March 3, 2021

The perks and dangers of the democratisation of finance

The GameStop / Robinhood saga has dominated the news over recent weeks and provoked some strong reactions across the industry. For FinTech as a whole, the scandal raised some intriguing questions the industry might have to address in the future. In this post, we explore some of the perks and dangers of the democratisation of finance.

The “democratisation” of finance

The FinTech industry is often characterised as disruptive, fast moving, providing innovative solutions and allowing easy access to financial services for consumers as well as businesses. Popular banking apps such as Chime and Monzo have allowed individuals to access a range of banking solutions through a simple click of a button. We have also seen the world of investment and trading opening up to the general public thanks to an array of players such as Revolut, SoFi or Ally Invest. Previously inaccessible financial markets and investment options are now attainable by just about anyone thanks to FinTech.

Companies in this space pride themselves on offering a tailored, personalised and convenient customer experience to users. MoneyFarm, for instance, pledges to “handcraft” investments for its customers, creating a unique profile per investor, customised based on individual investment goals and risk appetite, all the while claiming low fees and adequate protection.

The dangers of inadequate education

The GameStop / Robinhood saga showed us that the “democratisation” of investments through FinTech is not without its share of risk and implications. Opening such nuanced and often risky endeavours to the general public can prove catastrophic if not executed with the adequate knowledge and understanding it requires.

A chilling reminder of the dangers of reckless investment is demonstrated in an advert for online trading platform XTB. While the face of the brand, world-renowned football coach Jose Mourinho showcases the opportunities of online trading with XTB, the small print at the bottom of the screen warns that “79% of retail investor accounts lose money when trading CFDs with this provider”.

One example of the volatility of online trading is the case of high-tech vehicle brand Nikola. Following the hype that was going to make Nikola “the next Tesla”, the start-up’s value more than quadrupled within a couple of months last summer, only to lose most of its value by the end of the year. In this case, the power of internet and social media enabled inexperienced investors to help the company reach spectacular highs as well as lows.

The gamification of investing

In recent years, investment platforms and FinTechs have also increasingly presented customers with a gamified user experience. Interestingly, academics have found that the simplified user interfaces employed by popular “millennial investment apps” could easily compare to those seen in a game, and that users can have a game-like psychological experience when interacting with them.

In Robinhood’s case, a top layer of the app showing strongly performing stocks could entice customers to invest in them who otherwise may not have done so. Not only is investing becoming more “fun” and accessible, but it may also be becoming somewhat addictive for a portion of investors. The recent events surrounding the GameStop stock have illustrated the impact the influx of retail investors who have been attracted to this gamified experience can have on global stock markets.

Reddit’s /r/wallstreetbets community has for several years explicitly promoted treating options trading like a casino, recommending platforms such as Robinhood as an easy and fun way to gamble on the markets. The highs and lows of the GameStop story have likely encouraged many more people to try out investment apps for the first time, and it remains to be seen whether these new investors will fully embrace the riskier elements of /r/wallstreetbets-style day trading. The extent to which these newer customers fully understand that mistakes in this complex environment can have real world financial implications certainly remains unclear.

Striking a difficult balance

Despite the obvious risks involved and amidst the GameStop controversy, Robinhood reiterates its stance towards its principles of laissez faire investment. Its ad at this year’s Super Bowl confirmed to the audience that “we are all investors”, marching on in its quest for new customers. Web communities of the likes of Reddit encouraging group action via slogans such as “underdogs can accomplish just about anything” will have prompted many to get on board.

Amongst the more responsible investment platforms, eToro offers a comprehensive ‘Education’ section on its website, ranging from financial markets guides to blogs, podcasts and tutorials. This education piece is crucial in helping narrow the knowledge gap between Wall Street / City professionals and hobby investors. The option of setting up virtual accounts for users new to try the world of investing is another method of demonstrating the ins and outs of the industry. However, despite some investment platforms also caveating the risks, the emphasis very much remains on the opportunities investing can provide.

As FinTech continues to evolve it will continue to look for the right balance between the opportunities and risks it provides to its customers. The amount of new customers investment platforms continue to attract seems to suggest that they are satisfying a clear demand for such products. However, at the same time, setting up the right guardrails and offering adequate education and support to customers is increasingly important as these FinTech services move from niche to mainstream.

February 1, 2021

The state of FinTech: a recap of 2020 and a glimpse into 2021

2020 was a very challenging year for most industries, and FinTech was no exception. However, the FinTech industry seems to have weathered the storm that continues to ravage the globe. Below we discuss three of the main trends KAE identified as defining for the industry.

Maintained growth & consolidation

Following the outbreak of the pandemic, investment budgets were slashed in most industries as uncertainty began to overshadow strategic planning. Less so in FinTech. Investors seem to have retained their confidence in financial technology as global FinTech investment reached $44 billion in 2020 – an increase of 14% from 2019. Unsurprisingly, the US was the main catalyst of growth, attracting the largest share of capital with $22 billion – up by almost a third from the previous year. More surprisingly, although Brexit seems to have contributed to a 9% year-over-year drop in funding, the UK retained its position as the #1 destination for FinTech investment in Europe.

Consolidation has been an ongoing theme in the industry, and the new challenges of 2020 further accelerated this trend. While lesser known / emerging start-ups continued to struggle to convince venture capital investors, more established FinTechs secured investments of record high value. Visa’s $5.3 billion acquisition of data aggregation start-up Plaid (blocked by US regulators since) and SoFi’s £1.2 billion purchase of banking-as-a-service provider Galileo were prime examples of the high-value M&A activity that dominated the industry. Venture capital also continued to pour into FinTechs sitting at the top of the unicorn’s horn, with Stripe ($850 million), Chime ($700 million) and Klarna ($650 million) raising the highest amount of funding throughout 2020.

