On the eve of the ACT Annual Conference we take stock and reflect on a controversial yet inevitable theme and its recent trajectory from dumbed-down conversation-stopper to intellectual fire-starter for treasurers. Our opening speaker, John Kay, firmly prophesises (in his latest book Other People’s Money) that: 'The revolution will come. Institutional inertia can slow technological change but can rarely prevent it altogether.... [t]he evolution of payments will pave the way for broader change both institutional and intellectual. Our understanding of money and banking will be fundamentally revised.'
So, if there is a point at which a 'healthy scepticism' becomes anachronistic, what can credibly take its place for risk managers?
You got to not talk dirty, baby If you wanna impress me
-Prince, Kiss
'Are you excited by the FinTech revolution?'
It was an afternoon in late March. My phone was jammed awkwardly between my shoulder and cheek. My tilted gaze was fixed - through the windows of ACT towers - on the Shard. Which was, in turn, callously jabbing at a downcast and sullen looking little rain cloud.
I was attempting to engage a brilliant treasurer in that hottest of 'stop-its' that was 'FinTech'. She was weary and sparse in her responses displaying an uncharacteristically clipped lack of interest. Or even something verging on slight contempt (if only she could overcome the apathy). But then she conceded: 'I did see that Martin Wolf wrote a piece in the FT about FinTech… so it might not all be a load of absolute hyperbole and marketing guff.’ There will be no blue sky thinking here.
This group treasurer wasn’t alone in her sentiment. Another had shot me a link to Wolf’s article the day it was published. The email read simply: “There might be something in it after all?”
The shared sentiment is not merely the apparent reverence for Mr Wolf and his opinions. A respect which is surely due. But, more interestingly perhaps, it is the sceptical dismissal that belies both treasurers in their surprise. Despite being white, male and middle-class, Wolf (like Kay) seems as far from a precocious young start-up upstart as our imaginations will allow us to get. Some, it appears, sat-up and took note. A little. Maybe.
On the road from the City of Scepticism, I had to pass through the Valley of Ambiguity.
- Adam Smith
A few hours after my tech-toiling with the treasurer on the telephone, I stepped out into the persistent drizzle to meet a friend for coffee. She is an economist in her mid-twenties working just down the road at the Bank of England. She has great ambitions in Policy. Sometimes we talk shop. On this occasion I was hoping not to. But no sooner had we perched at a table, delicately stuffed-in amongst stuffed-shirts, than my hopes were swiftly dashed.
With trembling urgency and a coy air of secrecy she proceeded to tell me that a senior (in all senses) mentor within the BoE had given her a tip-off: ‘Want to get ahead in Policy? Make yourself a FinTech expert.’
On the one hand I was intrigued by the fact that this was what she had been told. It did seem, again, to lend some 'establishment' credence to the idea that digital innovation in finance was something that would prove to be of increasing, pervasive significance. On the other hand, I was shocked that she seemed so surprised by the suggestion and so utterly (by her own full admission) clueless on the topic.
These two reactions were of course paradoxical. How could I be surprised by the suggested significance of FinTech on the one hand and by its apparent irrelevance on the other (shouldn't she have been less surprised?)? To some extent this seemed to reflect a wider paradox surrounding the digital vortex. A vortex which seemed to simultaneously draw-in and divide the so-called ‘evangelists’ and the self-proclaimed skeptics. FinTech was a topic of discussion. But talk consisted of an awkward and indecorous buttressing of the fanatical and the cynical.
My friend's mentor has proved to be institutionally consistent. Baffled, blushing -suspicious even- as some may be by the possible 'love- in' between those zany young techsters and them dusty ol' regulators, there does appear to be something in the air. One might, reading between the lines, even wonder whether Mr Wolf had arrived at his own emboldened FinTech 'outing' as a result of the cited and (back then) recent speech by Andy Haldane.
We are all looking for 'credible' voices.
I have my faults, but changing my tune is not one of them.
- Samuel Beckett, The Unnameable
Perhaps it's understandable that proponents of financial technology are oft referred to as ‘evangelists’. Culturally, most 'FinTechers' are perhaps ‘Tech’ first and 'Fin' somewhere thereafter. They are good at being 'shouty' because by virtue of their industry, and often their demographic, they are ‘digital natives’. They possess a seemingly ferocious online and social-media prowess. A voracious appetite for the tweet. And then the re-tweet. All of which might look like marketeering-barbarism. Particularly to trepid non-natives. 'Evangelical’ then, seems to refer to a sense that proponents preach. A damning inference that perhaps they lack the capacity for doubt, reflection and critique which the enlightenment taught us was the foundation of all serious intellectual pursuit and progress.
It may feel generally true to say that ‘FinTechers' are 'marked by ardent or zealous enthusiasm for a cause (link)'. But as anthropology and linguistics have taught us, when a label is bestowed it tends to reveal as much, if not more, about the 'bestower' as it does the object of bestowal. As the, still hot-off-the-press, Contemporary Treasurer confirms, treasurers tend to be late adopters. It's no news to say that risk aversion is in their sinews. So, isn’t there something a little ungenerous about those who conservatively resist change labelling the innovators, technologists and inventors as 'evangelical'?
Unless, of course, treasurers actually will get excited if -and when- they see something that will clearly help them do their jobs (think of a really efficient TMS for example? Phoar!) Innovators may be innovative but are they innovating for you? And unless they are why you should care? Who can blame you for not being hip to the hype? As one of our own Policy and Technical team said to me: 'Call it what you like, whether its technology or its elephants that are helping me, I don't care as long as they're helping.'
Which makes for a nice segue to cliché: just what is the elephant in the treasurer's room? Could it be payments envy? (Not so much Freud as android)
I said 'Do you speak-a my language?'
