The software market serving treasury managers requires fundamental change rather than many “flashy” offerings currently being provided by fintech players, according to Phil Beck, head of treasury management at Capital One – the US based banking and finance institution.
“A lot of the fintech stuff I see out there is a lot of bells and whistles. Certain stuff gets a lot of attention,” said Beck, speaking on the sidelines of an industry event in Chicago. “My favourite one to pick is blockchain – which gets a lot of coverage. It’s so hyped yet it’s just bells and whistles. It’s not fundamental yet to changing the game and yet, of course, it has the potential to do so.”
“I think a lot of that is how some people have marketed it, and some of it’s down to how analysts have covered the market – they’ve got this shiny tool," said Beck. "The reality is though if you look at what’s happened fundamentally in commercial banks, some are saying ‘let’s rebuild the entire experience’. From the point of client onboarding right through to being able to see your loans all in the one place, and creating a digital, native experience. That’s not bells and whistles sexy, but it fundamentally changes the way a customer experiences banking in a commercial sense.”
“There’s basics of treasury management, of getting fully electronic payables, of starting digitally first and finishing all the way with electronic reconciliation. That stuff isn’t sexy. It’s not exciting. But it fundamentally changes the way businesses operate.”
For Beck, a lot of innovations – such as blockchain – could take between fifteen to twenty years to have profound impacts on the industry.
Capital One is advocating cloud-based treasury management systems – which Beck said is crucial to allowing clients to integrate systems seamlessly.
“From a treasury management and commercial banking standpoint, our main thrust is really around modernising the overall technology and architecture to serve our customers on a completely different and better manner that’s cloud native and cloud centric.”
“Everything should be driven from a user centric standpoint in the same way any big tech company would operate. Maybe that’s a little different from most traditional banks," he said.
“With that comes new things we can do around the traditional stuff provided by a commercial bank. Most people think a commercial bank is where they get their loans, or make their deposits – do the basics and the fintechs are the guys who do the exciting and new stuff, payables, receivables. As a bank though if we really embrace technology, rethink how we use that technology, we can fundamentally be a bank and a fintech – but a fintech first with our size and scale.
“Most of the banks have done it with partnerships in trying to get there. We’ve taken a very native first approach.”
The treasury management system (TMS) market has evolved rapidly, as fintechs and banks drive change, said Beck. But there are wider forces at play.
“The market is changing and maturing," he said. "What happens in the consumer side in our daily lives spills into the corporate side – no doubt. We all use our smartphones, we all do our consumer banking online. You use other applications – look at Salesforce – and you wonder why banking is so archaic, and old, and difficult. I think there’s a natural pressure as the world and the economy changes to be more digitally native in everything that we do.”
“The second component from a treasury standpoint – as some of the basic stuff starts to go electronic, you start moving to ACH for instance, that’s just the tip of the iceberg. The entire process needs to be reinvented, rethought to be made for a real time, cloud native architecture," he said.
Those factors, and the growing list of powerful fintech players impacting developments are driving change in the market.
"The extra fuel on the fire has been the amount of money given to fintechs over the past seven years, that has brought a lot of innovation and thought into this space that quite frankly just wasn’t there, or at a big enough pace," said Beck.
“So you’ve got a convergence of broad industry trends: what’s happening in cloud and consumer markets, you’ve got people thinking about TMS differently from a commercial standpoint, layer into that a tonne of investment into the fintechs and I think you’ve got the makings of this being a completely different environment.”