Lost in Transformation...
by François Masquelier, Head of Corporate Finance and Treasury, RTL Group, and Honorary Chairman of the European Association of Corporate Treasurers
Does the future belong to fintech? We are seeing a true technological revolution that will radically rearrange the landscape of banking in the short term. A transformation is in progress, but some of the people affected seem to be doing remarkably little about it. If they wait too long, some financial institutions could miss the digital train and be left standing on the platform. We must not stick our heads in the sand and pretend that nothing is happening. Even less must we think that, come what may, banks and other financial institutions will always be needed? The end can come through doing nothing, too.
“Tomorrow belongs to those who can hear it coming” (David Bowie)
The future belongs to fintech, a grotesque word but one in keeping with our times, a contraction of financial and technology. In the ‘fin’, we see or should see the banks and other financial institutions. However, it is not certain that all of them have taken on board this necessary and vital transformation in their business model. The technology is here and continues to beam out its enormous potential at lightning speed. Will the ‘financials’ be able to turn it to their advantage and adapt to this technological revolution? The question is vital, but difficult to answer. To paraphrase Alvin Toffler, we are facing a sort of fourth wave, although some people dispute it vigorously. It is no longer an opportunity to be grasped but a precondition of long-term survival.
We think that the initial claim (“The future belongs to fintech”) is indeed true. The future of finance lies with digital technology, and nothing will be as it was before. Technology will be to finance what the steam engine was to the Industrial Revolution. The way in which financial companies react will reshape the landscape, particularly for payments in Europe, but also for finance in general – trade finance, funding, disintermediation, online platforms and others. Where treasurers see an opportunity, banks see a threat. There lies the rub.
Spectators in a play performed without treasurers
Treasurers, key players in this digital play that is unfolding without them, have decided to make themselves heard and to mount the stage. As with the new financial regulations, they forgot to include treasurers, even though they are in the front line of those affected. Taking action, rather than being on the receiving end of these changes, is the aim of EACT (the European Association of Corporate Treasurers). They also want to be consulted on electronic payments, instantaneous payments and the possible use of blockchain to replace clearing houses, for instance. In the final analysis, who would reject a payment system that is more secure, more transparent, cheaper and that has greater traceability? That, however, is what blockchain technology offers in the short term. Banks and other financial institution should see the new entrants to the market, the financial start-ups, as being worthy of copying rather than as being disruptive. But nevertheless…
In any change lies opportunity
As with the foreign exchange market with online platforms and peer-to-peer solutions, or as for trade finance with dynamic discounting solutions, for example, fintech has already created a disruption or even a break. Moreover, the PSD2 Directive requires existing operators to open up to outsiders and thereby to increase competition. Unfortunately, the banks and other financial institutions are ill-prepared to harness these new technologies and take them on board. The latter are a sign of disintermediation. They must try to avoid losing everything in the free-for-all through not doing enough.