 25 percent using them regularly, followed by Italy (24%), Sweden (23%) and the UK (14%). Juniper Research, which predicts that spending worldwide via mobile wallets will rise by nearly one third this year to US$1.35 trillion, says that the implementation of PSD2 in Europe should “spur further competition within the European wallet space, with existing players poised to introduce additional services to complement their payment offerings.”

PSD2 will encourage a new wave of innovative and integrated payments services companies that do not need to rely on established card-based infrastructure. As well as this, we are likely to see an acceleration in the use of mobile payments at physical point of sale, not just in ecommerce scenarios

Lu Zurawski


Fintech disruption sees digitisation take centre stage in African banking strategy.

Africa presents the ideal environment in which to evolve a new cash and payments services architecture – by linking rapidly changing customer expectations with new technologies. This puts banks squarely at the centre of mediating the creative clash of trends and technology – as Africa’s financial institutions harness disruption for innovation and growth.

Says Kent Marais, Head: Product Management, Transactional Products and Services for Standard Bank, “From a cash management perspective, Africa’s ongoing growth – in a rapidly changing technology and client expectation environment – presents an opportunity for industry-leading disruption.” This is especially so as Africa returns to growth. Even without a convincing commodities price rebound the African Development Bank is predicting GDP growth figures of 3.4% for the continent in 2017 – and 4.3% in 2018. Lead by increasingly diversified and integrated economies, especially in East Africa, the continent is expected to remain the world’s second fastest growing region after Asia. While growth rates and opportunities vary and factors, like interest rate volatility, can often cut into what looked like great profits on paper, “Africa’s overall numbers speak to the sustainability of the continent’s growth narrative, especially as key economies increase their trade – and integration – with emerging Asia,” says Mr Marais. In this rapidly growing – and changing – frontier environment, traditional views of cash and payments are being fundamentally disrupted, driving rapid innovation in Africa, “often ahead of the rest of the world,” he adds.

Banks are the ideal partners to bring disruptive technology to market – in a way that usefully and positively transforms the lives of Africans

Kent Marais

Disruptive technology transforms Africa

Today, retailers in Africa increasingly offer payment and money transfer services. Mobile operators offer mobile payments with scaled agency networks. Aggregators bundle client groups to negotiate better rates from established players. New fintech products like distributed ledger technology, data and prediction analytics, robotics, and digital identity solutions challenge – and deliver more quickly and easily – the kind of services and insight that used to be the preserve of banks. “While, these developments hold great potential to transform the efficiency, cost and speed of Africa’s payments landscape, many – in their raw form – cannot be of immediate benefit to customers and clients,” says Mr Marais. Without a strong use and business case, adoption by existing customer bases, or proper integration into system that deliver to customers and clients, disruptive technology will not improve services, change lives or transform economies. Instead of viewing these disruptive elements as a challenge, “banks are the ideal partners to bring disruptive technology to market – in a way that usefully and positively transforms the lives of Africans,” says Mr Marais. As African banks collaborate with different disruptive technologies and start-ups they will explore and evolve new revenue and service opportunities – as they test and adapt technologies to meet increasingly complex customer needs.

Disruptive technology meets new customer and market needs

Mr Marais believes that key areas in which disruption is helping meet customer and market needs across Africa include:

  • Creating inclusive and open banking platforms

Clients in Africa often operate across multiple jurisdictions and currencies, using suppliers who do the same. The result is that clients deal with multiple banks, even on single payment transactions. Since SWIFT, for example, can to some extent provide a unified view of all the elements of a payment transaction, “banks in Africa are increasingly challenged to develop non-proprietary platforms allowing non-traditional banking players to interact with bank and client data,” says Mr Marais. The move to an open banking environment and the evolution of Application Programme Interfaces (APIs) will significantly impact the payment environment. Banks will use APIs to access third party services, allow third parties to access their services and co-create new products and services with third parties.

