The Fintech Effect

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Global Finance: How is the market for cash management services changing?

Dick Oskam: Banks’ geographic footprint has resurfaced as an issue. Although SEPA (Single European Payments Area) is a reason to centralize European payments, companies still need banks and bank accounts to make payments and get clearing. But some banks are pulling out from different geographies. Many large corporates are being forced to issue RPFs [request for proposals] for their cash management business.

GF: How is technological innovation from outside the banking sector reshaping treasury services?

Oskam: Developments from Fintech companies that were very geared initially to retail payments are now getting to the corporate world. One way for Fintech companies to enter the space is through PSD2 [Payment Services Directive 2, which provides the legal framework for the creation of an EU-wide single market for payments]. It makes it easier for nonbank providers to manage transactions.

That has an impact on European banks but presents an opportunity as well. Fintech providers keep banks sharp.

GF: Some new regulations are just going into effect. What’s their impact?

Oskam: There’s a lot of unrest regarding Basel III. There are still discussions ongoing with the regulators about the interpretation and implications of notional pooling. Offering notional pooling to clients is still allowed. But it’s much more costly than before because of the implications for banks on their leverage ratios.

We’re moving to virtual accounts. In one form, a company has a real IBAN [International Bank Account Number], but it’s administered by a bank. We open a virtual bank account that’s used to route funds coming to a master account. In another form, the company has one bank account and it creates sub-accounts—say, for different business units—for general ledger purposes. Intelligent software knows which money is meant for which unit.

GF: What trends are there in payments?

Oskam: Banks are now working on implementing 24/7 instant payments. Banks will have to replace the current, batch-oriented way of clearing and settlement of payments. People have focused on Bitcoin. But that’s just one opportunity of what blockchain technology could develop. [“Blockchain” refers to the public ledger of all Bitcoin transactions] Treasurers must stay up to date. But the underlying business is still payments, even if the way you conduct them changes.