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 FinTech@kae.com