Banking Fintech Payments

Challenging the status quo – fintechs and corporate treasury services

Challenging the status quo – fintechs and corporate treasury services. Only a small percentage of fintech investment is targeted at serving large corporations. Image: Fotoluminate LLC, Shutterstock.com
Written by Patricia Hines

Only a small percentage of fintech investment is targeted at serving large corporations, a sector ripe for investment and innovation. Story by Patricia Hines.

The rapid rise of fintech firms offering non-bank financial services is triggering what some consider “creative destruction” in banking. Recognising that technology is a key enabler for efficient treasury operations, an increasing number of fintech firms are creating specialised solutions for corporate financial management. Four key external forces are supporting the rise of non-bank financial services:

  • economic influences
  • demographic changes
  • regulatory environment
  • technology evolution.

The four external forces supporting the rise of non-bank financial services. Source: Celent

A confluence of economic influences has lowered the barriers to entry for fintech startups. Most significantly, global interest and investment in fintech firms has risen dramatically over the past five years. However, only a small percentage of fintech investment is targeted at serving large corporations, a sector ripe for investment and innovation.

As baby boomers retire, financial management staff is getting younger, reflecting the demographic changes influencing fintech growth. Accustomed to intuitive, easy-to-use technology tools accessible from anywhere, younger staff expect more in the way of treasury technology than Excel spreadsheets to streamline, digitise and automate financial management functions across treasury and finance. This is especially true with respect to payments, one of the hottest areas in the fintech space.

Lack of regulation

While the regulatory environment for traditional financial services firms continues to become more complex, fintech firms benefit from an almost complete lack of regulation. Regulators acknowledge the need to oversee the safety and soundness of fintech firms, but also recognise that excessive regulation can stifle the development of more efficient financial services. Thus, regulatory bodies are working on frameworks to strike the appropriate balance between innovation and protection.

Fintech firms excel at leveraging the technology evolution to create a differentiated customer experience. Rather than serving the breadth of corporate customers’ treasury management needs, fintech firms can cherry-pick narrow segments for their offerings. Newer technologies such as web, cloud, mobile, big data and artificial intelligence allow fintechs to develop new value propositions at a lower cost than traditional development approaches.

As discussed in a new Celent report – ‘Challenging the Status Quo: External Forces Supporting the Rise of Non-Bank Financial Services‘ – fintechs are unbundling traditional corporate banking services, leveraging emerging technologies to offer new, innovative treasury solutions. But recognising that universal banks have unrivalled experience meeting the complex needs of corporate customers, many fintech firms are collaborating with banks through a number of different innovation models.

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– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Image: Fotoluminate LLC, Shutterstock.com

About the author

Patricia Hines

Patricia Hines is a senior analyst with Celent’s Banking practice. Her areas of research include global transaction services and wholesale banking, with emphasis on treasury and cash management, corporate banking delivery channels, and trade and supply chain finance, along with commercial and small business lending.

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