Corporates felt like their requests were being overlooked as banks and fintechs clamoured over winning market share, but with a need for fast, safe and reliable transactions, having the competitors work together seems to be the most effective solution.
Stephen Darnley, corporate treasurer for International Air Transport Association (IATA), explains he is not concerned with the use of fintechs by banks, preferring to see a collaboration with a bank than to go to a fintech directly.
“We do not want to work directly with fintechs, but with the banks in partnership it becomes a different question,” he says. “Having that bank involvement validates which fintechs to work with.
“Fintech ideas fall down when they run up against regulation.”
The prospect of fintech involvement is not seen as a red flag, says Darnley, adding: “The industry is not concerned if it needs the involvements of fintechs to make the problems better.”
Nicholas Franck, director, group treasury projects at cosmetics company Oriflame, says the climate of competition has got in the way of real progress being made.
“It seems like banks and fintechs want to push each other on, but it seems like a missed opportunity,” he says. “Why not just get rid of local legacy systems that can’t move rich data? Instead, engage with the fintechs and create a utility for the industry.
“The cooperation model is what corporates want to see investment in, and fintechs want to do it to make a new business model out of working in conjunction with the banks.”
Being the catalyst for change falls on the shoulders of the banks, according to Franck.
“A bank is so much more than a service completing cross-border transactions,” he says. “They are the ones with the money to invest and the information needed to know what to develop. They could gain from moving to a collaborative model.”
Banks have already shown themselves to be adaptable.
IATA’s Darnley says regulatory changes, such as the arrival of Sepa in Europe, have driven a change in technology, especially if it is needed to support compliance.
“This has put pressure on traditional business models,” he says. “Banks are becoming more focused than before, which has to be a good thing.”
The scope of problems that could be alleviated by a different approach to working is wide.
IATA completes the financial settlement services after customers have booked flights, gathering the funds from ticket vendors and travel agencies to distribute to airlines. The company sees $400 billion in settlements each year, and works with 70 banks in 185 countries.
“Dealing with 70 banks is a nightmare,” says Darnley. “If there were more standards on account opening, KYC [know your customer] and payments, it would make things easier.”
Complying with KYC is a complex process for IATA.
“With airlines it is easier to address KYC, as it will be with limited companies or multinational corporations,” says Darnley. “The challenges come with the smaller travel agencies or even sole traders. There has to be a way of getting the KYC documents from them prior to the processing of payments.
“Overall, there needs to be more efficient procedures for the management of data.”
FX rates cause another set of problems.
Darnley believes this is another area where new developments could make the process less volatile.
“There is a need for simple systems which can detect the best rate for payments to move at,” he says. “There is an opportunity to create more efficiency.”
Primarily our members want fast, safe and cheap payments. And this is what we want from the banks- Stephen Darnley, IATA
Oriflame operates in 60 markets, mainly in Asia. The company works on a similar model to Avon, with individuals acting as salespeople and earning commission. As well as selling face-to-face, salespeople can set up their own version of the website, with all sales made through it linked back to them.
Functioning in this way in largely emerging markets poses issues on both collections and payments, with multiple currencies and regulations to be taken into account.
Due to this operating model, Oriflame is focused on serving the needs of its salespeople, but the financial practices of these individuals is far from homogenized.
Says Franck: “We need to collect money from customers, but they do not always have bank accounts. There needs to be a greater level of banks working in conjunction with fintechs and telcos, with built-in straight-through processing of transactions. This works in Kenya with M-Pesa, so why not elsewhere?
“There is more efficiency from straight-through processing. We want bank help in difficult environments.”
The development of mobile money alongside the challenges of the unbanked in its core markets is posing difficulties for Oriflame, as it attempts to keep up with the customers’ needs while dealing with legacy banking platforms.
“Customers pushed for the use of e-wallets,” says Franck. “In China, almost all collections are made with Alipay and Tencent.”
Some markets, however, are experiencing issues as they lack the ability to keep up with the changes.
Franck says: “Overall, we see 90% of orders online, but only 20% of payments made online. There is a clear gap in the possibility of developing payments.
“Our sales online are growing at 40% rate a year, but this makes it hard for the people without access to the technology, and the unbanked. There should be solutions for these people.”
Although the banks are in need of updating their systems, corporates equally need to think about bringing in newer technology. IATA’S platforms were created in 1971, and have not had a wholesale overhaul since then.
Darley explains how the IATA has influenced the introduction of new technology in the airline industry. The group was instrumental in the implementation of e-tickets, initially in 2004 and with 100% adoption reached on June 1, 2008. The removal of paper tickets has saved the industry $3 billion per year.
The companies are having to embrace more flexible ways of working to keep up to speed with their customers.
“We have moved to give our agents the option to settle daily,” says Darnley. “We have had to become more flexible in approach, and expect the banks to be more flexible in turn.
“The rest of the industry has changed since that time, most recently with the move towards fintech and blockchain. But primarily our members want fast, safe and cheap payments. And this is what we want from the banks.”
Comparing their experiences with what is widely available to customers is leaving treasurers feeling neglected.
Darnley says: “There is a feeling of frustration with the industry. We see rapid advancements in retail space that are used to enhance the retail client experience, for example with Faster Payments. Developers are not taking to the business-to-business space as quickly.”