5 Benefits of Financial Technology

Financial technology (also referred to as FinTech) is the use of innovative technology to deliver a wide range of financial products and services. It is intended to facilitate the multi-channel, convenient and fast payment experience for the consumer. This type of technology is effective in many different business segments, such as mobile payments, investment management, money transfer, fund-raising and lending.

The rapid growth of financial technology has been very beneficial for consumers worldwide, such as the ability to serve customers that were not previously attended to, a reduction in costs, and an increase in competition.

Let’s take a look at a few of the benefits related to financial technology:

Better payment systems – this type of technology can make a business more accurate and efficient at issuing invoices and collecting payment. Also, the more professional service will help to improve customer relations which can increase the likelihood of them returning as a repeat buyer.

Rate of approval – many small business ventures are starting to use the alternative lenders like those involved in financial technology because it has the potential to increase accessibility and speed up the rate of approval for finance. In many situations the application process and time to receive the capital can be completed within a period of 24 hours.

Greater convenience – the companies involved in financial technology make full use of mobile connectivity. This can significantly increase the number of people who can access this type of service and also increase the efficiency and convenience of transactions. With consumers given the option to use smartphones and tablets to manage their finances, it is possible for a business to streamline its service and provide a better all-round customer experience.

Efficient advice – many of the latest systems rely on robo-advice to give people guidance on their finances. This can be a very quick and low-cost option to get useful information on investments, as well as to limit a person’s exposure to risk. However, this type of service won’t be able to give the most in-depth advice that would come from a professional adviser.

Advanced security – Using the latest security methods is necessary to ensure more people are confident in using this type of financial service. The need to harness the latest mobile technologies has resulted in a major investment in security to ensure customer data is kept safe. A few of the latest security options used by those in this sector include biometric data, tokenization and encryption.

Planning For Emergency Financial Situations

Emergency financial situations can happen to anybody and any financial arrangement exercise is not ideal without planning for such occasions. The whole idea of having an emergency fund is to offer a cushion against any unexpected expense.

This will ensure it does not have any negative impact on your financial condition and does not rip off the whole financial security.

There are many circumstances which can cause a financial emergency such as a sudden illness, accident, medical emergencies, emergency house repairs, loss of a job, emergency car repairs and much more.

The major reason for having an emergency fund is very clear because when a person falls into an emergency financial situation, they will have to break their savings or make a compromise to get the needed money.

It’s not rare to find people who just take out their credit card and swipe it for hard cash. Opposing popular opinions, credit cards are the worst way to fund any financial emergency. The fastest way to get thousands of dollars its to get a car title loan it is not a long-term solution but a short-term solution.

In a circumstance where you’ve taken a cash advance with your credit card to get the needed money, the credit card company will charge you a cash advance fee with an interest rate. This is a very costly way to borrow and manage finances for emergency situations.

Therefore, what is the best amount that should be set aside as emergency money? There are diverse opinions on it. Some professional’s experts agree that a minimum of 3-6 months’ worth of monthly income should be set aside for an emergency situation. This amount can differ according to marital status, the size of family and lifestyle.

Everyone must reserve some extra cash in case of emergencies. But, the amount to reserve depends on your income and monthly expenses. The amount that is needed for your emergency fund is open to debate, the minimum amount should be sufficient to cover your expenses for daily living for at least 3 months. It’s also ideal to save for 6 months even though some financial advisers agree on a full year worth of cash.

These funds must be kept aside in an instrument, which is easily available when needed. It could be money in a bank account, hard cash, liquid funds or fixed deposits. This will ensure the fund is always accessible instantly or within a short period when it’s needed.

Where to Keep the Cash

Your situations and what can offer you peace of mind are the factors that can help you determine how cautious you want to be. Keep your emergency fund somewhere that is safe and accessible because you may be required to get the cash in a hurry when an emergency arises. The best option you’ve is to open a money market account or savings account. But, always examine their offer with regards to the interest rate, minimum balance, and other terms.

