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11-11-2021 14:21

Exciting times for FX automation

FX trading is undergoing a digital transformation, with automated solutions eliminating the manual, repetitive tasks and making more time for brain work. Matti Honkanen, Nordea’s head of Next Gen FX, talks to e-Forex’s Larry Levy in a podcast about the rapid change that’s underway.
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The financial industry in the Nordics has been at the forefront of digitalisation, with no exception when it comes to FX trading. Professionals in treasury and finance departments have for years been trading currencies in banks’ digital interfaces. However, the process has still been highly manual, requiring copy-pasting of data between systems and assembly of vast excel files.

Now, new automation solutions are rapidly revolutionising the process, taking over the manual, repetitive tasks and clearing the way for more meaningful work.

Someone at the heart of this revolution is Matti Honkanen, Head of Next Gen FX, the agile software development team that’s driving Nordea’s FX automation efforts. Honkanen recently spoke to e-Forex’s Larry Levy for a podcast on the current state of digitalisation in FX.

“Right now, the most interesting digitalisation process is taking place in the automation space,” Honkanen tells Levy. The user only needs to provide the system with the rules, and the platform will execute accordingly.

Right now, the most interesting digitalisation process is taking place in the automation space.

Matti Honkanen, Head of Next Gen FX, Nordea

Automation does not mean giving up control

Honkanen emphasises that automating FX processes does not mean a loss of control. Rather, automation and control go hand-in-hand, allowing users to focus on controlling, not performing, the tasks that need to be controlled. What’s more, automation doesn’t eliminate the need for human actors, but rather changes the nature of the work – for the better.

“Advanced digitalisation gives us humans more time for brain work since we need less time for the menial, repetitive tasks like copy-pasting data or performing the same action over and over again every day,” says Honkanen. People can instead focus on how to achieve the outcome they want, and how to improve the results from day to day.

The demand for automation is certainly there. Interest has surged among the biggest treasury departments in the Nordics, which are swamped with manual tasks and hunting for automation opportunities. Nordea’s customer base for FX automation has, in turn, grown rapidly. For example, see how FX automation has been a game changer for environmental services company, Lassila & Tikanoja.

Nordea’s Thematics team recently released its annual treasury survey, which found that large corporates are ramping up their automation efforts. Automation is one of the top three areas treasuries say they would like to spend their time on.

Bridging the business-tech divide

Honkanen says one of the most common problems he sees when it comes to digitalisation is a mismatch between tech and business competencies.

“You’ll have the tech people who have no idea about the business or treasury side and the treasurers who don’t know the tech side well enough to ask for the good solutions,” he says.

To get the transformation right, it is crucial to hire people with sufficient understanding of both the business and technology sides, whose expertise overlaps in a good way. That’s one thing Honkanen strives to maintain on Nordea’s Next Gen FX team – a very close relationship to the business to ensure priorities are aligned.

Honkanen rejects the notion of the classic banks vs. fintech battle, noting that banks can also be fintechs and invest heavily in technology and digital transformation. He expects digitalisation to reshuffle the market, with both banks and fintechs emerging as winners:

“Clearly there is a role to play for the digital and innovative banks and fintechs alike who understand and can fulfil the customers’ needs. The world will belong to those who keep learning and improving faster than the rest.”

The future is more interesting than ever, and the speed of change is actually increasing.

Matti Honkanen

Getting to real-time settlement

Honkanen notes that, contrary to what some cryptocurrency enthusiasts claim, even the current dominant, or so-called “fiat,” currencies are programmable.

“My developers are doing just that, programming applications that trade these currencies,” he says. However, the problem is that it’s not possible to settle these currencies at any time. One can only settle European currencies, for example, during European trading hours.

“It’s quite a big issue for corporates, and the problem gets even worse if you have accounts in multiple banks because the settlement window is then even more narrow,” he adds.

The root cause of the problem, according to Honkanen, is that the current trading and payment flows are running on an infrastructure created a “long, long time ago.” There are many manual steps run by commercial banks, central banks, clearinghouses and other players at the end of the day, making it impossible to settle trades 24/7. That, in turn, means that automatically traded FX can’t be settled efficiently.

However, Honkanen notes that the new digital currencies central banks around the world are looking to develop could be a promising solution.

“The future is more interesting than ever, and the speed of change is actually increasing,” he says. “It’s also great to see that the customers are helping us with this so we can get to the next level.”

Listen to the full e-Forex podcast here.

Find out more about the full range of automation tools in Nordea’s AutoFX Suite, available in DenmarkSwedenFinland and Norway.

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