CashFac has long worked closely with NBFIs (non-bank financial institutions) on design of new product as well as ways to enhance banks’ complex cash management solutions. Since 2008 there has been a surge in R&D investment in CashFac Virtual Bank Technology.
This might seem odd against the backdrop of the struggles of the banking sector, CashFac’s biggest market, but the two are actually closely related. CashFac is positioned between two powerful influences – banks and NBFIs. It’s a kind of virtuous circle, the banks get big deposits from the distribution of the product, and the NBFIs get a product that has been designed with their full input.
Historically, the banks would design cash management product working from their core solutions outwards. It always was a key area for investment by banks because of the vast amount of cash that the NBFIs manage or process. Two things happened after 2008: firstly, banks needed better access to stable deposits from customers and secondly the consolidation of banks meant that the focus was on smashing bank platforms together and cutting costs, which basically means that the banks have not had the bandwidth to build the next generation of cash management product.
At the same time the NBFIs have had to grapple with two things themselves: increasing cost to income pressure and new regulation such as RDR (Retail Distribution Review) and the client money regulations in the insurance market.
Competition in the NBFI markets means that they [the NBFIs] have had to specialise and cut costs. Cash processing of client money is becoming so complex that it is emerging as the biggest point of pain and the biggest risk area behind the front line of business. As these businesses increasingly specialise and as compliance affects client money processing at a more granular level, so the resources involved in the detail of cash processing and the attention and sensitivity of financial controllers increases.
Whatever the advance of recent years, the industry is still full of spreadsheets and ledger systems, off line reconciliation and increasing numbers of people.
Our investment has been targeted at real time workflow with bank-connected virtual bank accounts inside the workflows; real time, continuous reconciliation inside the workflow; 100 per cent money allocation and real time problem isolation. We have pushed the surface of our technology out to the wide area to connect the point of origination of money flow and achieved a level of automation where funds are reconciled as they are in flight.
What has surprised our bank partners is the size of the funds in process. It’s not an area where banks have traditionally operated and it does highlight the big difference in cash processing by NBFIs.
Paul Ormrod