Going forward, with the growing size of such deals, regulators are likely to increasingly scrutinize direct takeovers – which could somewhat hinder the pace of consolidation. However, the industry seems to be ahead of the game, with some players focusing on incremental investment in their strategic partners (also referred to as “creep acquisition”) that are more likely to get the green light from regulators. The example of Visa’s ever strengthening partnership with and stake in Klarna is a template many other legacy players could try and emulate in 2021 and beyond, as they strive to maintain their stronghold over the industry.

Riding the waves of the pandemic

The accelerated pace of digitalization we saw throughout every aspect of our personal and business lives is one of the main reasons why the FinTech industry as a whole has withstood the challenges posed by the pandemic. As most of our activity defaulted to remote, FinTechs that cater to this new paradigm saw immense growth.

FinTechs offering online / mobile banking, payments, investment or lending to individuals and / or businesses saw record adoption rates and continued their shift from the periphery to the mainstream. In Europe, FinTech app usage grew by 72% in the direct aftermath of the pandemic outbreak, while the top seven digital banks in the US grew their cumulative user base by 39% throughout the year. Moreover, the boom experienced by e-commerce and m-commerce across the world also helped power the FinTechs that feed off these ecosystems.

While most of us will hope remote is not the new normal, digital is seemingly here to stay – offering a plethora of opportunities for FinTechs to capture. Payments start-ups Deserve and Plastiq, digital banks Upgrade and BlueVine, investment platforms Pagaya and EasyKnock and online lenders LendingPoint and C2FO are currently amongst the fastest growing FinTechs that are gearing up to challenge their more established peers as well as incumbents this year.

Logos sourced from relevant company’s LinkedIn page

Embedded finance

For some time now, offering financial services is not legacy banks’ prerogative anymore. However, businesses whose core focus is outside financial services, have traditionally relied on partner lenders / payment providers to satisfy their customers’ financial needs. Then came a new phenomenon: embedded finance, namely “nonfinancial companies offering financial products and services to their customers while retaining complete control over the customer experience” – a market tipped to be worth $7.2 trillion globally by 2030. So far, Amazon has spearheaded this space, recently extending its lending propositions to cater to not just its merchants but also consumers with its buy-now-pay-later offering. Shopify white-labelling Stripe’s payment acceptance engine is another successful business model others might want to follow. We expect BigTechs and other non-financial giants to join the game soon; and while payments and lending seem to present the clearest opportunities, other types of financial services are likely to be trialled too. FinTechs often have a niche technology that is superior to that of their partners, or offer a fitting complementary service. This represents a win-win proposition: software-as-a-service providers of the likes of Solarisbank, Railsbank, Modulr, Marqeta and Treezor will be more than happy to remain behind the scenes and capitalise on their partner’s vast customer base.

2020 was a tough year and 2021 did not exactly start off on the right foot either. Still, while the FinTech sector is likely to have its casualties, the industry will also produce winners. The flux caused by the pandemic is not just about its threats but also opportunities and their agility puts FinTechs in prime position to capitalize on these. 2021 is shaping up to be another interesting year for the industry.

March 26, 2020

FinTech health check: Covid-19

What the current Covid-19 pandemic means for the global FinTech industry

The current pandemic sweeping through most of the world has wreaked havoc in most areas of the economy as well as our personal lives. As schools and businesses gradually shut down, governments plead for people to stay home to contain the spread of Covid-19. With the virus showing no sign of going away, countries could remain on lockdown for many months to come.

However, as is the case with every change, among the many challenges, the pandemic might provide some industries with an opportunity. As we minimise personal contact, services offered in digital form are becoming more popular. While Netflix and Amazon Prime replace cinemas, DHL and FedEx does the shopping for us, and Uber Eats and Grubhub connect us to our favourite restaurants, people have an option to manage their finances remotely too.

Within financial services, FinTech companies have been the main drivers of digitalisation. With some more mature FinTech services appearing to have plateaued recently, could the current crisis provide the next push for the industry? Let us have a look at some obvious suspects that could gain traction during the pandemic.

  • Peer-to-peer payments: As people across the world are advised, or even forced to stay home, digital wallets (e.g. Venmo) and mobile money (e.g. M-Pesa) might be the easiest and quickest channels to send money to peers, whether within the country or internationally. With many of the world’s borders closing, sending money to family members / friends stuck in a foreign country is likely to become more relevant. Cross-border payment solutions (e.g. TransferWise, Revolut) can help people send much needed funds to others faster (even real-time) and cheaper (even fee-free and at mid-FX rate) than banks and traditional FX companies.
  • Online merchant payments: As part of the lockdown enforced by many governments, ‘non-essential’ shops are being forced to close, while more wary consumers will likely try to also avoid stores that continue to be open such as supermarkets and pharmacies. Thankfully, ordering groceries, ready-made food and medicine, as well as non-essentials such as books and clothes should not be a problem across most of the world. With a variety of digital payment methods such as mobile money in Africa, QR payments in Asia and digital wallet payments in Europe and North America available to online buyers, we expect the likes of PayPal in the U.S., M-Pesa in Kenya, AliPay in China and Swish in Sweden to accelerate their war on cash even further.
  • Consumer lending: As people might lose some of their income or even their jobs over the next months, loans of all types are likely to rise in demand. While banks are still kings in the lending arena, their digital loan propositions are often cumbersome and require personal visits to the branch. On the other hand, some FinTechs are mastering digital credit scoring by utilising advanced machine learning and artificial intelligence to better understand their customers through alternative sources of data. In areas including consumer loans (e.g. Affirm, Klarna, Tala), mortgages (e.g. LendingHome, Blend) and student loans (e.g. SoFi, CommonBond), these solutions can help provide, facilitate or refinance loans more efficiently.
  • Business lending: Similarly to individuals, some businesses might find themselves in need of cash to cover their costs as they face a slump in demand or even being forced to close down for some time. With their advanced credit scoring algorithms, small business lenders of the likes of Kabbage and Funding Circle as well as payment service providers such as Stripe and iZettle might see an uptick in demand for their short-term loan and cash advance services.
  • Health and life insurance: Amidst a life-threatening pandemic, health and life insurance will always be amongst the most in demand financial services. While some countries offer universal health insurance for all their citizens, in some others such as the U.S. many people rely on private health insurance. With incumbent insurance companies generally slow to innovate, InsurTechs such as Oscar in the U.S. have come to the fore with their digital solutions, offering personalised plans to individuals, families as well as businesses, the latter who are looking for coverage for their employees. InsurTechs such as Ethos in the U.S. are tackling the life insurance space and are increasingly gaining traction, using predictive analytics and sophisticated data technologies to provide cover that is easy to access and available for all.