  • Ongoing compliance agenda

As African domestic legislation dovetails with global compliance legislation the continent’s payments environment is set to modernise, including Africa’s electronic collections capability. While local, regional and global compliance pressures are often viewed as a burden and a cost by banks, their combined pressure to increasingly track payments or provide visibility across complex transactions, “is driving cooperation with fintechs as banks seek to innovate tracking mechanisms in environments without developed banking architecture,” says Marais.

  • Time and cost pressures

While providing wider access and deeper financial inclusion requires more investment – usually at more cost – this comes at a time when customers are pushing for cheaper products and services. These competing pressures in what is an increasingly commoditised payment product space, “is likely to drive even closer convergence, partnerships and cooperation between banks, technology, fintechs and legislators,” says Mr Marais. Equally, while one often hears that cash is still king in Africa, “today, outdated and rigid paper-based processes come at a cost to clients on the continent – in time and money,” says Marais. Becoming more cost competitive and efficient requires investment in new technology. While this comes at a cost to traditional institutions like banks’ it is critical that banks and their systems become more agile if they are to be truly client-centric.

  • Increasing dissonance between corporate and retail payment experiences

With many businesses in Africa either in start-up mode or still small, individual entrepreneurs who started businesses, “expect the same kind of service from their business banking partner as they experience as individual mobile account holders,” says Mr Marais. Right now, the corporate banking experience is not as developed as that of individual account holders. This is forcing banks to develop, by providing the same kind of capability – available electronically 24/7 -to businesses and corporates that individual retail clients have grown accustomed to on their mobile managed bank accounts.

  • Cross border visibility

Once payments cross a border in Africa clients usually lose sight of when the correspondent receives the payment, which institutions are handling the payment, and how many deductions have been made. “Banks, today, need to be able to provide visibility in real time across the whole length of the transaction,” says Marais. In a growth environment where ever-more Africans are involved in cross-border and international trade, Africa’s varied exchange control and currency jurisdictions, “present rich opportunity for the evolution of instant electronic currency conversion and payments systems that meet the legislative requirements of multiple currency and exchange control environments,” explains Mr Marais. Banks have increasingly had to react to fintech disruption – so far either through partnership or outright absorption. More recently, participating in industry-wide collaborative efforts – like the SWIFT GPI initiative – is providing banks a platform to collectively explore more efficient ways of managing and refining new payment technologies and systems. “Ultimately this kind of collective collaboration will benefit the clients of all banks,” says Mr Marais. Present in 20 markets across the continent Standard Bank is playing a key role in driving the adoption of disruptive technology to meet the rapidly changing transaction needs of African clients. This is being achieved by placing digitisation at the heart of the bank’s overall strategy. “It is both exciting and rewarding to be a part of Africa’s banking industry as it moves to creatively evolve and integrate new technologies to meet African’s payment challenges – measurably and visibly, driving growth and transforming lives in Africa,” says Mr Marais.


TLS preview: Taking blockchain treasury technology out of the sandbox.


2017 and 2018 have both been predicted to be year blockchain breaks through to the mainstream in fintech, but as of today businesses are still floundering when it comes to finding use cases for the innovative technology. This has not prevented pioneering treasurers from diving into the sandbox to experiment though.

Take, for example, the Port of Rotterdam, which is establishing a subsidiary to experiment with its clients to understand technical implications as well as the business benefits of blockchain. Tim de Knegt, treasurer and manager of strategic finance and treasury for the Port of Rotterdam, has reinvented his, traditionally, inward-looking role within his company. The Port established its blockchain subsidiary in early July and it is due to go live in November. It has already reported global interest from governments, tech companies and financial institutions alike. International enquiries have come from the likes of Singapore, Dubai and Los Angeles and from companies such as Google and IBM. While it has not yet implemented any software into production yet into the company, de Knegt tells bobsguide: “We believe blockchain technology is a game changer, and not just for the financial industries. It will change other industries such as logistics and energy as well. “The most interesting area for me is logistics. It is quite a fragmented industry right now. There are a few players that dominated the market and lots of smaller players. There is more efficiency that could be made in supply chains and from a risk perspective.” “Many blockchain use cases which eliminate inter-organisation or cross-organisation trust issues may impact the work of the corporate treasurer,” argues Lior Yaffe, senior developer and managing director of tech firm Jelurida and core developer of blockchain platform Ardor. “There are many applications that require third parties who do not trust each other to conduct business that provide opportunity for the introduction of a blockchain in which all transactions are digitally signed, timestamped and potentially transparent to all participants,” he explains.

