“…this success led me to start my first company at the age of 26, building the world’s first Microsoft Windows-based corporate banking platforms for global trade finance, payments, and custody services…”
Aditya Menon CEO&Founder Tallyx
The Value of Experience in the Computing Era
I was fortunate to land my first job in New York building ABN Bank’s first global high-value payment system for corporates and correspondent banks to initiate payments through SWIFT and CHIPS (the world’s U.S.-dollar clearing house). I was fresh out of my Masters in Computer Science program and full of idealism in the spring of 1986. It was the era of highly centralized mainframe computing, and my project went a small way towards creating a bridge between the bank’s main-frame and corporate customers distributed around the world. On the technical side, mainframes and PCs were notoriously unreliable. Therefore, Jeanette Saunders, who was ABN’s mainframe programmer, and myself created a finite state machine (I learned from the famous IBM Watson Researcher Ron Ashkenazi) to synchronize the last known good state between mainframe and PC, because both crashed regularly. The system actually ran without interruption for five years until it was replaced, and routinely processed hundreds of millions of dollars a day in USD payments from around the world.
This success led me to start my first company at the age of 26, building the world’s first Microsoft Windows-based corporate banking platforms for global trade finance, payments, and custody services. Tiger Systems sold electronic banking to nine of the top twelve U.S. banks, and also to global banks like Royal Bank of Canada. Again, the aim was to connect the bank’s centralized platforms with the corporate treasury and to give them more control over both transactions and information flow. This benefited the bank, as a lot of manual work was outsourced to the corporates, which gave the corporates power and control.
In 1994, I founded my second company, after having sold the first one to SUNGUARD, and decided to flip the business model by offering to automate trade processing for JC Penney and Woolworth’s. These two giants issued hundreds of letters of credit each day, and were inundated by multiple bank treasury software. We solved this by providing a single platform that interconnected the corporates with the banks, seamlessly and transparently, providing the possibility to the corporates to save millions of dollars each year. After their initial resistance at being upstaged by their corporate client, a number of the banks contracted to take our platform, as well, including the bank I had started with — ABN AMRO. ABN AMRO ran fourteen different back offices around the world, and needed a single face to thousands of corporates. So we built BankStation, a single global platform that operated seamlessly across 40 countries and enabled corporate customers to initiate trade, payments, and custody transactions from anywhere in the world. We provided the glue to interconnect a distributed enterprise, a far cry from the initial days of centralized mainframes. The person responsible from ABN AMRO, Johnson Lau, is now one of our key advisors to Tallyx after decades of experience in transaction banking — globally.
The Biggest Threat to Banks
In my more recent past as Managing Director for Global Digital Strategy at Citi, I realized that the banking world I had lived in for the past 20 years was starting to undergo a fundamental transition — led by UX, but also the rails were shifting. Initially, we thought the threat would come from Fintechs, and I co-authored a report in 2016, Banking at the Tipping point, that showed how Fintechs were ready to disrupt the world. This year, before leaving Citi, I co-authored another paper, Bank of the Future, in which we revised our view to see that the real threat to banks was not the Fintechs, but big-techs — Amazon, Google, Facebook, Alibaba, Tencent ,and Baidu. The most profitable area of banking is lending, and these giants have already started to disrupt this last bastion for banking.
Over the past six months, I have come to realization that although Fintechs have not scaled to their disruptive potential, as originally anticipated, they are definitely setting a price benchmark for services:
Decentralization Is Changing the Game
So, what’s next? It’s decentralization that has the power to topple the tech giants. With seven of the top ten most valuable companies now a globally dominant tech giant, we are at a point of peak centralization, and believe that the pendulum can swing toward decentralization.
Looking at the future of financial services through a “decentralized” lens, I realized that just as water finds its own level, transaction costs for financial services can also find their own level, provided that unnecessary intermediaries are removed and a sufficient basis for establishing trust between buyers and sellers exists. It hit us like a bolt of lightning — if we could enable buyers and sellers to enter into smart contracts and tokenize the digital journey for goods and services being bought and sold, we would actually remove a lot of complexity and allow the true cost of doing business to determine what it should really cost for a financial transaction — in our case, borrowing — to facilitate working capital for buyers and sellers.
Banks made about $18 billion in transaction fees for trade finance in 2016, while only serving less than 20% of the market. There is a huge opportunity for us to decentralize trade and hand control back to buyers and sellers. This is the start of an amazing journey, and I like to underscore this with a quote from Will Little of Hackernoon, who says: “We’ve entered a world where “trust” is moving toward distributed networks of machines that no one person, group, corporation, or government owns. These networks have rock-solid data integrity, zero downtime, and financial incentives for anyone who participates.” As Vitalik Buterin and other luminaries make this dream a reality, we are positioning ourselves for a #shiftchange.
The universal quest for efficiency has led us to examine how blockchain redefines the way buyers and sellers interact: doing business in a safe and trustless manner without the need for unnecessary costs forced upon the ecosystem. Another key goal is to remove dependency on a central custodian (clearing house or intermediary) to monitor and affirm transactions.
by Aditya Menon CEO&Founder Tallyx