Other than the immediate traction some of the above solutions might experience, the pandemic is likely to trigger FinTech activity in other areas and have a long-term impact in previously underpenetrated industries, none more likely than the healthcare sector. With current FinTech solutions only scratching the surface of the industry, the pandemic is likely to reveal the shortcomings of healthcare systems globally that need streamlining. HealthTech and other forms of digital health innovation will become more critical as Covid-19 spreads. Looking towards the future, the FinTech solutions that emerge from this crisis will help people, businesses and the government better manage our finances and lives in such unprecedented times.

For this to happen, there is a call to action for the investment community and governments around the world. They need to remain committed to and protect FinTechs as in these difficult times many may find themselves short of funding and / or working capital. Covid-19 is set to reset many parts of the global financial services industry, with FinTech (including start-up valuations) amongst the most affected. On the other hand, the current situation may also spur M&A activity as some FinTechs look to scale their operations in response to new opportunities or to just survive.

Written by:

Matyas Fekete

February 14, 2020

Vantage: Tink

We interviewed Tink, Europe’s leading open banking platform that enables banks, FinTechs and startups to develop data-driven financial services

Tell us more about Tink! What makes your vision unique?

Tink is Europe’s leading open banking platform that enables banks, FinTechs and start-ups to build smart digital financial services for their end-users. This is done by allowing our customers to fetch data from over 2,500 banks in Europe — that reach 250 million European bank customers — and build personal customer experiences on top of this.

Our mission is to enable data-driven financial services that delight both our customers and our customers’ customers. Tink has been paving the way for more customer-centric financial services since it was founded in 2012 by our CEO Daniel Kjellén and CTO Fredrik Hedberg. By enabling our customers to access financial data on behalf of their customers, we allow them to focus on the development of their core business idea, bringing their vision to life, and ultimately creating better experiences. We do this by removing all of the complexity and providing seamless authentication (and consent) flows for customers of practically any bank in Europe, with just one line of code.

2019 was a busy year for Tink, including high-value funding rounds, expansions and partnerships with the likes of PayPal and NatWest. What can we expect from Tink in 2020?

I think we’re just getting started! In January alone we made three major announcements. We first announced that we closed a €90 million funding round, which we will use to sustain our growth in Europe and help us further evolve our offerings. In the second announcement, less than a week later, we shared that we entered into a strategic partnership with BNP Paribas in Europe — building on the existing collaboration with BNP Paribas Fortis in Belgium, and will soon go live with the bank’s Italian network known as Banca Nazionale del Lavoro. The third major announcement from January was that the Tink Platform is now officially live in France. This means that over 4,600 developers on the Tink Platform can now start building services for the French market.

Looking at the months ahead, it’s clear that the PSD2 saga isn’t over yet. However, we’re not going to wait for the dust to settle. We’re committed to living up to our promise in making sure that we provide the tools to empower our customers to start building the future of financial services whether the APIs are ready or not.

Partnerships with banks are integral to Tink’s success. What are the main challenges of working with incumbent players? How do you overcome these?

My personal opinion is that innovation does not come easy to large financial institutions. The operating model has been optimized like clockwork around fixed processes and parameters. These institutions are frequently audited, manage huge amounts of capital, and typically serve thousands, if not millions of customers; they have enormous responsibility on their shoulders.

For Tink, this means that we’ve had to mature as a company much faster than most start-ups. We have had to get a banking licence issued by the Swedish FSA, set up a support organisation with extremely stringent Service Level Agreements (SLAs), and source the best talent in the industry to process all of the legal and technical requirements to deploy new technology at scale.

Tink’s partnership with NatWest made the news recently, resulting in the launch of NatWest’s personal finance management feature. What makes this feature unique? And what other features do you think are integral to a state-of-the-art mobile banking app?

Few people outside Sweden know this, but Tink was originally founded as a consumer app in Sweden. During our years as a consumer company, we’ve learned that the future of mobile banking is not a features game, it’s an engagement game.

Today our Personal Finance Management (PFM) technology aims to help users understand their finances, empower them to make smarter decisions and, ultimately, achieve financial happiness. We do this by providing our customers the tools to quickly build intuitive, personalised and visually engaging customer experiences.

When it comes to PFM there is no one-size-fits-all solution. The relationship between a bank and its customers rests on a foundation of trust and therefore the PFM experience should too. Ultimately, it’s all about having the users’ best interest at heart and building from that starting point.

While many industry players have implemented open banking features and apps, the progress of open banking has been slower than many expected. What do you think has led to this? And what do you think is necessary for open banking to reach its full potential?

The sceptics are saying that the progress has been slow, but I don’t necessarily agree. It is true that the quality of PSD2 APIs has not been as good as many hoped. In fact, in September we had to conclude that none of the PSD2 APIs that Tink integrated checked off all of the requirements outlined in the regulations. Now, in 2020, we still find significant deficits from a technical and user experience perspective. However, these shortcomings should be considered temporary, as the industry is successfully working together to develop exciting new use cases that will deliver value to customers in extraordinary ways.

There is evidence of this success everywhere. According to the European Banking Authority’s Payment Institutions Register, over 183 companies have been granted a licence to perform account information services and/or payment initiation services in 2019; Tink’s platform is now counting over 4,600 registered developers, up by more than 200% year-over-year, and we’re seeing open banking use cases emerge for every phase of the customer journey — from onboarding to support.