Treasurers must look outwards

General treasury and financial teams are often keen to operate in relative isolation, but they could bring more value to their companies by being outward looking using the knowledge that they acquire, argues de Knegt. The main benefit of blockchain will not come from using it as a single company, but as a group of companies due to the scalability of the technology, he contends. “[Treasuries] can add a lot of value to the sales process and create better external relationships with their own clients. They should look further than their own bubble. They should optimise systems and processes in the companies and within their own supply chains. “I work with some of our largest clients to see how, from a treasury point of view, I can add value to their role. “Blockchain is not necessarily a starting point for a general treasury. I don’t experiment with it from a treasury point of view but more from a business point of view. I look at physical and virtual transactions. That is where my role differentiates from the traditional treasurer.”

Northern Trust’s escapades into blockchain are an example of how outward-looking partnerships can benefit a business. After launching what is potentially the first fully functioning blockchain for trading private equities in February 2017, the bank is now preparing for more advanced applications of its blockchain platform. The US bank’s blockchain platform initially had four nodes powered by Hyperledger’s open source Fabric codebase. Swiss management firm Unigestion was the opening client. The technology has been processing transactions since February. Over the next few months, Northern Trust plans to upgrade infrastructure so that the bank can spin-up nodes for any number of limited partners, general partners and more. “Current legal and administrative processes that support private equity are time consuming and expensive,” said Peter Cherecwich, president of corporate and institutional services at Northern Trust. “A lack of transparency and efficient market practices leads to lengthy, duplicative and fragmented investment and administration processes.” “Northern Trust anticipates substantial opportunities to bring improvements to the private equity market by using blockchain technology,” says Justin Chapman, global head of market advocacy and research at Northern Trust. “This is an important first step to connecting participants much more effectively, including investors, managers, administrators, regulators, advisors and auditors.”

How big are the barriers?

Two much-discussed hurdles that are preventing widespread blockchain implementation are scalability and working proof of concepts. This is partly because blockchain applications in the corporate world are still in their infancy, “so it is hard to testify about specific use cases,” Yaffe tells bobsguide. With such a fast-paced level of innovation in the tech industry, it is surely only a matter of time before adequate solutions to scalability are proposed. Yaffe claims that his new product Ardor, a blockchain-as-a-service platform, already offers a solution to scalability and blockchain bloat (a build-up of data making the system less efficient). It also uses features such as decentralised phasing, voting, and trading making it a useful tool for corporates. But while the technology, and number of transactions, you can do with it is vital, the key component needed now is participation from all parties to discover value added services for a group of businesses. For example, in a trade transaction the Port of Rotterdam may rely on information from others to ensure supply chain compliance, but if all parties participated in a blockchain solution, the technology could automatically prove that every participant is compliant. Traditionally treasurers will look for a working proof of concept that is scalable enough to get the results they want before implementing a new system. But the traditional method does not work here as the technology is so new. Therefore, Knegt argues, treasurers are required to innovate and look at how they can bring value to their clients as well as their own businesses if they want results.

“There are lots of small systems that are improving but these do not deliver on what they promise”, says de Knegt. “You need to find the right use cases.”