E-Invoicing in 7 Steps

Step One: Know your ‘as-is’ process:

I knew all too well in my days of selling e-invoicing, that if a prospect didn’t know their ‘as-is’ process, they were a good 12 to 24 months from implementing e-invoicing. So don’t skip Step One.

If you don’t know your process, you probably don’t know key metrics like your First Time Match Rate. This means you won’t know the degree to which e-invoicing might help you (and you may have problems in your process which need other solutions, as well).

And, you probably don’t know the true cost of your invoicing process, and therefore will not be able to put together a water-tight business case.

By mapping out your ‘as is’ process you will come to understand:

  • Why invoices fail
  • How e-invoicing can remedy problems in your process flow
  • How many invoices would be ‘in scope’ should you proceed with e-invoicing
  • What your ‘as-is’ cost is, and how much it will go down by moving to electronic
  • How many days it’s currently taking to process an invoice, and how e-invoicing would reduce the time
  • How, by reducing the number of days, your capturing of negotiated discounts might be favorably effected

Step One is likely to take you 3 to 6 months, but by the end of it you’ll be clearer and more realistic when you make your business case.Importantly, knowing your cost-per-transaction is essential for negotiating effectively with the provider you end up signing.

Step Two: Know the vision of the company:

Process change makes sense to stakeholders when it is contextualized against the overarching ambitions of the company.

This means it’s worth taking the time to understand where the company wants to be in 6, 12 or 24 months’ time, and you can extrapolate that intention back to how e-invoicing might accelerate or bolster the realization of that goal. Take the time to lift yourself from the ‘day to day’ and understand where the company is headed. (Ask lots of questions, and really listen to the answers.) Then you can:

  1. Understand and communicate the wider purpose of e-invoicing and position e-invoicing as a key enabler for realizing goals
  2. Use the language of the senior management to present e-invoicing back to them
  3. Move e-invoicing up the priority list

This endeavor requires planning, and an investment of time outside your day job, but it will pay off down the road, when your CFO and CPO and CTO (Chief Treasury Officer) see e-invoicing as their single point of failure.Step Three: Get procurement on board early

This is easier for an organization where Finance and Procurement are already aligned, already share reporting lines and objectives, and operate as one team.

But in organizations where this ‘joined-upness’ doesn’t exist, it’s common for Finance to own the project, because they get the more immediate gains, and involve Procurement almost as an afterthought. This can kill the project on the spot.

This is largely because e-invoicing is a supplier-focused program, and even though Finance, or rather Accounts Payable, pays suppliers, they are actually owned by Procurement. This means suppliers will listen to Procurement regarding the e-invoicing project first, and finance second. So if procurement are not brought in, or are at all dismissive of e-invoicing, your suppliers will feel this mood, and drag their heels in signing up.

This is perhaps the key to getting e-invoicing right, and so easily overlooked as a small detail. It’s not. It will make – or catastrophically break – your project.

When working with Procurement, consider the following:

  • Drivers – why are we doing e-invoicing?
  • Scope – all suppliers, invoice types, AP transaction types, countries?
  • Solution scope – just e-invoicing or an end to end solution?
  • Message – mandatory or optional?
  • Quality of the database – will the comms ‘land on the right desk’?
  • Signatory – how senior will the signatories be? The CPO and the CFO? (Ideally, yes.)
  • Targets – are Finance and Procurement KPI’d on the same targets?
  • The non-compliant – who will respond to the suppliers that resist?
  • Who will own the project? Perhaps Finance and Procurement together?

Investing time in seeking out a partnership from Procurement early on is fundamental to a successful project.Step Four: Give the project a name

You will likely find that the nameless projects stay in project status for a long time, and rarely move to operational or ‘go live’. This is not a coincidence.

By giving your e-invoicing project both a pre- and post- contract name, you:

  1. Give it an identity which helps people ‘get it’
  2. Create interest and curiosity (‘what is this Globe project everyone’s talking about?’)
  3. Avoid confusion because you’re all talking about the same thing
  4. Heighten engagement and inspire greater emotional attachment, especially, I find, if you stay away from the obvious like Globe, Probe, e-Procurement Project – all decent names, but how about something more fun, like names of characters from movies or fiction? Or having a competition (with a really good prize) to come up with the most creative name?

