London Tech Week this year once again opened its doors to celebrate some of the greatest global progression in technology. London is leading innovation in fintech in particular – despite some doubts since the UK’s decision to leave the EU, research has revealed that London’s fintech scene is growing more than three times faster than Berlin’s.
Transformation is happening in every sector, but in finance the effect is particularly acute. At a Financial Web panel discussion as part of London Tech Week, Xero welcomed the CEOs and Founders of challenger bank Tide and MarketInvoice along with HSBC’s Global Head of Propositions, Commercial Banking, to discuss exactly what this means for business.
Open APIs hold the key to a next generation of business management
Small businesses have not typically been at the forefront of being able to tackle the ubiquity of mobile and machine learning to use to their advantage. But given their prevalence in the UK – SMBs comprising over 99% of all private sector businesses in the country – things are now changing. Small businesses can now access the innovative services they need, all thanks to open Application Programme Interfaces (APIs).
George Bevis, Founder and CEO of challenger bank Tide said that although APIs are changing the game, the opportunity is still fairly limited: “There are a limited number of companies in the country who have opened up APIs and as far as the technology goes, we haven’t yet seen anyone creating an idea that is truly game changing, so there is real potential in the future of the financial web.” Bevis warned however: “When it comes to finance and in the case of some traditional banks, there are fears that opening up platforms for other solutions to plug in to could cannibalise their own business, and security too, which simply isn’t true. It’s entirely necessary to evolve.”
Richard Davies, Global Head of Propositions, Commercial Banking at HSBC said that the bank was the first to create an open banking API, and its enthusiasm to adapt to the changing needs of businesses who expect a range of collaborative services to be available to them is critical to ensure they stay relevant. “We have lent nearly £10bn to small businesses in the last few years, but accessing capital is now going beyond traditional bank loans. Banks, accounting software and accountants are more joined up now and APIs have the potential to solve problems beyond banking, while still keeping traditional banks integral to the process.”
From filing accounts to funding, SMBs need more speed
Anil Stocker, MarketInvoice’s CEO and Founder spoke to the audience about how getting funding is still a ‘horrendous experience’ for businesses. “The whole process is far too long, from printing off ledgers to taking them for review,” Stocker explained. Companies like ours can offer solutions that reduce these types of tasks down to minutes, simplifying processes and all the while ensuring everything is available to the business owner through one channel – in this case, Xero’s API. The objective here is to provide fast, flexible funding for growing businesses to meet their ambitions.”
Banks have the advantage when it comes to machine learning
A really exciting element of fintech development, the panel discussed, was hidden in the potential of technology like machine learning. “Historically, business banks are just not as inventive as consumer banks, although more financial institutions are sitting up and taking note of the progress being made now than they used to,” Bevis commented. “There is a huge amount of untapped opportunity relating to machine learning – and at the moment humans are used in most business risk decisions as opposed to consumer, as there are subtle indicators that machines do not yet understand. But with a big enough data set, you will be able to replicate that sort of thinking with low cost rates, and it’s here that banks may have the advantage in the next few years.”
And data is exactly what’s key for these machines to learn, and we’re seeing it more and more as banks and technology companies learn to share. The flow of financial data, who controls it, what technology powers it and what regulations protect it, is a debate that’s long seen banks and financial technology companies situate themselves on opposing sides. However, strategic partnerships between the two parties are successfully bringing banks closer to their customers and there’s a growing school of thought that banks and tech companies can actually be friends, not foes.
Keri Gohman, President of Americas for Xero, says on the issue: “With the ability for Fintech companies to access banking data with a set of credentials, it’s understandable that banks may be dubious of them and their potential to compete. Increasingly, though, banks and Fintech companies are recognizing the strengths of their counterparts–teaming up to help share their customers’ data in a secure way and giving the user power to put their ecosystem together.”
It’s important to note that better access to data from the bank’s system gives the bank control. But moving forward, consumers will expect to have the bank’s system work seamlessly with the apps that they use in their daily lives. Banks that don't integrate will be left behind.
A point one of the audience members raised was that there is challenge in educating business owners and influencers about the progress and potential of the financial web, as the concept and its potential is still relatively unknown. Companies with open APIs offer a ready-made customer base to smaller companies offering add-on solutions, and these are customers who are aware and embrace this kind of technology.
But one thing is for certain - there is work to be done in proving to the wider business community about how game changing these developments will be in the future, giving small businesses back the power.
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