Blockchain tokens must be multilingual to compete

Another key hurdle to widespread blockchain usage is that blockchain tokens are not currently suited to any device, argues de Knegt. “Eventually blockchain should be like Microsoft Office – you can use it on a Mac, a PC or an iPad. You will be able to use the token on any type of computer,” he says. However, Yaffe says from purely technical perspective, this is not a hindrance to adoption. “Blockchain applications with rich cross platform user interfaces are available now,” he insists. Yaffe sites the wallet application of Ardor, as an example. “Unlike most other blockchain technologies Ardor and NXT implement a reference user interface for every feature and transaction type they provide. This includes desktop, web and mobile support. “However, private blockchain is an infrastructure technology which mainly benefits large corporations, consortiums and government. These entities take a long time to evaluate new technologies where implementation cycles can take several years. “I expect the first real private blockchain applications to be deployed to production around Q3 of 2018 but widespread deployment may take between three to five years.” Ardor’s blockchain technology is preferable for corporations to the blockchain that bitcoin sits on, argues Yaffe. “[The blockchain behind] bitcoin is designed for a single purpose, transfer of value between accounts, all other applications on top of bitcoin use various workarounds to squeeze data into the blockchain not for its intended purpose. “On the contrary, Ardor, based on the NXT blockchain technology, is designed from the ground up for extensibility using a modular transaction types architecture which can be easily adapted for various use cases,” he says.

The Treasury Leadership Summit will take place this London on December 5-6. For more information visit


How treasurers can use AI to simplify invoicing.


Matching incoming payments with invoices has long been a frustration for companies with many valuable hours being spent trying to determine who’s paying for what. However, artificial intelligence (AI) and machine learning solutions are starting to emerge that claim they can combat these treasury headaches.

“Incomplete remittance information typically leads to an arduous and costly reconciliation process”, argues Rodney Gardner, head of global receivables in global transaction services at Bank of America Merrill Lynch (BoAML). Data analytics AI technology is still in the early stages of deployment, but it is already set to transform financial markets and could act as a key differentiator in performance, Matthew Hodgson, CEO of Mosaic Smart Data tells journalist Victoria Beckett. With take-up of AI on the rise, PricewaterhouseCoopers (PwC) recently predicted that global gross domestic product (GDP) will be 14% higher in 2030 because of artificial intelligence. This is the equivalent of an additional $15.7trn, or more than the current output of China and India combined, according to PwC research.

The real advances for AI in recent years center around the automatic reading of documents, argues Bertrand Cocagne, head of product at Linedata Lending & Leasing. “I’m referring to …systems being able to recognise the structure of documents. For example, advances are being made where AI can recognise the structure of say, a balance sheet document, and automatically exploit the content,” he says. The most difficult problems in the marketplace today is re-association of the transaction – the credit is in the client’s demand deposit accounts while the remittance data resides elsewhere, argues Gardner. “Remittance data comes in all shapes and sizes: e-mail; e-mail attachments, portals, back of the envelopes, carrier pigeon,” he laughs. One AI solution that attempts to tackle this issue is BoAML’s AI payments solution, ‘Intelligent Receivables’, currently available in Canada and the US. It uses artificial intelligence and other software to help companies vastly improve the straight-through reconciliation (STR) of incoming payments to help companies post their receivables faster. Straight-through processing (STP) enables the entire trade process for capital market and payment transactions to be conducted electronically without the need for re-keying or manual intervention. The tool combines AI, machine learning and optical character recognition (OCR) to help business to do accounts receivable reconciliation and payment matching more efficiently.

Remittance data comes in all shapes and sizes: e-mail; e-mail attachments, portals, back of the envelopes, carrier pigeon

The proliferation of payment types

One of the biggest challenges when addressing the issues of transaction re-association is the proliferation of payment types, according to Gardner. “There is a press release about a new way to make a payment nearly every week. That’s incredibly exciting but it means the accounts receivables manager sitting in that shared service centre better be reading the press and accounting for how that new payment type is going to be processed. If it comes in and falls to the floor, guess what? You’ve got to hire four or more people in your shared service centre to manage the new payments. Nobody is talking about that,” he says. “I am of the opinion that low-value transactions are the best value on the planet bar none. Since low-value transactions are settled the same day, there is no reason why a corporate shouldn’t be telling their payers, ‘here’s how I want to be paid’,” continues Gardner.