So, from my perspective, I think we’ve already made impressive leaps, but I’ll admit that there’s still an amazing opportunity ahead of us. I often say that open banking is a 20-year industry transformation. I personally believe that regulations such as PSD2 — when fully implemented — will provide a more than adequate framework to enable banks, licenced TPPs, and other stakeholders to deliver enhanced financial, and increasingly non-financial, services.

The past few years have seen the consumerisation of B2B banking services, as business account holders are continually having their expectations raised by their experience as consumers. To what extent do you think Open Banking will disrupt the B2B space going forward, and what particular applications do you see as candidates for this?

Most people will probably encounter open banking technologies for the first time as consumers when using multi-banking PFM apps. However, in the B2B space, businesses across all industries have been using account aggregation for many years.

Before PSD2, most enterprise financial management software vendors enable business customers to gain a consolidated view over their finances. But after the strong customer authentication (SCA) regulations were enforced on September 14, 2019, a lot of the existing connections broke and now businesses are anxiously looking for new mechanisms for creating a single overview. Over the next 12 months, we expect to see more-and-more businesses move over to open banking platforms such as Tink to fully benefit from recent enhancements.

More importantly, seeing the innovation in the B2C space, businesses will start to demand more intelligent services from their banks and service providers. Specifically, with open banking, there are opportunities to improve invoicing, cash management, tax optimization, and capital risk. The chief financial officers and treasurers of the future will expect higher levels of automation, lower costs, and more direct control over business operations through open banking.

The banking space is becoming increasingly competitive, with incumbent banks, FinTechs and most recently BigTechs all vying for market share. What role do you foresee for these types of players in the banking ecosystem of the future?

Like many other industries, the financial services industry is currently going through a digital transformation. By now, most large banks are trying hard to become more digital, agile, and innovative. I don’t think there is a single bank in the world that thinks that the future of, for example, customer onboarding is going to be in a branch office. They know it will be online, on an app, and at the leisure of the customer.  However, these banks also have a large number of traditional customers that continue to rely on predictable and familiar practices. These contradicting forces, the investments in compliance, product and service innovation, and change management, and the current monetary policy enforced by the ECB is putting immense pressure on operating margins for some of the largest banks in the world. And honestly, this is one of my personal concerns because history shows that when a bank stumbles, so does the economy.

Some banks will try to solve this problem alone, but the smart ones will take advantage of the ecosystem. This is why I think roles for FinTechs, BigTechs, and financial institutions are going to be increasingly symbiotic. When thinking about BigTechs, some have indeed announced partnerships with banks to launch financial services. However, they themselves have no interest in being as heavily regulated as the banks. When thinking about FinTechs, some may be looking to take a piece of the pie (e.g. challenger banks, alternative finance lenders, payment institutions), but most operate alongside the banks by complimenting or even augmenting their existing offerings.

This is Tink’s position as well, we aim to empower banks — as well as some of the other creative FinTechs in the market — to build the future of financial services. Ultimately, powered by open banking technologies, I imagine that this ecosystem will continue to grow and stretch into every other industry we know.

What are some key trends that you expect to see in 2020? How will Tink look to take advantage of these?

There are several things that will define 2020. Firstly, we expect to see a plethora of customer-focused use cases going beyond simple ‘money management’. Think easy onboarding portals, personalised financial dashboards, embedded payments, instant loans, and bespoke financial services. I think that applying machine learning and artificial intelligence (AI) to open banking data is going to be pivotal here.

Second, I also foresee banks shifting their focus from an investment perspective. Many of the discussions in 2019 were around ‘exposing APIs’ for the sake of compliance, providing other players with a window into your company’s data. This year, we expect to see banks step up as TPPs (Third Party Providers), looking at ‘consuming’ other providers’ APIs in order to enhance or augment their existing financial services, operations, and digital interfaces.

Finally, we’ll see several incumbent banks in Europe trying out the marketplace model as we have seen with Starling in the UK. From being a closed shop, offering only their own set of products and services, to a marketplace, offering a range of products from other banks and TPPs to their customers.

Our opportunity is to provide the rails and brains of open banking. In other words, the infrastructure to access data and initiate payments, and the tools to enable our customers to build competitive data-driven services. We believe that any business that can provide value should be able to access financial data with the customer’s consent, enabling them to leverage the power of technology to offer great products.

Written By:

Jan van Vonno
Research Director

Jan van Vonno spearheads Tink’s research and thought leadership program. Founded in Stockholm in 2012, Tink is Europe’s leading open banking platform that enables banks, fintechs and startups to develop data-driven financial services. Tink’s customers include companies PayPal, NatWest, ABN AMRO, BNP Paribas Fortis, Klarna, and many others. Jan is responsible for the strategic positioning of Tink within the context of open banking and Tink’s outbound communication and content. Jan worked most of his career for the International Data Corporation (IDC). During his time at IDC, he covered various technology and business topic as the head of the European digital transformation research program

January 31, 2020

FinTech year in review

Reflecting upon the past year, and looking forward into 2020

Last January, the FinTech team at KAE predicted the key trends that we thought would drive the advancement of the industry in 2019. Last year was full of significant developments from players all across the world and in many different sub-sectors, but we thought it was time for us to hold our predictions up to the microscope and see how accurate we were.

Incumbents catching up

  • Prediction: Incumbents will improve their offerings in 2019 in an attempt to match, or even exceed, the experience offered by their FinTech counterparts and further enhance the pace of innovation in financial services
  • Reality: The payments industry saw several mergers and acquisitions around payment processors, for example, Fiserv acquiring First Data, enabling the traditional players to expand their product offerings without having to reinvent the wheel. Meanwhile, in banking, established players tested their own digital banking solutions to compete with the rise of digital-only banks such as Monzo and Revolut. We saw Natwest launching its digital challenger  as well as its digital business bank Mettle and HSBC launching, Kinetic, its app-only business bank, to mention a few. Whether via M&A activity or through developing solutions to rival FinTech competitors, 2019 saw a firm response to the momentum of FinTechs. This year, we can expect collaborations between FinTechs and corporations to grow asbanks turn to FinTechs to fill the gaps in their offerings, ultimately giving a much richer proposition to their customers.

