Fintech Insider Podcast by 11:FS
00:28:03 · Ross Gallagher
[00:28:03] S1: I do. I mean, I love that point about building these native experiences with agents in mind, obviously, rather than it being a sort of bolt on or even an afterthought to to sort of what you're already doing. Aurelien, one area I'd be really keen to get your insight because I think it's going to be an area where people within financial institutions everywhere are going to be sort of noodling this question is, you know, when you start to think particularly about something like customer acquisition, and when banks are, you know, competing to be selected by AI agents, That's quite a difficult thing for a lot of people I think to get their heads around, it's quite a fundamental shift. What do you think about that?
00:28:46 · Aurélien Bonnel
[00:28:46] S4: Yeah, so the traditional model of acquiring customers no longer applies here, right? So free coffee at the branch, the agent doesn't really care about this, can't drink it. So you have to basically put the promotional material in a way that is understandable by agents. That means first of all, a brand new wave of marketing that banks are not used to. Right? You need to hit the channels that you would not normally see banks touching, Reddit, x.com, you know, your x Twitter. So all of those channels that are used as sources of data for the agents basically need to become the marketing channel that the banks are touching. And then you need to make a case that other banks are not doing. If you're just competing on interest rates, it's basically a race to the bottom where everyone just loses their margin progressively over time. So you need to find something that is compelling to an agent. They all think in the same way, that's the point of the commodity tool. So you just need to find something that is more niche, that is more applicable to a specific class of customers. And instead of seeing marketing campaigns that are just shooting from the hip and trying to get as much of a demographic as possible, we're gonna see banks, financial institutions generally finding the pressure points for specific ecosystems, like shipping and logistics, like your courier van, your milk delivery person, and try to find aspects that are interesting to them that they need help with from a financial standpoint, and generally try to become more and more niche. That means the bloat of marketing is gonna become bigger and bigger and bigger, unfortunately as well.
00:30:32 · Ross Gallagher
[00:30:32] S1: It's kind of back, Conrad, to your point about the sort of cost of operations, but I'm interested in like how how are you guys thinking about, I suppose, differentiating in this new context, but also then sort of avoiding that race to the bottom that I think Aurelien quite quite rightly mentioned?
00:30:53 · Conrad Ford
[00:30:53] S2: Yeah. I mean, my starting point would be that we don't face the innovators' dilemma that the incumbents would face. So, you know, at the moment, we've got, what, 5,000,000,000 or so of of asset... Of liabilities on our balance sheet. And and our total market is $253,100,000,000,000. That's how much SME deposits there are in our segment in The UK alone. Right? So why does that matter? Means if you think the world's going a certain way, you have the option of actually accelerating that move rather than it attacking, you know, because one of the big incumbents will have tens of billions of that chunk in their existing customer boats, on which they're pretty bit of pain, they'll fall in no interest. So we don't face the innovator's dilemma. I'm sure the big banks would claim that they're gonna they're gonna think they're not gonna think like Kodak, right? But it never happens that way, right? In in the end, people get fired for thinking thinking like the innovator. So in big institutions. So so we do have that option. So first and foremost, we're building that kit for our customers and and for non customers as well. So in other words, the kind of the the sound bite I always say is that if you if you imagine Allica customer is a business full of £2,000,000 or euros of turnover, okay? And what and they're quite sophisticated, quite complex. They will have often subsidiaries. They'll have significant payroll, lots of staff. I say our customers are big enough and complex enough they need a treasurer. But they're not remotely big enough to afford a treasurer. In fact, they won't even typically have a strategic finance person at all. Right? They'll have a... Have an external accounting firm or maybe an internal bookkeeper. Yeah? So there isn't really somebody who thinks about money as a as a day job. So why can't your bank think and act like a treasurer on your behalf? Why can't it think ahead and say, well, okay, well, there's a big lumpy tax bill in April. We haven't set the money aside. Let's set it aside and earn some interest. Or it looks like payroll is tight in May, so let's actually pre approve an overdraft. So why can't your bank do that? So you can probably guess what Allica is gonna do, right? And we don't just have to do that for existing customers, right? Why not do that for non customers?
00:32:59 · Conrad Ford
Because one would assume that if we pre approve an overdraft for them, that's a pretty compelling reason to think about moving to Allica. So so that's where we're going. We've got a number of bets, new bets in that space. But in the end, the thing that we don't know is basically there's gonna be many other participants in this market. I would expect the comparison sites to be playing here. Right? This is their natural territory. So the comparison sites, they're they're presumably gonna be building agents or working with agent firms. And then you've got accounting software has the same level of insight that we do. Actually And in some cases more, they can see invoices in the future, for example. So they they have a slightly better insight in some cases. So my point is basically, we can't just try and solve this for our customers and and solve it as a monoline. We also have to lean into the fact that there's gonna be other solutions out there. And we are, that means of course that we need to be thinking MCP. So in other words, we need to be building a bank, bank in such a way that if people, if our customers want to interact with us via agents, via their agents. So so I mean, I think that's a really interesting topic by the way, because everyone, the the technical stuff around MCP is really not that hard, right? If you've built an API first bank, right, the MCP's fairly basic actually. The hard bit is being API first. Of course, if you were founded more than ten years ago, it's freaking hard to be API first because you you didn't have a crystal ball. Right? But if you're a modern bank like us, API first. So so the technical side is actually the I think there's a softer side, right? So we we need to think through all the things around payment authorizations. So is it gonna be the same as buying on the internet? In other words, up to a £100, the agent can do what it wants. But over a £100, the human being is gonna need to horse wise it. So he needs to think through all of those things. And it's not clear whether or not the regulator is gonna tell us, well, that's how it is. So we're gonna have to come up with our own rules or the industry is gonna collaborate on rules. We don't know. So you've that bit. But even more, even harder to think through is basically there's a whole list of questions that come out with agents, right?
00:35:06 · Conrad Ford
So let's say that I confide to my chat GPT that I'm feeling lonely, right? My chat GPT thinks I can help, and just goes and buys you a dog. Right? Orders you a dog online, right? Yeah? Very rational thing to do if you chat GPT. Terrible idea in practice, right? We're gonna need a whole new class of defensive agents, right? They're kinda like, hang on, gonna need... Can't just buy a dog. You can't do that, yeah? They're kinda like puppies not for for life, right? So so we're gonna need a whole new class of agents and a whole new class of thinking. It's a very exciting time, but people kind of underestimate the extent to which this is fresh piece and a lot of things are, and and and I'm really enjoying it. Right? You you live for times like these in your career when new things happen.