Predicting the problems

Reconciling payment deductions is also a headache when matching payments with invoices, for example if a broker takes commission from a deal. Cross-border payments also present additional reconciliation issues, for example if a transaction was billed in dollars but paid in Thai baht. Gardner argues that AI and machine learning can be used to tackle both of these issues. This is where predictive analytics plays a crucial part. Matthew Hodgson, CEO of Mosaic Smart Data, says: “In many cases, banks are underutilising the data which they generate internally and spending significant amounts on buying market data from trading venues and exchanges. “However, the internal data is where some of the insights with real competitive advantages are held. Market data is available to anyone with deep enough pockets, but no other institutions have access to this internal data,” he says. Using machine learning combined with internal data to reconcile payments can solve a myriad of headaches.

For example, if one client, for some reason, continuously forgets to include part of an invoice number, the first time the business can spot the error and correct it using the client’s open accounts receivable file. The next month, if the client does the same bad behaviour the machines will spot the pattern and match the correction. Once predictive analytics is involved, the machine can not only correct the invoice number but also remember and predict when this bad client will pay, for example on the fourth of the month. This information can be fed into the treasury workstation which can then predict when the business will receive the payment which can help treasurers with their cash forecasting. BoAML will be able to produce these types of predictive solutions in the next couple of years, Gardner expects. “When I talk to treasurers, they sometimes don’t realise the amount of horsepower that they currently have against reconciling the books. They are often in the dark about their accounts receivables from a cash flow forecasting perspective. They have no analytics around predicting their receivables so we’re creating a dashboard for them to help them better manage their cash flow,” he says.

When I talk to treasurers, they sometimes don’t realise the amount of horsepower that they currently have against reconciling the books

What makes a successful payment product?

When launching new payment technology there are two guiding principles for success, according to Gardner. The first is global consistency. Secondly, it cannot require the payer to have to do anything different. “From a receivables perspective, the minute you try to change payer behaviour, I believe you’ve put everyone at a disadvantage. There are some great tools and solutions out in the marketplace but most of them require the payer to do something different, and you don’t get the uplift,” he argues. For this reason, he believes bringing AI reconciliation within European virtual account management would be a logical next step for AI corporate payment and invoicing technology. “SEPA was great on the electronic side but not on a straight through reconciliation basis. And why is that? A virtual account works very well – you probably know who paid and why they paid you but the cash application remains the tricky part,” says Gardner. He proposes marrying virtual accounts with an AI solution. The bot would go into the virtual sub-account, look at the transaction and re-associate it with the remittance data, regardless of where it came from. “It will re-associate those two data points, create a posting file, and boom! You have straight through reconciliation, even in a virtual account scenario,” says Gardner.

A question of trust

One of the key factors holding back AI and machine learning is consumer and user trust. Cocagne argues that trust can only really come from experimentation and actually seeing the results of successful implementation. “The algorithms used within current AI systems don’t allow for much transparency with regards to how the system rationalizes its decisions, which makes it difficult for the industry to trust the outcomes. The key to building this confidence is really the successful real-life application of AI. With real results and success stories more trust will come,” he says. Gardner argues this problem is generational. “The older generation sees banks as trusted transactional, information protecting, partners. But I think millennials don’t give it a second thought to adopt new payment innovations. So, it depends on your audience,” he argues. Due to the older generation’s unwavering faith in traditional banks, banks are still key players in AI technology innovation.

Regulators are raising the drawbridge

Regulators are increasingly focusing in on AI payments technology. “Some of the first companies that came into the payment space were out ahead of regulations, and they weren’t necessarily regulated as banks,” Gardner says. “Now there’s a catch up by the regulators so the barriers to entry to the payments industry, outside of banking, are now higher if you’re new to the payments market. This is causing some of the fintechs to approach the banks and propose collaboration,” says Gardner. “It makes a lot of sense if you’re a fintech looking to enter the payments space to join up with a financial or a banking partner that knows the local regulations and markets. Putting those two together creates quite a powerful force,” he adds. Open banking regulation is also spurring payments and AI technology innovation. Because of open banking regulations, Gardner says: “Corporates are starting to put their receivables factories on top of the payment factories and centralising receivables for better STR, for better visibility, better cash flow forecasting.” A payment or receivables factory being the centralisation of the payments or receivables process within an organisation.


