Four transformations in financial management
The fourth industrial revolution is under way, and technology is advancing in leaps and bounds. Many technological trends also mean changes to companies’ procurement, purchasing and payment processes. Legislative amendments in 2018 will also mean changes to CFOs’ day-to-day work.
All organizations, including yours, should start preparing for the following four key changes:
Machine learning will affect the day-to-day of financial departments more than any other technology over the next few years. Although self-learning machines and artificial intelligence solutions are still seen as visions for the future, they are already part of our lives. For example, the movie you watched on Netflix was recommended to you using machine learning algorithms based on your viewing history.
Companies’ financial and procurement processes are an excellent environment for automation based on machine learning, as these electronic workflows generate a huge amount of historical data about human actions. Machines can learn from this data. This represents a major change: for example, making use of neural networks, the machine independently creates the necessary models for executing a task – with no need for coders. Technology also makes it possible to automate the posting of purchase invoices, in addition to other processes that require inference. We have found that the machine learning algorithm has a success rate of 94 percent, which is continuously improving.
Blockchain technology has been described as a revolution comparable to that of the Internet. It gained a bad reputation from its first application, the virtual currency bitcoin, which is why many companies have not taken this technology seriously. However, blockchain technology has huge potential, and we believe that blockchain-based solutions will rapidly become more common. For example, we are involved in setting up a project to create a catalogue of Finnish e-invoice addresses using the blockchain technology.
A blockchain is a decentralized database in which data is stored on thousands or even millions of computers instead of just one server. This makes blockchain cost-efficient and also extremely reliable: when content can be verified from multiple sources it becomes impossible to modify data. Company supply chains are becoming more and more extensive, so we need a trustworthy technology. Blockchains make it possible to create intelligent agreements in buyer and supplier networks.
The new Directive on Payment Services (PSD2) will oblige European banks to open their system interfaces to third parties. This is the most significant of the upcoming legislative changes at the EU level. The directive is a welcome change: it will increase transparency and competition in the payment market, which is currently dominated by banks. It will create opportunities for FinTech operators and drive growth in the banking sector, which is facing major transformations.
We believe that the PSD2 will streamline payment processes between companies and, in turn, affect purchase-to-pay chains. Payment transaction operators will be able to create new services for companies. They will be able to transfer real-time credit information between sellers and buyers and offer factoring services within the supply chain.
The PEPPOL network will increase in importance in terms of electronic cross-border payments when EU directives oblige public-sector organizations to send and receive e-invoices in accordance with the CEN/TC 434 standard. This legislative change is particularly significant for the tens of thousands of companies that engage in trade with the public sector, but we believe that its effects will also be reflected in trade between companies. Harmonized practices will aid the adoption of electronic procurement and payment models in Europe while also laying the foundation for automatic and real-time selling and buying processes.
How will these changes affect your operating environment? How can your business benefit from the changes? Can your partner provide you with compatible solutions that enable you to be among the first to seize the new opportunities?
There is not much time left to prepare. These changes will happen so quickly that those who fail to act will miss the opportunities.
Petri Karjalainen & Henri Wiik
Petri Karjalainen is Head of Product Marketing at OpusCapita. He studies the effects of disruptive phenomena and technologies on clients and partners and identifies the new business opportunities that they create.
Henri Wiik is Product Marketing Manager for invoice automation at OpusCapita. He specializes in software robotics and machine-learning solutions and is currently focusing on their application within the buyer-supplier ecosystem.