Interconnected banking

  • Prediction: 2019 will be the official start of open banking; Europe’s PSD2 Regulatory Framework will come into force with several other regions waiting to follow suit.
  • Reality: Implementation was found to be more challenging in Europe and in countries such as Australia were deadlines were pushed back in order to give banks more time to prepare amid security concerns. Nevertheless, players including Lloyds and Tink both made moves to enable players across Europe to take advantage of open baking functionality. We would predict that we will see the API marketplace model grow. A good success example of this is Starling where 3rd party developers are free to integrate their own products into Starling’s marketplace, ultimately allowing its customers to use all integrated products through their Starling app. Open Banking has unquestionably opened a multitude of opportunities for connecting individuals and companies to banking data, and the way in which large organisations are transforming themselves to compete with new entrants will continue to be an area to watch in 2020.

FinTechs go global

  • Prediction: 2019 will be the year that more established FinTechs will prioritise expanding globally in pursuit of growth
  • Reality: The market saw various expansion developments, including, Revolut and Monzo expanding to the U.S., Klarna expanding in EMEA and Alipay setting its sights on Europe. Additionally, Visa’s FinTech Fast Track Program hit a milestone as its expansion into the U.S. established the programme as totally global. Despite the fact that FinTechs have indeed become more global, domestic markets remain the chief source of revenue. For example, 70% of Ant Financial’s Alipay users are based in China.

Gearing towards a TechFin future?

  • Prediction: 2019 could be the year when technology giants of the likes of GAFA (Google, Apple, Facebook, Amazon) really start to make a mark on the financial services industry.
  • Reality: Some of the largest technology companies have been highly active in the financial services arena; Apple launched its credit card with Goldman Sachs and Facebook announced its controversial cryptocurrency payment project (Libra) last year. On the other hand, we are yet to see significant product launches outside of payment solutions, with many of the current examples using a financial incumbent as an intermediary to bypass additional financial regulation. All things considered, the question of “How far into financial services do technology giants want to go?” remains unanswered, at least for now.

Blockchain’s reality check

  • Prediction: 2019will likely to be the year when even the strongest Blockchain enthusiasts concede that the technology might not be the solution for everything that needs improving in the industry.
  • Reality: Blockchain still has not revolutionised the industry. 2019 saw a decrease in funding from the previous year for the first time since 2012, though this is more than offset by the vast growth between 2016-17. Despite the 2019 investment slump, many industry experts are still feeling bullish about Blockchain’s prospects in the coming years; Blockchain solution spending was expected to increase by 80% in 2019 based on H1 data, while the forecast for 2018-2023 suggests compound annual growth above 60%.

But do the numbers correspond to the reality? For many, the real-world applications of Blockchain are still equivalent to the boom and bust of cryptocurrencies. The real benefits of seamless cross border transactions and traceable supply chains that eradicate fraudulent activities are still yet to establish themselves. 2019 was a mixed year for Blockchain but it seems all hope is not lost yet.

The battle for security

  • Prediction: Automated solutions addressing security challenges are likely to attract significant attention in 2019 as the battle between customer experience and trust persists.
  • Reality: With security and fraud prevention top of the list, payment processors were, as predicted, actively working to prevent and minimise the occurrence of fraud. There has been a rise in the number of significant trials around the use of biometric security technology as it can be used to process an individual’s physical traits to authenticate transactions with a high degree of success. Push payments fraud and other more intricate forms are still endemic, but with the rapid growth and enhancement of AI to detect and prevent suspicious transactions, 2020 may be the year that the financial industry finally takes control of fraud.

Written by: 
Andrea Ronnberg

September 26, 2019

Vantage: OakNorth

Tell us more about OakNorth including what makes your vision unique?

OakNorth is the next-generation credit platform that is redefining lending to lower mid-market businesses globally.

Historically, there’s been a massive focus on tech efficiency within the retail banking space, and a massive focus on people within the corporate and large business banking spaces.

As a result, the segment of the market that we focus on (the lower mid-market where loan sizes are typically between $1m-$25m) has been overlooked and underserved for decades.

The platform helps our bank and lending partners to more holistically and profitably cater to this market segment. It supplements the traditional method of relying on backward-looking historical data sourced from the borrower, and scenario analysis based on standard haircuts that are not necessarily linked to industry drivers (Level 1 and 2 analysis), with technology and massive data sets, to model a forward-looking view that’s informed by industry benchmarks, macroeconomic drivers, and scenario analysis specific to each business (Level 3 and 4 analysis).

Within the UK, we use the platform to do our own balance sheet lending (via OakNorth Bank), and throughout the rest of the world, we license it to other banks and lenders such as NIBC Bank in the Netherlands, so that they can replicate our success with SME lending in the UK, in their own markets.

Since its inception, the business has secured over $1bn from leading investors, including: Clermont Group, Coltrane, EDBI of Singapore, GIC, Indiabulls, NIBC, Toscafund, and SoftBank’s Vision Fund.

The business was founded by Rishi Khosla and Joel Perlman who were inspired to launch the business following the challenges they faced in securing debt finance from high street banks for their previous business, Copal Amba.

What have been the key drivers of OakNorth’s high growth trajectory over the past few years? 

A clear and focused proposition that genuinely addresses an unmet market need, a world-class team who believe in the mission and the vision and genuinely care about fixing lower mid-market business lending globally, and world-class technology (superficially the application of machine learning and big data)  to deliver that proposition, and of course, incredible support from both our investors and our customers.

How has OakNorth’s communication and PR strategy evolved as the business has scaled? 

Before we launched, had any clients, or had proven our proposition, our strategy was focused on promoting our strengths as a lender and highlighting how there is an unmet market need. So, we talked about our banking license, the strength of our board and executive team, our tech stack and why the SME lending market is ripe for disruption.