The digital revolution in corporate treasury.


New research for 2017, commissioned by Ixaris Technologies into the adoption of payment technologies among corporate treasurers, identifies growing interest in use of new products and services – indicating that the long road of the digital revolution may finally have reached the door of the finance team.

Initial results from the CFO Payment Pulse showed that testing new products and services – including use of emerging payment technologies – and increasing supplier collaboration are important objectives for treasury teams. Interviews carried out in preparation for the launch of the research bear out the survey findings. For Alan Hawkins, Head of Commercial Cards at ING, automation of commercial payments using new technologies represents “the biggest opportunity” for banks. A point underlined by Alex Mifsud, CEO, of Ixaris Technologies: “The opportunities to resolve the many intractable challenges of payments across the enterprise are enormous. Banks play an important role in this and are finding ways to partner with innovators and new entrants to deliver treasury innovation.” While the scale of the commercial payments opportunity is encouraging news for incumbent financial institutions it also highlights that banks and traditional providers have work to do to demonstrate the benefits of commercial payments products, particularly in the case of virtual cards where adoption remains relatively low. Among survey respondents, fewer than 20% currently use virtual cards or virtual accounts to settle their bills. By comparison direct debit and credit transfers are used by around 80% of respondents, and 54% use commercial payment cards.

Positioning the opportunity

As Hawkins remarked, the challenge for banks is, “articulating that opportunity. Right now, this is still an immature market, with lots of innovation going on. Payment service providers need to be clear about the problems their clients have, and how their solution can help solve it. If payment systems providers want to be successful, they are going to have to identify specific sectors, and work with senior treasury executives at target clients to show how their solutions will solve problems”. Indeed, different sectors and different sized businesses have varying expectations and requirements from their payment services. The research reveals that commercial card use among large firms is likely to be double that of their smaller counterparts. Similarly, while risk mitigation is a priority for large firms for small and mid-sized businesses the role that payment services can bring in improving competitiveness is more important. As proof of the challenge ahead, almost 65% of companies surveyed still use cheques – suggesting there’s considerable change to come as firms make the switch to electronic payments.

35% of respondents said they expect to reduce their use of cheques in the next year, citing a preference of cards, wire transfers or direct debit and contrasting with more than one in three respondents expecting to increase their commercial payment card spend by between 20% and 40%. Among electronic payment methods, direct debit and wire transfers are currently most used by respondents; wire transfers are overwhelmingly popular for their perceived ease of use (75%), relatively low cost per transaction (42%), and wider supplier acceptance of wire transfer and direct debit (38%). The insights reveal that these preferences are not set in stone, however. Respondents say that they might change their payment technologies if they could see how new systems would help reduce costs, make savings, or automate processes. James Sykes, Head of Commercial Cards at Lloyds Banking Group, says these findings tally with his experience: “Encouraging the use of cards among clients is all about reducing costs and benefitting both your clients and their suppliers. To persuade clients, it’s essential to work with them to help them see the benefits card usage can bring to their business. Payments can sit in so many different places, so helping customers to see the benefits of cards and make the change from existing systems is the biggest challenge.”

Automating the payment engine

It’s around automation, however, where the survey indicates the most profound change is still to come to corporate payments. A change that might not be that far away. The research shows a clear, as-yet unanswered, need to improve payment processes including payment approvals, reconciliation, invoice approval and logging receipts – alongside integrating new solutions with existing banking and accounting systems. 65% of those polled said this was the most important factor in selecting a new payment system followed by reducing the number of manual processes required (56%), and improving the payment approvals process (53%). As Mifsud notes, while retailers have addressed many structural inefficiencies in payments, these inefficiencies have yet to be addressed by the corporate sector. According to Mifsud: “The introduction of machine-to-machine interfaces that reconcile transactions incurred with e-receipts and invoices could save businesses significant costs in terms of time and money.” Mifsud goes on to characterise the key areas of concern for corporate customers as being “cost, control and convenience” – that is, reducing cost, controlling data trails associated with transactions, and improving the user experience at every stage in the process.

