Fundtech: the journey to value - Chris Zingo

Fundtech is a leading provider of financial technology to banks and corporations. Here, the company's global head of sales, Chris Zingo, speaks to Future Banking about implementing a new software standard in payment processing across the entire supply chain.

A heady cocktail of regulation and innovation is transforming the payment processing space at banks and across the financial supply chain. The former has seen banks and corporates reacting to new rules with incremental technology fixes while the latter has forced them to become more technologically agile.

These changes come at a considerable cost, and Fundtech's global head of sales, Chris Zingo, believes these investments are not being optimised.

"What's happened in the past is that banks and corporates have responded to regulatory requirements by investing in a tactical fix and then having to go back later and reinvest because regulations continue to evolve and also because these tactical fixes aren't scalable," he explains.

"Many of our customers are realising that they aren't leveraging their investments. We recommend organisations address tactical fixes as a starting point, but implement scalable systems that can address strategic objectives over the long term."

Fundtech is a leading provider of financial technology to banks and corporations of all sizes in the Americas, EMEA and Asia-Pacific. It was founded in 1993 and publicly traded on Nasdaq until November 2011 when GTCR, a Chicago-based leading private equity firm, acquired the company.

The firm develops transaction banking systems, which it offers as a software licence or software as a service (SaaS). Major product lines are available for payments, including solutions for payments execution, immediate payments, CLS and SEPA; cash and liquidity management, supply chain financing and electronic invoice presentment; financial messaging, including SWIFT connectivitiy and solutions for compliance and anti-money laundering; and remote deposit capture, merchant services, credit card gateway, and mobile banking products.

"We've been around for 20 years," says Zingo. "We've been building our capabilities organically and also inorganically through strategic acquisitions, looking after the fundamental components of the supply chain: cash, payments, financial messaging and merchant services."

One-stop shop

Fundtech offers transaction banking across the whole supply chain, connecting the corporations with the banks. It is one of the only companies catering to the whole supply chain in this full-service manner.

"We have a pretty mature customer base and our opportunity is to align these capabilities and deliver more value to them," says Zingo.

The ethos, he adds, is to "convert capability into utility". This means looking for areas of the market where the company can provide additional utility for its customers, and driving those solutions.

"We're very focused on the challenges our customers are facing today," says Zingo. "There is a major shift from a product-centric view of the world to a customer-centric one. We not only help the banks, but also their customers, the corporates, and the corporates' customers too."

For many institutions, a lot of their payment operations have traditionally been aligned to business strategy, usually the products and services they deliver to customers. This has brought about a natural fragmentation of operations; people focusing solely on high-value or low-value payments, for instance.

Fundtech's objective, in contrast, is to fully automate the supply chain so that it can drive straight-through processing (STP) of any transaction. The company's automated STP software solutions help financial institutions to manage all types of payments, within and across national boundaries.

"What we're seeing now is that there's a switch to a cross-transactional model, independent of the nature of the transaction and the nature of the payment type," Zingo explains.

"Organisations are being forced to become cross-asset in nature - to have an infrastructure agnostic of the business or the instrument they're supporting, but a lot of the traditional technology at the banks was built for product lines. We've been cross-asset from the beginning so we can automate all payments from the channel, through processing to clearing and settlement."

The benefits provided by this kind of consolidation are manifold. Firstly, if you don't have full automation of your payments, it's very difficult to give customers the cash position visibility they want in real time.

"What the corporates are really pushing for is end-to-end visibility in cash," says Zingo. "That means full automation of ERP and full automation of the decisions they make in terms of how they use cash."

However, one of the bottlenecks in this process is this fragmentation of payment operations. And what corporates are discovering now is that they need to consolidate to a global cross-transactional payment hub. To compound the issue, the core payment business is becoming more commoditised.

"You have bigger banks going downmarket and small banks moving up because of technology," says Zingo. "You also have third-party providers and the corporates themselves providing their own solutions, such as SWIFT solutions, for example, so that they can achieve more independence from their banks."

The journey to value

This all means that transaction banking is a strategic area now. It's an area that can be monetised if banks are able to provide creative solutions, but in order to do that they will need to further increase efficiencies and automation. If everything is consolidated on one platform then it brings all the fragmented work on wires, and low and high-value payments - regardless of transaction type - back to those people in the bank that can execute innovative new payment solutions.

"The challenge is to find a journey to value for our customers," Zingo explains. "We don't have a problem with buy-in - people want this; where it gets interesting is figuring out how to do it. So we work intimately with our customers and what we're seeing is that a lot of the immediate steps are determined by regulation - there are certain things that they just have to do.

"When you look at the core requirement of the client, most customers of banks want the ability to originate, execute and process transactions in real time.

"They want to know how to get end-to-end visibility of transactions and what intelligence they can add to this in order to make strategic decisions on how to allocate that cash, how to fund business operations and what to do with excess cash. They realise now that, if they can optimise the way they use their cash, there's a lot of value they can extract."

There's a lot of focus on onboarding from an automation point of view (the fewer touch points the better), host-to-host connectivity and ERP integration to generate this level of visibility. Banks are also offering more functionality to customers, and to their customers' customers, so Fundtech is working with many organisations to fully automate the supply chain.

"I'm surprised at the volume of manual cheques corporates are still writing, as an example," says Zingo. "What we provide is an opportunity for banks and corporates to provide automation and report on it."