Once we launched and started to build our loan book, our focus moved much more to promoting the transactions we were doing with SMEs and how they were using the finance from us to scale. Over time, as we’ve transacted more and more loans, we’ve had to find ways to still promote them all. This has meant putting processes in place to ensure sign off is as quick and efficient as possible, that we start the PR conversation early and have a press release worked up and signed off so that it’s ready to be issued as soon as the deal closes.

The strategy now also includes promotion of the platform and how this has helped us to build such a successful bank in the UK.

OakNorth is currently in the process of establishing itself in several additional countries, including the US and Singapore. Which have been the most challenging countries to expand into, and why? 

For the Bank, we have offices in London, Manchester, and Gurgaon.

For the platform, we have offices in NYC, London, Singapore, Shanghai, Hong Kong, Gurgaon and Bangalore. Many of these are markets that our founders, Rishi and Joel, had operations in for their previous business (Copal Amba), so they understand the regulatory landscape well, know where to find the best talent, etc. Having experience in news markets or seeking advice from someone does is really important for start-ups to ensure that all bases have been covered before launch.

Everyone knows the positive multiplier effect of lending to SMEs who are the backbone of the economy. New jobs will be created, new homes will be built, and there will be more GDP growth. So, as a business that is helping banks to unlock some of that additional potential and lend to SMEs more effectively, the reception in each market we’ve expanded to has generally been very positive.

OakNorth places emphasis on its lending solutions being custom-built, which typically requires a more manual approach. How does OakNorth balance this with the need to maintain fast set-up times and low costs through automating processes? 

This is exactly what our platform enables us to do – incredibly robust and in-depth underwriting and credit analysis, so that we can structure bespoke debt finance facilities quickly. The platform uses artificial intelligence and machine learning to enable credit papers, the 30-40-page documents that banks’ credit committees use to make informed lending decisions, to be pulled together in days rather than the weeks it would normally take. The platform then proactively monitors the financial and operational data of every borrower in a bank’s portfolio, flagging up any potential issues to assist in reducing the likelihood of a late payment or default in the future.

What element(s) do you think will drive the most growth for OakNorth, and other digital only UK SME lenders, in the next few years? 

Historically, businesses have taken a one-stop shop approach to banking, typically getting all their ancillary products and services (credit cards, loans, savings products, etc.) from their current account provider. However, over the next few years, I think we’re going to see a greater shift to the model that we’re seeing in the retail space – i.e. where people shop around for the best provider for their needs and have products and services from multiple providers.

The key driver of this change is going to come from FinTechs maturing – a lot of SMEs are still reluctant to switch to a challenger brand as they’re less familiar with them, there may be a perception that they’re less secure, etc. However, as FinTechs evolve from the start-ups they are today to mature scale-ups with profits and proven business models, we’ll see more SMEs switching to them.

For OakNorth specifically, our growth in the UK is going to be in our loan book and outside of the UK, it’s going to be in licensing our platform to other banks and lending institutions.

What are some of the key trends that you see to be impacting the FinTech space more widely? 

Collaboration – between FinTechs, between FinTechs and large financial institutions, between large financial institutions and big tech, and possibly even between FinTechs and big tech one day if the FinTechs can reach a scale that makes them interesting enough for big tech to collaborate with.

What advice would you give to growing FinTechs looking to scale? 

Operate from a mindset of frugality and make sure you have a clear business model and path to profitability from the outset.

When a company has too much capital available upfront, it tends to be built on fundamentally bloated cost structures.  Spending more money than is necessary becomes a part of the company’s DNA and changing this is hard. Having little to no money forces businesses to operate from a mentality of scarcity, and these businesses end up operating much more efficiently. Our co-founders, Rishi Khosla and Joel Perlman, started their first business (Copal) with just £40k so even though it was much easier to raise capital to start OakNorth, they still took a very frugal approach, ensuring they didn’t spend a penny more than they absolutely needed to. That has remained their philosophy throughout the OakNorth journey so far and as a result, we’re one of the few unicorns in the world that is profitable.

Written by: 
Valentina Kristensen

May 24, 2018

Vantage: Starling Bank

Starling Bank, the challenger bank recently named as the Best British Bank of 2018, has CX firmly on its mind

Starling Bank, one of the UK’s first digital only challenger banks, is known for its fast service and straightforward banking. Julian Sawyer, Starling’s COO, explains how important customer experience is to the evolution of the bank from product development to business growth.

Tell us more about Starling Bank, including what makes your vision unique?

Starling is a completely different kind of bank. Back in 2014, during her role as Chief Operating Officer of Allied Irish Bank, our founder Anne Boden became interested in how financial technology could be used to help customers manage their money. She also came to realise that the only way to do this was to start her own bank. And so that’s what she did.

Anne brought together a team, all of whom recognised that after the financial crisis in 2008, so much had changed – but not in banking. Our vision is to ensure that banking goes through a revolution, putting customers at the centre of everything we do and giving them digital tools to help them manage their money, all from one app.

In early 2016 Starling secured funding of £48 million ($70 million). Later that year, we were granted a banking licence by the Bank of England, enabling us to build the UK’s first mobile-only current accounts. Less than a year after launching in the App Store in May 2017, we were voted Best British Bank and Best Current Account Provider at the Smart Money People awards. We currently offer mobile-only personal accounts and business accounts and have plans to launch a euro account in the future.

Starling Bank recently became the first mobile-only bank to offer a business banking account: in your opinion, what are the challenges associated with being a first mover in offering new types of customer experiences?

There’s no doubt that being the first to offer a completely new product presents challenges. As a first mover there is no previous example of process to follow, or previous mistakes to learn from. It’s also harder to anticipate customer response to a new product launch that they perhaps haven’t come across before or feels unfamiliar to them.

