There is currently more buzz than ever around fintech start-ups, billions of dollars (and pounds) are being raised by entrepreneurs promising to disrupt all elements of finance. The reward for whoever gets it right will be enormous, but the most obvious source of disruption (and value generation) is not in the tech itself, but in how it is used.
Having to do more with less
Almost every survey of treasurers shows much the same two things: treasury (and finance in general) is now expected to be a strategic partner to the “business” (which is good) and it is also expected to do more than ever with fewer resources (which is less good).
Can technology bridge the gap and provide the solution? There is no shortage of fintech start-ups and more established firms that promise to be able to do just that, but there is a problem for any treasurer hoping that fintech will ride to the rescue.
The problem with Fintech
The race is on to figure out how fintech applications can cut out the huge costs embedded in finance processes and so release enormous amounts of value. And while the search for the next $1 billion “unicorn” captures and excites the imagination, it also masks the fact that there is an inherent limitation to the potential impact of most fintech applications, because much of fintech concentrates on creating single-purpose solutions for one product or service.
There have been some great innovations made in recent years, but they don’t really help the beleaguered treasurer who now has to figure what benefit, if any, he might get from each new application, while true game-changing disruption of the finance process seems as far away as ever.
Where the true disruption lies
How can we get to the most efficient and effective treasury technology model?
Much has been written about SaaS and the Cloud (although neither is a new idea) but treasurers are not yet reaping the full benefits of that technology – because to do so will require a change in the way they think about the tech and how it is used. The truly disruptive potential of this technology is not in the tech itself, but in the changes to behaviour that it facilitates.
Rather than thinking about individual applications, platforms or services as stand-alone functions that “bolt on” or “plug in” to an existing treasury operation, it is time to re-imagine how the treasury could function as a distributed system.
Obviously, the concept of a distributed system is borrowed from computer science and care should be taken not to push the analogy too far, but a simplified view of what a distributed system is provides some interesting ideas to consider. In short, a distributed system is characterised as being made up of multiple autonomous units that communicate with one another to complete a series of tasks and in which there is no single point of failure.
Towards a “Distributed Treasury”
So what might a “distributed treasury” look like?
It would have a single point of access to multiple functions, taking advantage of either cloud-based technology or in-person services whichever makes sense, it would be lean in terms of staffing, but key person dependency would be non-existent (as far as such a thing is possible).
The full range of possible services would be available to all participants on the platform regardless of their size.
By James Philcox, bobsguide contributor