Since when is there a niche to be found in the payments market? It looks like financial software firm, SmartStream Technologies has not only gone and found one but is also on track to corner it. Is this the first in a stream of services signalling a fintech evolution? Anna Milne speaks to SmartStream’s Nathan Gee to find out
Having pretty much invented reconciliation processing, the firm has found a corner in the market for retail payments. And the reaction from banks and payment processors has been quite staggering. A lot of reconciliation is still being done manually. We shouldn’t be surprised, of course. As of last year, there was still a financial services firm in the City of London whose ‘computer’ system worked in shillings and pence and that may still be the case.
SmartStream doesn’t rest on its laurels, the company jets about. And at so many of their international events scoping out interest and opportunity for automated retail payments reconciliation and exception handling, they have been met with great interest to the extent that they are hosting their own events to talk on the subject.
“Often senior representatives from retail payment organisations, such as credit card issuers and acquirers tell us that they did not know this technology existed,” said marketing director Nathan Gee from SmartStream.
“A lot has been done manually to this date and has been ignored all these years. It’s like a mini renaissance, driven by the consolidation of Fintech innovations, which has been referred to as Fintech 2.0,” Gee added.
Fintech 2.0 denotes a new attitude in payments which is more exercised with consolidation and integration than disruption, as new technologies move deeper into middle and back office processes. It has a primary focus on business model development, volume and growth and there is a realisation that better overall control of the payments lifecycle is required, Gee explained.
“Fintech innovation is no longer a matter of individual, isolated single apps, it’s about end-to-end integration of technology innovation into a bank’s existing business,” Gee said.
“Fintech 2 means we are able to provide change to processes and infrastructures,” Gee added.
Gee explained the main driver is the pressure of regulatory reporting in real time, responding to margin pressures and the proliferation of start-ups, consumer-led companies, technology giants, and banks buying new innovation.
“From a tech point of view, banks are looking to have it explained and solved for them,” he said.
SmartStream has conquered post-trade reconciliation automated processing; when a company does it for 70 of 100 of the top global banks, it is safe to say they have mastered it. Since 2000 it has grown through acquisitions and now it offers processing across the middle- and back-office as well as data management.
Delighted by the prospect of branching into retail payments, Gee said,
“A whole new market has emerged in terms of retail payments reconciliation. A new door has opened up and banks are realising new technologies do mean something and are now taking it seriously,” said Gee.
“We have the controls they need to handle transactions from start to finish: reconciliation, acceptance, management. Payments are so competitive and the margins are lower. We provide cost savings.”
The Euro value of single transactions is on the downward slope and there is a lack of automation in this space, according to Christian Schiebl, head of the software’s business unit. Clearly introducing an automated process would help save costs in an area where margins are already squeezed.
“Rather than develop a deep system solution that attempts to be everything to everybody, we collected feedback from the main players in this market, identifying typical use cases.
“The climate in which players are competing is exceptional. Pressure from financial regulators is increasing, all while card schemes, consumer protection bodies and fraud prevention agencies are all adding to the complexity and expense of doing business,” Schiebl said.
“Start-ups have apps, etc. Even with blockchain, no one has talked about reconciliation, we seem to be the only ones in this space.”