Step Five: Know what you’re shopping forWhat do you want? Is it a best-of-breed e-invoicing solution? Is it e-invoicing with dynamic discounting? Is it e-invoicing with workflow and routing, or an e-procurement functionality for your upstream procurement process? Do you need it to be VAT compliant and language sensitive because you are rolling out across multiple countries? And do you need to use their onboarding capabilities? (This is always advisable.)

Knowing what you want, and then capturing these requirements in a document is key.

You will have:

  • Commercial and business requirements
  • Process requirements
  • Scope requirements (impacting the legal treatment and the languages supported)
  • IT requirements (but these are probably weighted lightly, as all e-invoicing solutions I know of are system agnostic)
  • Resource or/and timing requirements

Then make sure that the companies you invite to respond to the RFP all offer similar-ish services, so you are not comparing one solution type against another completely different solution type in order to make a decision.Step Six: Determine the cost of delayed-implementation

Quantifying the cost of doing nothing – ‘continuing as per’, and having this as a daily, weekly, monthly and annual figure, will help drive a deadline.

It’s advisable to build this figure with the main stakeholders, so they all agree on it, and understand that, allowing the project to slip by a month is actually costing the company X.

Having the daily figure will help drive the pace of the project.

Step Seven: Follow the best practices of the provider

The provider you end up selecting will have likely rolled out 20 – 100 e-invoicing programs (if it is one of the bigger providers like Tungsten, Ariba, Taulia or Tradeshift). This means you will be benefiting from their experience, which is now structured, and documented.

Some providers swear by their best-practices so much that they attach a guarantee to their invoice conversion.

Best practices will include advice like “clean your suppler data, or let us clean it”, “have procurement sign off on the communication”, “be available and ready to respond when some suppliers say they won’t comply with the request”.

7 Signs of a Decaying Financial Portfolio Management System

One of the biggest threats that most Portfolio Managers face is the prevalence of legacy systems.

Over the past three decades, investment advisors have been empowered by the advent of technology from simple spreadsheets to complex home-grown systems. From that time to the present, the industry has seen exponential growth and with it, enormous complexity. Challenges include round-the-clock trading in markets from New York to Sydney, varying accounting standards, shortened settlement cycles, and of course, increased regulation and security issues to name a few. As if that were not enough, technology seems to change every day leaving many legacy systems struggling to keep up with customer demands. Cheaper, faster, smarter, and more efficient norms are expected – they cannot be the exception. Failing systems can sharply undermine your company’s ability to service its customers and maintain its market share, much less grow the business.

In this age of big data, business intelligence, and data analytics, legacy systems can represent a massive risk to your business. If day-to-day operations require the ability to manage process, distribute, and accurately report financial data, being behind the curve is not an option. If this sounds familiar, it is time to ask, “How did we get here?” and more importantly “How do we get out?”

Here are the seven signs that will tell you if you have a decaying system and how it must ideally operate:

1. Facing difficulties while managing data due to disparate systems?

Maintaining data in different systems or manually moving move data from one system to another will lead to inconsistency and errors. Is your data quickly identifiable, consistent across multiple systems, complete, accurate, and reconciled among different systems? If your answer is a NO to these questions, you must reevaluate your platform. Your system must be able to eliminate manual data flow, update all the data with a single change, deliver timely and accurate reporting including intra-day, and make data easily traceable.

2. Are your client communications professional?

Investors expect your reporting to be clear, concise, and highly customized to their needs. This statement holds especially true for institutional investors. Organizations that can meet these expectations will have an immense competitive advantage over those that cannot. If your current system does not deliver the level of reporting your clients expect, you will run the risk of falling behind.

Your client expectations are not limited to the form and content of reporting, but also to how you deliver information. They expect instant access to real-time information, be it through a web portal or a mobile platform to stay relevant and highly competitive, your systems must be flexible enough to send and receive communications via any channel of your client’s choosing.