He just smiled and gave me a Vegemite sandwich
- Men at Work, Down Under
In the main, FinTech innovators innovated for themselves and people like themselves. Or at least as a result of first-hand experience. Frustrated high-street (and by high-street I mean frequently online) customers clever enough to conjure their own solutions through their techy super-powers. That's entrepreneurship for you: Encounter Problem. Identify gap in the market. Fill gap. Sell IP. Happy days, etc, etc. It is a familiar and organic process. What feels less natural and wholly more unpleasant is to have somebody attempting to force cat food down your throat when, actually, you're a dog - thank you very much.
Sometimes speaking to treasurers about FinTech, if it wasn't fully dismissed, I sensed that they saw it as something that was being done to them. As though they felt themselves to be passive victims of a terrible misunderstanding - of surgery administered by over enthusiastic and well-intentioned urologists replacing a kidney when it was the knee that wanted some work. But enough of the strained mis-matching metaphors. You know it all already.
Someone in the shipping sector recently described himself as getting lumbered with aspects of B2C payments innovation some of which helped and others of which felt like a fully wrong fit. The treasurer (who will be speaking at this week's annual conference) told me that faster payments are not the holy-grail when it also means potential faster, irretrievable losses. Treasurers want a payments landscape that is fit for purpose and efficiency is an 'end to end' matter. Increased overheads on compliance and security in a faster-payments world is leaving something to be desired particularly for businesses dealing solely in B2B transactions. If you're a treasurer working in retail you may be one of the few who are more easily able to ride on the back of the FinTech fanfare. But - as James Marshall, Virgin Media's group treasurer, will tell us this week - in many B2C transactions, good old fashioned direct debit remains a firm and favourite fixture for customers, so even in retail the revolution has perhaps not been as all encompassing as you might think. Yet.
Back in March, Wolf opened his article with Bill Gates' famous wisdom: 'We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Do not be lulled into inaction.' This reflection on the delicate nuance of the pace of change which flies in the face of evangelism on the one hand and cynicism on the other, was echoed by Rich Wagner (Chairman of the Emerging Payments Association), when he spoke for us at the last Treasury Forum. He said 'I'm very excited about the change that is on the horizon but some over-night revolution?... well it's a myth.' And that is precisely why it is not going to be something which is 'done to' you. You will not metamorphose overnight into an odd insect you neither recognise nor like.
The revolution is made through human beings, but individuals must forge their revolutionary spirit day by day
- Che Guevara
John Kay writes that 'the evangelists for bitcoin...are in a sense not imaginative enough. They are simply trying to reproduce in the electronic world a commodity - currency - that has long existed in the material world' whilst Kay's words are levelled specifically at bitcoin, they make for an interesting warning/ call to intellectual arms. If something new is not quite hitting the mark, seldom is it because it is new. Much more likely it is because it is not new - not imaginative - enough. This takes us back to his point cited at the start: 'The evolution of payments will pave the way for broader change both institutional and intellectual. Our understanding of money and banking will be fundamentally revised.'
FinTech may have looked like something niche, discretely located in the realm of B2C banking, lending and payments. Which might at best awkwardly contaminate aspects of the treasurer's life. But something bigger is taking place. And in the past few weeks whilst I've been holding warm-up call's for panel discussions at the annual conference that is already becoming clear. From March to May the tone has already shifted.
In recent weeks I've heard excited chatter about how FinTech will pull TreasuryTech up by its socks, helping to improve the function and efficiency of TMSs. I've heard fascinating conversations about the blurring of payments and information and the profound strategic value of the data attached to digital transactions. If payments transactions are now holding a business value greater than their monetary sum, have treasurers just been handed a golden ticket? And if so what might this mean for the role? As someone said on one call 'My CEO is much more interested in the data we can get from the payment than he is in the payment itself’. Is this going to significantly bolster the strategic clout and range of group treasury? I've heard treasurers who want to talk about AI this week. And 'imagine if banks started to aggregate and provide detailed data on your working capital and supply chain finance (as it already does to its high-street customers to assist them in their own cost effectiveness)!' Then there is the cloud which is steadily gaining traction as a trustworthy, even downright useful, tool for treasury as it digitises. Treasurers have even told me that sometimes they are dealing with FinTech companies directly. 'Not for your plain vanilla stuff' - but sometimes it’s necessary 'and yes it is shaking up our relationships with our banks’. And that's another topic that will receive significant attention this week.
Good news - FinTech could disrupt finance was the title of Wolf's now fabled article. A fraught, if not tempestuous, 'love triangle' which has pitched-up between tech companies , banks and corporate treasurers has precipitated an anxious kerfuffle around who begets, who adopts and who may have to relent. Yes, we can call it disruptive. But why should we assume that's a good thing? Last time I checked 'disruptive' was what my mother called me when I was pulling my sister's hair, yanking the cat's tail, and refusing to eat my vegetables - all whilst screaming the house down. How did this become a good thing? Well, in time, I learned that it was generally more constructive to negotiate with my sister, to ignore the cat, to eat (certain) vegetables and to scream the house down only with an intelligible argument I could actually win. Through experience, total chaos gave way to relative order. Might it not be so with FinTech and its place in the free market?
But crucially treasurers must become an active and creative force within this market. They must help to shape the innovations from which they will benefit and to select the suppliers from whom they prefer to acquire these new solutions. Our challenge as producers at the ACT is to facilitate the imaginative process for treasurers in a digitising world. Rather than add to the noise we must undercut the hype so as to hit the nerve and stimulate the sorts of intellectual expansions which will help our members and community to lead the change that they want. This week will be a starting point, not a flash in the pan. We look forward to setting out on this journey of nuanced, thoughtful and helpful innovation together. And in the spirit of Odysseus let's 'hope that the road is a long one, full of adventures, full of knowledge.'