However, being groundbreakers is also very exciting. We have an incredibly talented team at Starling who are brilliant problem solvers. Our key to understanding customer response is our Community – the platform through which Starling customers can discuss new features, updates and tell us what they like and what’s missing.

To provide innovative solutions for businesses, we’ve tried to smooth out all the friction associated with traditional business bank accounts – customers can open a business account in 10 minutes, not 10 days.

As Starling Bank is at the forefront of digital banking, how and who do you choose to benchmark your experience against? Do you even believe benchmarking is important with Starling Bank’s current position?

Looking forward is always better than looking sideways. We’re the first mobile-only bank to offer personal accounts, business accounts, connect to the Current Account Switching Services (CASS), become a direct member of the Faster Payments Scheme and SEPA, use 100% cloud based technologies and gain approval for our Marketplace enabling API integration with third-parties. We are also the first and only digital bank to offer all of the following: Google Pay, Samsung Pay, FitBit Pay, Garmin Pay and in-app provisioning of Apple Pay. We’re creating our own benchmarks for the industry.

Based on your experience, what are the main pain-points that customers usually experience when banking online and/or via mobile?

Even the simple action of taking laptops out of the equation instantly makes digital banking easier. Managing your money from one app is transformative. All you need is your smartphone – no more card readers, spreadsheets or frustrating phone calls waiting to speak to your bank to cancel a card or tell them you’re going abroad. You can set up new payments, split bills, check your monthly spend, lock your card if you’ve lost it and send a message to our 24/7 customer service in-app, with only a few taps.

Are there any key trends and/or technologies that you feel will impact the customer experience element in banking (and any other industries) over the next year or so?

The rise of online banking and of digital challengers has already had a huge impact on traditional banks who are closing more and more branches every week. However this also means that there is a gap in service. Physical branches are closing, but the online services and banking apps are not being updated and improved at the same rate – not even close. Starling has been built from scratch by the digital generation – we are able to deliver the fast, intuitive, secure service that people are looking for. Our focus on faster banking, keeping customers updated on payments with features such as real time notifications, and an attention to detail when it comes to UX and UI is transforming the customer experience of banking. We expect these features to become the norm and as such we are raising the game for the other industry players or customer expectations.

In terms of specific technologies that will impact banking in the next year, Artificial Intelligence will be key. Further down the line, we believe that we will move towards a cashless society in which banking will become more invisible. For example, people will be able to walk into a store, do their shopping and be charged on their way out without having to queue and pay at a till.

About the Author:

As Chief Operating Officer, Julian Sawyer oversees business operations, including payment systems, card operations, customer service, human resources and supplier relationships. Julian worked as a management consultant at Andersen Consulting (now Accenture) and EY, specialising in large-scale transformation in the cards and payments industry.

He set up his own financial services consultancy, Bluerock, which he ran for thirteen years before selling it in 2012. After many years as a consultant, joining Starling gave Julian the opportunity to put all his learnings into practice, to build a bank with an amazing team of true professionals. He enjoys working at a fintech business since he loves delivering things, making things happen and moving things forward at pace.

More about the Vantage Series:

This post is part of the Vantage series by KAE that provides a fresh perspective and hears first-hand from various players across the FinTech & CX ecosystem.

KAE will be posting a number of interviews with companies that share their candid viewpoints and to really get under the skin of the FinTech world and Customer Experience within various industries.

If you would like to share your views and participate in the Vantage series, feel free to reach out to us at

Written by:

Julian Sawyer

January 22, 2018

FinTech vantage: Bud

The technology platform brokering a new deal between people and their money. We find out more from Bud...

Bud is a technology platform that links financial services together and strives to make banking better. We recently spoke to Jamie Campbell, Head of Awareness, to help understand more about Bud and how the PSD2 regulation and the rise of open banking could impact FinTech companies like them.

1. Tell us more about Bud, including what makes the company and its vision unique. What do you think are the critical components that will make Bud successful?

Bud is a technology platform brokering a new deal between people and their money. From the start, we wanted to create a platform that allows people to use any financial services in one easy to use app or website – the steep innovation curve of FinTech creates more choice and more complexity in the market which we aim to solve.

Our platform is harnessed by banks to create win/win collaborations with FinTechs, that in turn, create great experiences for their customers. Banks want to build better relationships with their customers, FinTechs want to reach new audiences, and customers want hassle-free finances that look after their interests. Bud is the only platform in the world that connects those three things.

Critical components that go into making Bud are threefold:

Aggregation. Beyond simple account aggregation, Bud pulls together multiple data sources, financial and non-financial, to create a digital picture of an individual’s finances. We perform our proprietary analytics and programmes over this data which leads to the next stage…

Journey recognition. Using all of those data sources to piece together an understanding of what that customer is doing with their money and signposting key events where Bud can help limit fees or cover with better services. For example, this can manifest as bill switching, finding more effective ForEx, sourcing new investment options, etc…

Marketplace. The final component involves providing the customer with the most relevant product at the right time to take advantage of those events. We currently have close to one hundred partners with enough variety to ensure that we can serve customers across all areas of the financial ecosystem.

2. Where is Bud currently on its journey and what barriers have you encountered along the way?

Bud has been running for two and a half years and has proven its model, initially with a customer-focused product launched via the FCA sandbox, and now with distribution partners such as HSBC here in the UK.

We have also been lucky enough to be involved in a scheme set up by Nesta, the innovation charity. Their Open Up Challenge was a push to get companies, such as us, to develop open banking-based solutions for SMEs. Following a successful six month build, we were delighted to win. There will be a ‘Bud for Business’ proposition in the market soon – plenty of banks are interested.

We are fully regulated by the FCA and are growing massively. Last year we increased the team by 400% and we have just moved into new premises that will allow us to double in size. We have roughly twenty job posts open (so if you are a developer looking to work with an award-winning company in the FinTech space, get in touch).

The barriers that we come up against won’t surprise anyone. Regulation is a barrier for everyone entering financial services. Regulation is a part of the fabric of Bud, it’s integrated into our operating model. The fact that everyone at Bud understands where we sit with regulation means that we can innovate quickly and help our banking partners better.