While high profile new entrants in the business-to-business payments sector are few – there is some early proof of what the new model treasury might look like. Currencycloud has developed a strong track record supplying large banks and institutions with currency and cross-border payments services. The company’s co-founder Stephen Lemon says: “There is an enormous opportunity in cross-border payments and currency transactions. Customer expectations are increasing dramatically. The key is to build relationships by responding to each customer’s specific needs. Lots of big corporate customers are on a mission to see what’s happening in fintech for treasury functions. This mission is borne of necessity given the pressure to cut costs and improve efficiency, especially when it comes to cash management and the movement of funds between corporates and their suppliers.” As traditional commercial payment operations follow the path of consumer fintech innovations – the cry for automation and unification of payment services is going to get louder.

The opportunities to resolve the many intractable challenges of payments across the enterprise are enormous. Banks play an important role in this and are finding ways to partner with innovators and new entrants to deliver treasury innovation

Alex Mifsud, CEO, of Ixaris Technologies


10 things not to miss at the Treasury Leaders Summit.


It’s almost time for the Treasury Leaders Summit that will take place December 5-6 in London. Senior treasury and finance leaders from across the globe will come together to discuss the key issues impacting their industry. With a schedule packed with in-depth talks on the future of treasury and how to successfully protect your assets, we’ve done the hard work for you and picked out 10 things you can’t afford to miss at the event. We hope to see you there.

The evolving role of the treasurer

In what promises to be a great discussion, listen to speakers from and Dominos on how the role of the treasurer has evolved from solving back-office solutions to becoming more business focused and influential in a corporation.

Treasury Innovator17

Here you will be able to watch quick pitches from the shortlisted start-ups, innovators and disruptors, that will showcase their approach to a product or service. The winner will be announced on Day Two of the summit.

How to protect your assets

Did you know that 90% of larger organisations have explained that they have suffered from a form of data security breach, with 74% of small-to-medium sized companies reporting similar issues. In this discussion, hear about how digitisation can made a difference in this area, both in combatting fraud and protecting assets.

The future of payments

Hear from Franco Motta on how the advancements in technology and customers’ increasing appetite for speed and convenience are revolutionising the way we pay and manage our finances. This session explores the digital, consumer and regulatory drivers for what the future of payments will look like.

Blockchain 101

Tim de Knegt, Manager of Strategic Finance & Treasury at Port of Rotterdam, has recently implemented a Blockchain PoC into his organisation. He will be discussing how to build your business case for early acceptance and adoption as well as best practice advice to implementing this new technology. Discover how to share high-quality data, generate transparency and complete transactions efficiently lowers costs and risk.

How to partner with your CFO

This session, which is led by Malcolm Pape, will discuss how you can build your treasury  strategy in order to support business growth and how you can be of best value to your CFO.

Hedging new strategies

Interested in knowing how to reduce the risk of currency volatility and pricing movements? Malcom Finn, global financial controller at Costa Coffee will explain how you can hedge appropriately to minimise risk and take an offset position through derivatives and options.

Banks vs Fintechs: Competition or collaborative partner?

As competition and technology develops, banks are being faced by competition by technology innovators and disruptors. This exciting session will cover the challenges and opportunities for both established financial services players and those disrupting the industry, and discuss what it takes to make a successful collaboration.

Building an internal bank

Creating an in-house bank is not just for large multinational organisations. This case-study led session will demonstrate how to adopt the internal banking model and how the growth strategy can centralise your bank account management procedures and allow better forecasting.

And of course, the treasurers networking drinks

Don’t miss the opportunity to network with more than 150 treasury leaders and industry experts from Dyson, Specsavers, Deliveroo, and many more. To find out more, visit