The Financial Web is handing the power to small business, but they don’t know it yet

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Whilst the UK’s decision to leave the EU has created some doubts, research has revealed that London’s Fintech scene is growing more than three times faster than Berlin’s.

Transformation is happening in every sector, but in finance the effect is particularly acute.

Xero held a Financial Web panel discussion in London, last Wednesday, as part of London Tech Week. Xero welcomed CEOs and Founders of challenger bank Tide and MarketInvoice along with HSBC’s Global Head of Propositions, Commercial Banking, to discuss exactly what this means for business.

Open APIs hold the key to a next generation of business management

Typically small businesses have not been at the forefront of using ubiquitous mobile and machine learning to their advantage. However, currently SMB’s account for over 99% of all private sector businesses in the UK. Therefore things are now changing. Small businesses can now access the innovative services they need. This is all thanks to open Application Programme Interfaces (APIs).

George Bevis, Founder and CEO of challenger bank Tide said that although APIs are changing the game, the opportunity is still fairly limited. “There are a limited number of companies in the country who have opened up APIs. As far as the technology goes, we haven’t yet seen anyone creating an idea that is truly game changing. So, there is real potential in the future of the financial web.”

However Bevis warned, “When it comes to finance and in the case of some traditional banks, there are fears that opening up platforms for other solutions to plug in to could cannibalise their own business, and security too. This simply isn’t true. It’s entirely necessary to evolve.”

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Richard Davies, Global Head of Propositions, Commercial Banking at HSBC said that the bank was one of the first to create an open banking API. He explained HSCB believes it is crucial to adapt to the changing needs of businesses. These businesses expect a range of collaborative services to be available, is critical to ensure they stay relevant.

“We have lent nearly £10bn to small businesses in the last few years, but accessing capital is now going beyond traditional bank loans. Banks, accounting software and accountants are more connected. APIs have the potential to solve problems beyond banking, while keeping traditional banks integral to the process.”

From filing accounts to funding, SMBs need more speed

Anil Stocker, MarketInvoice’s CEO and Founder spoke to the audience about how getting funding is still a ‘horrendous experience’ for businesses. “The whole process is far too long, from printing off ledgers to taking them for review,” Stocker explained. Companies like ours can offer solutions that reduce these types of tasks down to minutes.We can simplify processes, all the while ensuring everything is available to the business owner through one channel. In this case, Xero’s API. The aim here is to provide fast, flexible funding for growing businesses to meet their ambitions.”

Banks have the advantage when it comes to machine learning

The panel discussed that one of the most exciting things of an element of fintech development are all the unknown possibilities of machine learning. “Historically, business banks are just not as inventive as consumer banks. But, more and more financial institutions are sitting up and taking note of new progress,” Bevis commented. “There is a huge amount of untapped opportunity relating to machine learning.

At the moment we use humans in most business risk decisioning as opposed to consumer. This is because there are subtle indicators that machines do not yet understand. But with a big enough data set, you will be able to replicate that thinking with low cost rates. It’s here that banks may have the advantage in the next few years.”

A point one of the audience members raised was that there is challenge in educating business owners and influencers about the progress and potential of the financial web. This is mostly because the concept and its potential are still relatively unknown. Companies with open APIs offer a ready-made customer base to smaller companies offering add-on solutions. Moreover these are customers who are aware and embrace this kind of technology.

But one thing is for certain – there is work to be done in proving to the wider business community about how game changing these developments will be in the future, giving the power back to small businesses.

Edward Berks is Director of Financial Web and Eco-System at Xero

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