3. PSD2 has been heralded by many as a pro-FinTech piece of regulation. Are there any parts of PSD2 that FinTechs need to avoid being tripped up by?

PSD2 covers account aggregation services and payment initiation services. The main areas to look out for are in getting regulated and having the insurance necessary to conduct the activities. For some companies, it won’t make sense to get licences of their own in this space and will look to firms like Bud to ‘borrow’ the service.

But PSD2 isn’t just pro-FinTech. For banks daring enough, it can be a huge asset to help develop new services and experiences for their customers. That’s what we have found with the partners we are working with: those with a strong strategy will perform well – bank or FinTech.

4. Where will the impact of PSD2 and open banking be most felt – will this be in the consumer or commercial payments worlds? Why do you think this is the case?

Open banking use cases I think are more developed in the retail aggregation world. But the commercial banking experience today is way below par, and most banks have SME banking high on their agendas for change. I think that the biggest impact will be in uncovering a market-leading SME banking experience as a direct result of innovations, brought about by open banking.

Ultimately, the impacts of open banking will be judged on data gained vs data lost in both aggregation and payment services. The immediate impact will likely be low, just like any adoption curve, but as people start to see, use and share more of the features open banking provides the uptick will become more dramatic.

5. What do you feel is the most important differentiator for FinTechs now and how will this change post PSD2 implementation?

The beauty of FinTech is that it has created massive amounts of innovation in each product vertical. Whether that is around access to credit, currency exchange, investing, insurance. New providers, freed from legacy systems, are able to leverage more flexible technology stacks to deliver far more personalised services. This kind of innovation is desperately needed in the market – people’s individual financial situations are almost limitlessly diverse and, if it is to meet this need, the market must be able to match this diversity with its offerings.

Post PSD2 differentiation will come in the form of data interpretation and activation; how FinTechs capitalise on this new data set. Whether that be in speeding up on-boarding processes, faster credit decisions, more accurate rates, more personal service. The value and differentiation will come from understanding a customer’s demands and using data to serve those needs in better ways.

6. How important do you consider open banking to be when it comes to building customer relationships? Why?

It depends on what side of the fence you sit. For a FinTech provider, PSD2 will allow you to build a relationship with customers that, in some cases, are not yours – or at least not in the traditional finance sense (they haven’t bought a product from you.) For a bank, it is an opportunity to get a richer picture of your clients and their finances, to offer real benefits and personalised assistance.

It will become more straightforward to shop around for products, right the way down to current accounts, so the focus for most businesses with high customer numbers will most likely be on keeping their customers. To do that, they have to create or deliver authentically useful products and services. Otherwise, people will find them elsewhere.

We are seeing banks adopting a new strategy: offering all services, including competitor products, to their customers. Currently it is regretful if your customer buys from a competitor. But in the future, what will be worse is if they buy from a competitor that is not in your ecosystem.

So, regardless of what you want your relationship to be like with customers, open banking will certainly play a role. If your strategy is to become the brand of choice that people do business with, you have two choices: build competitive services in-house or link those third-party services into your product. Personally, I think the answer is obvious. Different to what has existed in the past, but obvious.

7. What needs are Bud trying to solve for its customers and how will Bud’s value proposition address these?

For a while now, we have been comparing challenger banks and banks on level ground, but it is an unfair fight. I wouldn’t want a bank that has twelve million customers to duck and dive and move as quickly as a challenger can. That is not their role. But they can outsource nimbleness. They can bring in flexibility, technological excellence and the streamlined experiences that customers see elsewhere.

Bud’s role is as middleware for the financial services industry. We connect many products – all of which are suitable for every type of banking customer – into one platform that gets distributed to millions of customers via distribution partners.

8. How will you ensure your business model stands the test of time as competition grows?

Competition in the FinTech space is great for us. The more providers, the more complexity, the more our recommendation engine and marketplace becomes valuable.

The business model is relatively robust; we split marketplace affiliate revenue with our distribution partners and earn a licensing fee from them. And thanks to PDS2 it is understandable that the market will only get bigger. For companies wanting to sidestep into financial services, it has traditionally been challenging. Whereas now, by partnering with a company such as Bud, all of the regulation is taken care of, the services are integrated, and technical upkeep is sorted. It is an off the shelf product available to any company with a large customer base.

9. What is the one pearl of wisdom you would share with anyone starting their journey as a FinTech and why?

Understand the regulatory requirements that your product will need as early as possible. Work with the regulator so they can understand the model/product. It is the ticket to the game in the UK, so make sure you buy it before you compete.

About the Author:

As Head of Awareness at Bud, Jamie raises the profile of the company both in business development and marketing. He was Bud’s first employee and has helped transition the company from B2B to B2C. Previously, Jamie was a senior strategist in Advertising, working on brands such as Coca-Cola and Heineken.

More about FinTech Vantage:

This post is part of the FinTech Vantage series by KAE that provides a fresh perspective and hears first-hand from various players across the FinTech ecosystem.

KAE will be posting a number of interviews with FinTechs that share their candid viewpoints and to really get under the skin of the FinTech world.

If you would like to share your views and participate in the FinTech Vantage series, feel free to reach out to us at

About the Author:

As Head of Awareness at Bud, Jamie raises the profile of the company both in business development and marketing. He was Bud’s first employee and has helped transition the company from B2B to B2C. Previously, Jamie was a senior strategist in Advertising, working on brands such as Coca-Cola and Heineken.

More about FinTech Vantage:

This post is part of the FinTech Vantage series by KAE that provides a fresh perspective and hears first-hand from various players across the FinTech ecosystem.

KAE will be posting a number of interviews with FinTechs that share their candid viewpoints and to really get under the skin of the FinTech world.

If you would like to share your views and participate in the FinTech Vantage series, feel free to reach out to us at

Written by:

Jamie Campell