Investors are pouring money into FinTech startups, as they believe it will transform the world. The possibility of a secure,scalable automated clearing, truncation and settlement solution can be brought with Fintech. Integrategrating seamlessly with banking system and central clearing system, settlement can be doing more quickly and efficiently. With sufficient settlement operations accuracy and proper cash flow maintenance can be achieved.
Modernising Market Infrastructures With Fintech
Fintech developments including distributed ledger technologies (DLT), cloud computing, robotics and artificial intelligence are well positioned to modernise the current post-trade process and streamline the siloed design of the financial industry infrastructure.
It is important to understand the reasons for making the clearing and settlement processes faster and more efficient. More efficient and faster post-trade processing could enable faster recirculation of the capital back to the markets (otherwise tied up in the T+3 post-trade cycles today) and could reduce counterparty risks and thus, also reduce margin/collateral requirements. All these processing efficiency gains could further enable reduction of overall trading fees and enable increased order flow and liquidity.
These benefits seem attractive enough that many capital market players are taking a serious look at the potential for using promising Fintech technologies as the potential base for the next generation of post-trade processing. Fully dematerialised security markets as Singapore, Canada and Australia may be best positioned to emerge as clear leaders in this space and establish the first foundation for the future standard.
Post-Trade Settlement Processing optimisation with Fintech Today’s data hungry world does not stand for Settlement needs revolution for slow download times. Nor will it support lengthy settlement of payments, local or international. Today, the global payments is getting faster and cost-effective payments settlement, both locally and internationally.
- Both securities and funds need concurrent settlement. Transfer has to be final & unconditional, without any time lag between the two (any time lag is ripe for fraud). This concurrency requirement is absolute. Just faster (e.g. Getting from T+3 to a few hours or even minutes) does not meet the concurrency requirement, because hours or minutes are eons to a fraudster.
- Must be on a gross (trade for trade) basis. Any attempt at netting creates delay and creates a multi-tier market infrastructure that will impede innovation. We have Real Time Gross Settlement (RTGS) today – between Central Banks. The disruptive change is RTGS between individuals and companies in a permissionless network (ie the way that the Internet works).
- Centralised energy data in the cloud: Centralised data offers company leaders a single version of the truth, which facilitates faster and more effective decision-making. The fintech platforms that enable data consolidation will rise above the competition.
- Connectivity: Translating disparate data into a common language can allow seamless collaboration between counterparties. This data integration helps companies quickly identify the most crucial pieces of data in any given interaction with counterparties. The fintech innovations that enable data to flow more smoothly.
- Cloud automation: Cloud-based technologies can build on data centralisation and enhanced connectivity to automate key activities.The cloud also allows companies to minimise overhead costs by eliminating the need to perform complex technology implementations and maintain hardware. The most impactful fintech solutions will leverage the many benefits of the cloud to move the industry toward automation.
In the future, fintech payment services could enable companies to automatically process settlement transactions in real-time and transform the current monthly cash-flow cycle. In a new, fintech-enabled settlements and payments could be completed daily (or even more frequently), improving risk management, reducing capital requirements and increasing credit availability while also lowering operational expenses.