3. Struggling to cope with complex global investments?

Dealing with multiple regional and global investment regulations such as UCITS V and VI, Solvency II, AIFMD, and EMIR is a daunting task. All these regulations require you to maintain reliable, accurate, and transparent data. To comply with these regulations, you need Workflow Management, Data Management, and accurate reporting. Data, managing risk, and maintaining accuracy is critical to comply with regulatory reporting requirements.

With the increase in data sources and data complexities, your organizations need solution providers who can help you manage your data. Your system must not only be scalable but also provide actionable business intelligence in a format that is easily understood.

4. Finding it hard to achieve Integration of disparate systems?

Real integration is not a matter of simply connecting systems – your systems must be able to talk to each other seamlessly. Manually moving data from one system to another affects your efficiency, thereby, increasing the risk of errors. Integrating disparate systems not only reduces these risks but also improves efficiency by ensuring that back office and front office personnel can view transactions, cash positions, and holdings identically. This ensures that the entries are recorded accurately in your Investment Book of Records (IBOR).

Many organizations use multiple systems for accounting, reporting, reconciliation and managing client information. If different vendors have provided these systems, making them talk to each other could be a challenging process. If you have workarounds or portfolios that reside outside of your legacy system, it is time to rethink its usability. Your system must allow centralized and standardized portfolio management activity. In an end-to-end portfolio management solution that is built on open architecture, the work of multiple systems is consolidated into a single platform. Such a solution will allow easy access to third-party systems or any other system that is built in-house, thereby enabling you to reduce technology footprint while driving greater efficiency.

5. Escalating legal and compliance costs?

A 2013 survey of Chief Technology Officers suggests that one of the biggest operations and technology challenges that asset managers face is to comply with the current and future regulatory requirements. The complex regulations make outdated reporting systems more of a liability than an asset. The compliance costs of regulations such as AIFMD, UCITS V, and VI, or FATCA-are overtaking many budgets. Additionally, aggregating data from different systems for compliance reporting is a risky and resource-consuming process. To reduce these risks and costs simultaneously, your system must be prepared to deliver consolidated reporting, by leveraging automation, integration, and standardization of data from various sources. Your systems must also eliminate the manual compilation of data for reporting, thereby increasing efficiency and cutting associated compliance labor costs while ensuring integrity, consistency, and reducing your operating risk.

6. Being scrutinized by Investors’ due diligence?

After surviving the global economic crisis of 2008, institutional investors have become extremely wary of due diligence, leading to immense scrutiny of operations. The 2008 crisis exposed operational risks – the risk of failure that not only involved market forces but also the lack of infrastructure and controls. Investors have also become increasingly tech-savvy; they are asking the right questions and know what to find. To remain competitive in this vital market, your system must stand up to the intense investor scrutiny. You must show that you have the controls in place to manage the risks efficiently and that you are already adhering to well-organized processes. If Investors sense any gaps in your workflow and find that you are dependent on manual processes and workarounds, they will take their money elsewhere.

7. Legacy systems are not supported, serviced, or enhanced in the way you expect?

A product is only as good as its provider. Is you provider paying enough attention to you after the sale with 24/7 support? Does your provider have a track record of continuous product updates? Do they provide product training? Are they attentive to your suggestions or new ideas? Your provider must provide long-term support if you want your new system to last. Your product must be scalable, flexible, and must be built on open source technologies. In addition, your provider must not only help you set up but also ensure that your systems perform optimally without any disruptions. A relationship is a two-way street; as such, providers must be able to respond to your issues quickly, and also help your business adopt new functionality as and when it is needed.

Invest in your growth

A portfolio management system is the heart of your business. With a weak system, your business can be at serious risk, and you may not have the time to address it before it fails completely. Investing in technology will give you greater efficiency, reduced risks, and help you make informed decisions. Your provider, therefore, must have a proven track record of being committed to long-standing services, continuous improvement, and support you as you grow.