Accounting fraud has already been a major issue worldwide, with major collapses like Wirecard wiping out billions of Euros of shareholder value. During the COVID-19 crisis, fraud actually skyrocketed, with 72% of the Association of Certified Fraud Examiners expecting to see a slight to significant increase in financial statement fraud. To combat this spike, it requires accounting innovations that prioritize transparency and accountability without sacrificing speed and accuracy. As blockchain technology matures, it becomes the fulcrum for the kinds of innovations that will define the next decade of financial reporting, expense management and accounting systems.
Chris D’Costa is the Founder of Totem Accounting, a fintech startup building a novel blockchain-based peer-to-peer accounting and book-keeping network. He is known as a cryptocurrency early adopter and advocate having founded the Belgian Bitcoin Association industry body in 2013 and is a Lifetime Member of the Bitcoin Foundation. He has given talks at universities and conferences and regularly appears in panels and discussion forums.
What has been the traditional company response to financial technology innovations nationally?
As someone who has had many large international corporations as clients, my experience is that there is often enthusiasm for new technology at first, followed by a reluctance to invest in change – particularly inside the finance functions. This resistance has to be put in context, however. Finance is the heart of a business and if something goes wrong it can have grave consequences for both company and shareholders.
How has this changed over the past few years?
A new breed of senior management has arrived that is much more open to change and new technology. Millennials as managers are now moving business forward because they have a different appetite for change. They see that getting an advantage on the competition starts with using cutting edge technology and we see that finance is just starting to take that step.
Is there anything that has created a culture of change inside the company?
I think the spotlight has fallen on efficiency in the last year since COVID. It has been an accelerator for change, as well as provoking a necessary review of old ways of working. Companies have tried in the past to run lean, but here we have a situation where only the most necessary processes are kept because everything else cannot be carried out remotely. I think this is a net positive for all companies, but brings with it great opportunity for new businesses and technologies to enter across the board.
What fintech ideas have been implemented?
The clear winner in the new fintech area is blockchain, with companies like Tesla, Paypal, Twitter and Square all taking large asset positions in cryptocurrency. This change cannot be underestimated. We now have a situation where treasuries are having to deal with assets that are beyond the traditional scope, and have their own specific management requirements.
What benefits have these brought?
There has been an immediate Balance Sheet benefit to these companies due to the wave of enthusiasm this has brought to the cryptocurrency markets, and rising values. However, more than this, it has allowed C-Level members to explore serious discussions about the blockchain space in general. This could not have happened even 18 months ago, and it opens the doors to what projects like Totem can do.
Do you see any other industry challenges on the horizon?
The biggest challenge to the industry now is around employment. Both employers and employees expect much less loyalty from each other, and this is leading to a sea-change in the way the workforce is engaged.
In addition, remote working has now opened up opportunities for employers to engage anyone, anywhere in the world on short-term contracts. It is likely that today’s children will end up having hundreds of clients across the world during their working lives. This presents a particular problem for software business models that don’t look forward to this future.
Can these challenges be aided by fintech?
Fintech can play an important part in this movement. At Totem Accounting accessing our blockchain software technology doesn’t require a download or a licence – yet it can connect anyone anywhere at any time to businesses and customers. These efficiencies will play a very important role in the future of global employment, and trade.
Final thoughts…
We all know that software is eating the world. There’s an implicit assumption that all this software working as it should. I can tell you as a developer this is almost never the case.
For us at Totem, the recent Horizon scandal which saw hundreds of innocent Post Office managers unjustly charged with accounting fraud and in some cases arrested and jailed highlights the problem. How does anyone trust the software you are using? To address this Totem is building in public. By simply doing this we are holding our own accounting software accountable to the people that will be using it.
