FinTech is here to change not only banking.


Technological innovations have appeared in the financial world for good. Blockchain, FinTech, PSD2, API are headwords used by banks around the world. The dynamic development of technologies and new regulations leads (lead odnosi się do development) to enormous changes in the functioning of financial institutions.
The effects of these changes will affect not only banks, but all enterprises in the market.
Cryptocurrencies, such as BitCoin, Ripple or Etherum, kindle discussions among regulators, investors, bankers as well as consumers. One of the factors that causes this interest is Blockchain - Distributed Ledger Techology (DLT), which lies at their core, thanks to the use of cryptography and validation of data among peer participants (ie without "central" units supervising the system) provides almost complete data security.
One of the first applications not related to currencies tested by the market is the elimination of paper in dealing with customers. Conclusion of contracts, all kinds of certificates or transaction histories - will soon be fully digital, ultimately reducing the costs of mass correspondence, mass printing, scanning and archiving documentation to the costs of technological infrastructure, at the same time eliminating human errors. Work is also underway on foreign transfer systems, omitting clearing houses and correspondents. By eliminating intermediaries, such solution will result in both reduction of transaction costs and the time of their implementation (aiming for real-time transfers).

Why smart contracts are smart?

Using scripts executable only by the system after fulfilling certain conditions (smart contracts), blockchain allows to create a completely new way of incurring and settling liabilities (eg as a cheaper and faster alternative to escrow accounts). This way, it is possible to imagine the automation of the supplier settlement process?, when at the time of placing an order, a smart contract for payment for a good or service is created. This mechanism will transfer funds to the supplier only when the order is delivered.
On one hand, it guarantees the solvency of the recipient by lowering the risk on behalf of the supplier, and on the other hand, it reduces the costs of internal and external settlements. The automation of control functions should also be considered, where in multi-stage, complex operations (eg requiring several-level approvals) - transition to the implementation phase would be possible only after all process participants validated it by using cryptographic keys. It appears as a natural development of workflow applications, at the same time adding a completely new level of security and integrity of data (eg resolutions of the company's bodies signed electronically, instead of the circulation of paper documents).

How can open banking change the work of a CFO?
The implementation of the Payment Services Directive II (PSD2) is to open up the payment services market to non-banking entities, paving the way for companies (mainly start-ups) that offer innovative finance solutions (FinTech). PISP (Payment Initiation Service Provider) and AISP (Account Information Service Provider) are two new categories of payment services providers introduced by the Directive. In practice, it allows FinTechs to create and implement solutions that aggregate data from all company's bank accounts and to manage these accounts from one place. And all this using the API (Application Programmable Interface) - technological standards defining the method and form of communication between systems. In addition - using modern solutions in the field of data analysis and visualization, we can imagine how PSD2 will change not only the banking itself, but also the way the financial areas function - creating a kind of a "command center" available to the CFO at one touch of a finger. Promptness, completeness and correctness of data always result in better business decisions, more efficient management of cash flows of the company and, as a consequence, maximization of profits. In this case, preparation of comprehensive reports and financial statements, expenditure structures, or verification of the annual costs of a particular type of services, will no longer be a matter of days or hours, but one command in the system. In a system that sends relevant inquiries to all banks in which the company keeps its accounts, collects transaction history for a given period, searches all operations related to the services (e.g., filtering by recipient name or searching for key words in the transaction title) and displays data on the screen in the form of charts and tables.
Therefore, these innovations should not be seen as limited to the world of banking and finance. The question we should ask is how to use these changes and new technologies in the best way possible to manage the company and create value.

Robert Twarowski

Independent Consultant

Gekko advisoryNOW