The Finance Stack’s Great Unbundling Has CFOs Asking What They Need to Own

The bigger the company, the more sprawling its back office tends to be.

Enterprise resource planning (ERP) systems are supplemented by treasury management software, accounts-payable and receivables platforms, fraud tools, bank-connectivity layers, payment orchestration, foreign-exchange systems, reconciliation software and elaborate data infrastructure. Now, artificial intelligence (AI) is being introduced across much of that architecture.

The result at many large companies is a finance organization assembled from a sprawling network of applications that must continually exchange data, reconcile records and preserve controls across organizational and technological boundaries. The problem is no longer the absence of technology but that technology’s cumulative complexity.

Consider an ordinary supplier payment. An accounts-payable platform may approve an invoice. The ERP records the obligation. A treasury system incorporates the expected payment into its liquidity forecast. A payment platform sends the instruction to a bank. The bank executes it, and reconciliation software confirms the transaction against the company’s ledger.

Each system may work properly. The company still has to maintain the interfaces among them, and that creates costs that are easily overlooked because they sit across technology budgets, finance operations and control functions.

The previous decade rewarded companies for replacing manual processes with specialized software. The next may reward them for determining how few systems are required to achieve the same financial control.

Read also: Two Years Ago vs. Today: CFOs and the ERP Shift

The New Build-or-Buy Question is Around Ownership, Orchestration and Consumption

Finance transformation has traditionally been concerned with which processes could be digitized, and which new capabilities should be added. Digital transformation and embedded services are now table stakes across enterprise finance. The more consequential question today is centered around which parts of corporate finance infrastructure a company needs to own at all.

After all, cloud computing first weakened the assumption that buying software meant operating it. Application programing interfaces (APIs) have gone further, allowing companies to consume specific financial capabilities without acquiring the complete systems traditionally required to provide them.

A corporation can obtain access to payment networks without maintaining direct technical connections to every participating bank. Account ownership can be verified through third-party services. FX pricing and execution can be embedded into treasury workflows, while fraud detection can be purchased transaction by transaction and bank data can be aggregated through connectivity providers instead of internally maintained interfaces.

The PYMNTS Intelligence report “The Cross-Border Opportunity: How Payments Innovation Can Help SMBs Go Global” found in May that while traditional banks remain the dominant provider for international payments, FinTech companies are expanding their role by turning infrastructure that once required dedicated systems into services that can be purchased as needed.

For CFOs, that changes the buy-build-or-partner equation to one that is now split along the lines of ownership, orchestration and consumption.

Instead of owning every system that processes a transaction, companies may differentiate themselves through the rules governing those systems: when cash should move, where liquidity should sit, which suppliers receive early payment, when FX exposure should be hedged, which transactions require human intervention and how much risk the company is prepared to accept.

Read more: The $100 Million CFO Doesn’t Keep Score. They Call the Plays.

CFOs Become Financial Architects Rather Than Stack Owners

The likely outcome is not wholesale outsourcing. After all, consolidation introduces its own risks. Concentrating payment connectivity, identity verification or treasury operations in fewer providers creates vendor dependency and operational concentration. Shared infrastructure requires rigorous data segregation, governance, portability and resilience.

But a development this July in Georgia’s banking system gives a look at what a modular and interoperable finance core might one day look like.

Five of the country’s largest commercial banks, the Bank of Georgia, TBC Bank, Liberty Bank, Terabank and Basisbank, announced they are are adopting Nasdaq Calypso through a common infrastructure backed by the National Bank of Georgia. Instead of each institution building and operating its own full technology environment, the banks will operate as separate entities within a centralized Calypso instance, with segregated data but common infrastructure, workflows and governance.

See more: The Cloud Risk CFOs Aren’t Measuring: What Happens When a Vendor Disappears?

The rationale is partly economic. Georgia’s banking sector has expanded rapidly, with assets approaching $38 billion, while increasingly sophisticated securities, derivatives and risk-management requirements have increased the cost of the infrastructure needed to support that growth. Building and maintaining that infrastructure independently at each institution would require substantial investment.

The model is designed for banks, not corporate finance departments. But the underlying economics raise a broader question for CFOs: If financial institutions can share sophisticated capital-markets infrastructure, how much commodity financial infrastructure does an individual corporation really need to own?

Of course, companies still need to own capabilities that encode proprietary economics, control or information. A manufacturer may consider its working-capital models strategically important. A marketplace may view its payment-routing logic as central to margins, while a multinational may want direct control over liquidity policy and FX risk.

Still, the directional trend is one where firms are beginning to separate financial capability from infrastructure ownership.