Fintech Insider Podcast by 11:FS
00:28:12 · Valentina Kristensen
[00:28:12] S4: So I think, I mean, I think there's a few things. There's macroeconomic trends. So that's things like, you know, inflation, interest rates, the cost of living crisis. And I think there, you know, it's important for the customer, but it's also so important for the banks that are servicing those customers to have that real time data about how the customer is performing. Most banks tend to sort of lump businesses into one of a dozen or so categories, right? Or hotels, restaurants, bars, golf clubs, private members clubs would kind of go into hospitality and leisure. And obviously, those are all completely different businesses, right? And we saw that through COVID. We've seen it through Brexit, right? The hospitality sector is much more at the mercy of the labor shortages in hospitality than you have in other businesses within that sector. We recently completed a loan to Third Space, which is a sort of luxury health and fitness company. Now most banks would probably think right now lending to a luxury business that relies on discretionary spend probably isn't a business that is doing very well. I mean, ThirdSpace is incredibly profitable. They've got wait lists at most of their clubs. So, I think that just speaks to the fact that there is always going to be gems and unique cases in every type of business and subsector. So having that data as a business, being able to present that data to your bank, because that can then open up a number of new products and services for you. It can obviously open up credit lines, give you the ability to get a loan. But it's also great for you as a business, because then you can see other things that we should be doing, that our peers are doing. Are there certain parts of our business where we could be making the savings? Could we be being more efficient with, for example, our team, with our spending and so on? So having that access to that real time data can be incredibly valuable. And so I think there's a sort of the macroeconomic trends that banks and also their commercial customers are at the mercy of. I think in terms of broader macro trends, I mean, the fact is, ultimate business owners, entrepreneurs are people, and their expectations have changed as a result of the, you know, huge strides we've made in retail banking.
00:30:24 · Valentina Kristensen
And I mean, you know, I say huge, the first bank I ever worked with was Metro Bank back in 2010, with the launch of a new bank that was a bricks and mortar led model. Here we are thirteen years on, and if you were a new bank coming to market saying, We're doing something completely revolutionary. We're going to make a bricks and mortar led business. People would probably laugh them out of the room, right, and say, What are you doing? No one goes into branches anymore or shops, as Metrobank calls them. So I think, you know, that just shows you how much things have changed in just, you know, a decade or thirteen years. And those individuals then run businesses and have those same expectations. So yes, banks are absolutely at the mercy, because if you're being able to freeze your card on your personal account, you want the ability to do the same on your business account. If you have the ability to see real time spending on your personal account, you want the same thing on your business account. So, you know, absolutely banks are at the mercy because businesses are run by individuals.
00:31:28 · David Barton-Grimley
[00:31:28] S0: Yeah. It feels like we've gone from bricks and mortar to data. And you're right. As some of those macro trends like inflation and interest rate increases impact the bottom line of the business. All of a sudden, the business is is even more hungry in in some ways for that data around how the business is performing, where they can squeeze out the margins. It was really interesting what you said about being able to present the data to the bank to show that actually maybe maybe we are more profitable, in fact, that we we thought, or maybe we have more better cash flow, in fact, that we we thought, and therefore, a better valued loan. I think that's very interesting. Pranav, I'm gonna come... I'm gonna come down to to to you on data and the availability of all of this real time data. I'm very aware that Airwallex, like, works in this space. How how is this how is this availability of real time data creating either both issues for some of your customers and opportunities as well?
00:32:21 · Pranav Sood
[00:32:21] S2: I think it's a fantastic thing, first and foremostly. I think it's a challenge in the sense that the volume of data is something that most people are not capable or don't have the time to be able to navigate. And so the opportunity is for people like us to be able to show them what they need to know in a way that is comprehensible, easy to access, and also fits with the jobs that they need to do as a as a as a business person or business owner. For us, you know, when we look at the data that we're we're sharing, of course, that relates to payment performance, whether or not a payment is accepted or declined, the status, you know, all the the money and money out that you're looking at across your global organization. And as soon as you start to become a slightly more complex organization with different entities, different currencies that you're managing, suddenly the range of possibilities becomes very, very significant in terms of what you could be looking at. I think for us, when we look at the future, we're really excited about the opportunity to make that process simpler and and much more straightforward and actually looking into the use of things like AI in order to help our customers to be able to query data in ways that are... That is much more kind of intuitive to to them. So I think the explosion of data is in general a good thing. It helps us as financial services providers to offer better quality and and more contextual services, but we also have a duty to to help our customers to navigate it in a way that doesn't overwhelm them.
00:33:45 · David Barton-Grimley
[00:33:45] S0: Sarah, you know, data is is an issue, across the piece. Right? It's an issue everywhere, retail banking, across fintech, particularly around things like who who owns data. Can it be used? Can it be solved? All of these additional complications that it that it that it brings. Who who owns data? I mean, know, would you say that we need yet more fintechs to keep other fintechs in check? Is... Does regulation need to come up and and and help here?
00:34:11 · Sarah Kocianski
[00:34:11] S3: It's a really difficult one because I've I've done a lot of work on on open banking, you know, The UK's open banking or open finance, you know, as we're hopefully moving towards sector now. There are two schools of thought about how this should work. One school is the European school where it's like, these are the rules. This is how you will share data. You will use these standardized APIs transmit that data under these circumstances. These are the rules. This is what you must ask for from a customer. This is the authentication, etcetera, etcetera. And then you look at what's happening in places like The US where, certainly, they understand how to use data and, certainly, you know, they they they are using it. They are just doing it off their own backs. That has created a huge industry. Companies like Plaid, for example, really, really capitalized on this. But they're now at a point where they're looking at, to your point, control how do this? And at the end of the day, whatever the rules are and all regulations are, I think what people have finally come to realize is that it is my data. I am the customer. Whether I am Sarah Kuchansky or whether I am, you know, I was trying to make a huge organization, but, you know, ASOS, I own my data like it is mine. And I think that kind of actually has to be the grounding principle for anybody who's going around using that data. I think there also needs to be transparency. So, yes, we can use businesses. We can use commercial data to make better, more informed decisions about that individual. And this is often used and often described in a very positive light. We can give you credit access where you wouldn't get credit previously. We can give you a better loan terms. We can open an account for you where previously we wouldn't have been able to because we can't authenticate you, you know, in this country or whatever. The downside of that is if people on commercial banks are using customers' data to make decisions about them, and it is not transparent how that is being done. So we are going to turn you down for this loan. We are going to charge you this, you know, to Pradence's point, we're going to charge you this rate rather than that rate because of data we have about you. As a customer, you don't know why that's happened.