Cash pooling

Fintech
Finance
Banks
Treasury
Liquidity
Cash pooling

Waves Enterprise has developed a customizable distributed treasury and cash management (DTCM) service application for Alfa-Bank. The treasury business application enables corporate customers of the bank to manage account limits and disbursements, and to collect and distribute liquidity, with future versions of the application intended to include loan and deposit management as well as other related services.

Cash pooling
Problem

The current product scenario of cash pooling/cash management services involves realization of business logic directly within the bank’s platform (a centralized approach). The ability to manage product settings, time limits and payment details for inter-company liquidity management and cash collection algorithms is arranged by means of written requests sent to the bank. This necessarily entails certain delays from the customer’s treasury service, as well as the bank’s employees. Deployment of new cash management settings is not conducted in real time, involves paper documents and may incur operational risks and delays.

Market expectations
  • Instrument for cash pooling/cash management group of products/settings, managed from the customer’s premises (ERP or standalone business application).

  • Electronic document exchange mechanisms arranged between the customer and the bank for managing product settings.

  • The ability to customize banks-as-a-service directly from the customer’s premises:

    1. Account balance limit management
    2. Cash collection time limits
    3. Master and subsidiary account management as well as payment details management, plus business logic for cash collection management in real time.
Solution

Waves Enterprise offered to develop a corporate business application for treasury and cash management, with a BaaS (Bank-as-a-Service) approach. In the existing service model provided by the bank, product settings could generally be changed only by means of written requests. Corporate customers receive a business application, in which they stipulate all necessary settings for all corporate accounts and features related to those accounts.

The business application, DTCM (Distributed Treasury & Cash Management), was developed by Waves Enterprise in order to realize individual demands by a specific group of companies, and draws upon the approaches of open banking, open APIs, DLT and smart contracts. This enables distributed logic, which can be connected with the internal business processes and systems of the corporate customer.

Decentralized architecture enables synchronization of business processes between separate companies, allowing real-time information exchange and processing.

text

Basic solution architecture

Operation of the liquidity management and cash pooling service

Advantages:

  1. Execution of a host-to-host payment process that rules out the risk of fraudulent withdrawal of funds.
  2. Reduced costs to the customer for the treasury service, due to automated cash-flow management.
  3. Increased liquidity of customer funds.
  4. Ability to fully customize apps on the customer’s side.
  5. Simple technological integration of the bank’s and customer’s infrastructures.
  6. Improving the solution’s reliability and trust between bank and customer, thanks to the use of digital signatures and GOST encryption.

Transfer of funds is controlled by smart contracts, which ensure that all conditions written into them are observed. This automation dramatically reduces transaction costs, while ensuring full transparency and confidentiality of transactions.

All data is stored on the blockchain and is accessible to participants of the system, based on their permission level.

Alfa-Bank’s first corporate client to adopt the liquidity management system is X5 Retail Group, one of Russia’s top food retailers.

text

«This liquidity management solution takes the services that we can offer our corporate customers to a new level, ” says Denis Dodon, director of Alfa-Bank’s Center for Innovation Development. «The key difference between DTCM and other offers is that we can give our clients more than just a channel to send applications to the bank. We provide them with a way to shape the business logic of the product and actually ‘create a bank’ for the client’s convenience».

Multi-bank/multi-customer model

The connection of several banks and customers, and implementation of a multi-bank/multi-customer model, comes as a natural development to the system. As a result, the following is made possible:

  • Building complex hierarchical structures of cash pools
  • Interbank cash pooling
  • Implementation of a one-stop, user-friendly interface for managing liquidity held in various banks

text

Confidential data exchange process:

  • Each participant’s confidential data is held in private storage on their blockchain node.
  • At the initiation of confidential data exchange between two (or more) participants, the initiator publishes to the blockchain a transaction containing the hash of transferred data, while the data itself is sent in encrypted form over a protected channel outside the blockchain.
  • The recipient (s) compares the hash of received data against the hash published in the blockchain network, and in case of a match accepts the transaction.

Thus, in a private blockchain network accessible by all of its participants, only data hashes are stored, and confidential data itself is held in the local private storage of only those participants who have access rights to this data.

Want to order a project like this?

Send your request and we will contact you.