Fintech Insider Podcast by 11:FS
00:10:23 · David Barton-Grimley
[00:10:23] S0: It's always interesting to hear just how complex these needs are in commercial banking. And and just on your point, Valentino, about taking a a leaf from the book of retail banking and really understanding how, you know, customers have jobs to be done, and we just need to figure out what those jobs are and create services in order to do that. Sarah, I'm gonna come to you on this. How how do you think the needs of commercial banking differ from other retailers? Are there... What what what are the similarities and differences you would you would say broadly?
00:10:51 · Sarah Kocianski
[00:10:51] S3: I mean, I think that the first thing to mention is that everybody means something different by commercial banking, you know, to Val's point. She's... And also serves the M in the SME, but, you know, what what is an S? What is an M? What is a, you know, a a large scale enterprise? And I think sometimes that can kind of be a little bit stretched. Actually, you're trying to serve these customers, have to have an idea, a definition in your mind of exactly who you're trying to serve. I think on the larger sort of end of things, what we would call enterprise banking, if you like, Some of the needs that are different are the fact it's truly the scale, the size and the scale. You're moving a lot more money. You're often moving it a lot quicker. That comes with more complex compliance requirements, and then that slows things back down again. So you're trying to do more things, you're trying to do them more times a day, and it's more complicated because the legal team needs to be involved in everything. That prevents you from doing a lot of stuff in real time or has historically. As already touched on, the bigger you are, the more complex your IT system is. It's just almost a statement of fact. I think also we shouldn't lose sight of how old some of the ERP systems are that people are using out there, the enterprise resource planning systems. I also did a report on this a couple of years ago, just looking at treasury management. And I was shocked to find out just how many companies that are bringing in tens of millions of dollars, pounds, whatever you want to say, of revenue are actually using a whole lot of spreadsheets as well to try and manage their accounting and their finance functions, which is only mildly terrifying. So if you're going to try and serve them, are you going to access that information? How are you going to digitize that? How are going find their needs? And then as has already been touched on and Pranav will know a lot more about this than me, geography, you know, the bigger you are, the more international you are. You're moving money in different currencies, makes cash flow management really difficult. You have to start thinking about FX management.
00:12:44 · Sarah Kocianski, David Barton-Grimley
And again, moving money across borders, you're going come up against different rules and different regulations, and that's going to add further complexity to any of your kind of financial dealings. The one thing I would say that kind of, again, from kind the work I've done in this area that to be borne in mind though, and again, this touches on Val's point, is everybody has their jobs to be done. Treasurers are people who know what retail banking apps look like. So they almost... Their expectations are are change... Are changing in time with that. They sort of think if I can do this at home, if I can do this with my personal accounts, if I can use Ys to manage my FX, if you like, you know, to take that as a very simple example, why can't I do it at work? And I think that that is... The the bleed over is happening there, that the expectations of the people who are working in these finance departments is changing. [00:13:31] S0: It's so interesting, and I think you're right. It's gonna vary so much based on the size of the company, the sector, the geography, all of this kind of stuff. So, Pranav, I'd love to come to you about this and and and talk a little bit about how digital, are commercial banking customers really? I mean, so what what would you say is a typical type of customer which uses the services that Airwallex provides?
00:13:54 · Pranav Sood
[00:13:54] S2: So I think we go after a very similar type of customer to the ones that Oak North address in the sense that we're not so focused on the S of SME. We're much more interested in businesses who are operating at a slightly bigger scale, who have a global footprint, who are collecting or sending or spending money across borders, and who are exposed to some of the friction in doing so that Sarah mentioned as well and some of the legacy systems and processes that their existing banking providers will have put in place. I think the interesting point is the one that Sarah mentioned as well, which is that business owners are people and consumers as well. And so they feel and they see the advancement that is happening in consumer space, and they understand some of the changes that can happen in terms of ease of use and UX and UI that world and expect it the b to b side as well. But what's always interesting to me is just how little some quite sophisticated, business, CFOs or or treasury directors, how little they actually know about the way in which their money is moving around the world. And that manifests itself in a lot of different ways. So it manifests itself in the idea that, you know, they think we have to absolutely go and travel to America if we want to open a US bank account. Well, actually, you don't anymore. You can work with providers like us who can do that for you. Or guess what? I don't really understand how much my payment provider is charging me for FX because it's all bundled, but that's always how it's been. So that's always how it should be. And so it's a sort of paradox in the sense that people are becoming more and more attuned to the possibilities, particularly when it comes to user experience and and and and and kind of ease of use, but they're not necessarily being as clear about or as well educated on some of the differences in how people can now do things versus how traditional banks have done things in the past.
00:15:46 · David Barton-Grimley
[00:15:46] S0: Valentina, are you seeing something similar your side?
00:15:49 · Valentina Kristensen
[00:15:49] S4: Yeah. Exactly. And I think, you know, I mean, you know, Sarah, you mentioned about some of these businesses having large payments to make. So again, you know, you think about contextualizing things for the customer. You know, if you're a property investor, the chances are you're making very, very large payments in one go fairly often. Now most banks will have, you know, for regulatory purposes, they'll have a limit in place that if you want to transfer a certain amount, then suddenly it sort of raises a red flag, and then they have to go and do additional checks. Now, unfortunately, sometimes those checks can take several days, if not weeks to go through. And if you're a property investor looking to sort of get your next deal off the ground, you might be on a fairly limited timeframe, then that's really not going to work by, you know, having a bank that's sort saying, well, we have to go through these various checks and balances, and we'll kind of come back to you and then you call up and it's someone different the next time. Another example is with SME house builders or property developers. Often when you're building, you're going to build your next project, you have to set up a special purpose vehicle. And that special purpose vehicle needs a separate account. You can't just put the money into your existing bank account. So it's all good and well that a bank may make it now easier for you to open an account. Near banks make it fairly easy for you to open an account fairly quickly. But if you're in that business, you need to open perhaps multiple accounts. And again, you don't want to have to go through a lengthy due diligence process, lengthy AML, KYC checks when you've kind of already got an account with the bank, you kind of want to be able to kind of be fast tracked and get your SPV account set up so that you can then start working on your next project. Equally, you might be a cash flow business like a restaurant or a hotel versus a cash flow business like a nursery, right? And a nursery knows exactly how much money they're going to have based on the number of kids that they can accommodate, and exactly how many hours, how many are full time, part time, etcetera. Whereas a hotel or restaurant isn't going to necessarily know how many customers it's going to have day in, day out.