This piece is a sort of recap from a panel discussion at the London Tech Week conference that took place several weeks back. The panel consisted of several fintechs (including a ‘challenger’ bank) and HSBC. The header was ‘financial web’ but as one might guess, the discussion seemed to heavily revolve around APIs, particularly with regard to potential impact on small business. For anyone not in Europe (or in Europe but with head in sand), PSD2 requires that banks provide customer data access to licensed payments service providers as of January 2018. As is often the case, further amendments or timing adjustments may be forthcoming.
This particular topical range appears to have been somewhat UK-centric, with the indication that roughly 99% of private sector businesses there are considered to be SMB. Although this may be the case, that is subject to definition, and certainly does not take into effect job share or contribution to overall national wealth. However, in terms of overall numbers of businesses, it is directionally similar to most countries. The point for this discussion was in part around the unrecognized potential for small businesses to capitalize on the already existing and emerging technology.
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.”
This topic can naturally take various directions. In this case it touched upon API impact to bank security (an ongoing concern), new competition, artificial intelligence (AI) and the relative difficulty of a computer making a collective “corporate” decision (as opposed to a consumer version), and from a practical standpoint, SMB access to capital. The lending subject is particularly appropriate since SMBs have less access to liquidity and higher costs to attain it. One interesting connection was made between opportunity and risk.
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.”
Certainly seems better to have been there, but topically of course an ongoing set of speculation around where fintech is leading us.
Overview by Steve Murphy, Director, Commercial and Enterprise Advisory Service at Mercator Advisory Group
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