Innovations for the business community – the Fintech sector has been experiencing its bubble as-of-late and rightly so. Traditional banking was languishing under the weight of cumbersome legacy systems and was ripe for disruption. There have been (and continue to be) massive opportunities to innovate. However, so far, most disruptors have been focusing on consumer-orientated solutions – which are, unsurprisingly, a lot easier to implement than B2B solutions. In fact, according to a PwC report compiled last year, 80% of respondents believed that consumer banking will continue to be the epicentre of disruption over the next five years with personal loans (64%) and personal finance (50%). It makes sense to go for the low hanging fruit.
However, I like to swim against the tide, even if it keeps me from sleep. I knew we’d face huge waves in the form of compliance issues, company regulation and security but nothing that we couldn’t successfully overcome – so with Soldo, we decided to address the complex problem of spending by multiple people attached to the same account using different cards. It became apparent to us that a lot of money was being wasted through inefficient expense management systems (according to our research. UK SME’s were spending £8.72bn yearly on financial housekeeping, a number that can be significantly reduced through streamlined technological solutions).
The ability for companies to delegate, control and track company and employee spending in real-time struck us as vital and so that’s what we created a solution for and what we will continue to enhance, particularly under the guidance of the PSD2 law.
The PSD2 law is a big deal for the future of fintech. In a nutshell it seeks to harmonise the payments landscape; levelling the playing field between countries and between payments providers, resulting in more competition and ultimately, better value for the consumer.
The significance of PSD2 cannot be underestimated. It will fundamentally change banking forever. The directive is wide but one key aspect they want to ensure is the accessibility of Application Programme Interfaces (APIs). What this basically means is that instead of a merchant asking you to enter your payment details into their website when you want to buy something and then the merchant acquiring the money from your bank account by way of a few intermediaries, the API will simply ask you for permission to use your bank details. Once permission is received, the retailer will receive the payment directly from your bank, avoiding intermediaries. The API creates a direct connection between retailers and banks and opens up opportunities to consolidate account information in 1 portal.
There are other significant aspects to PSD2 like a ban on surcharging (additional costs) for card payments, better consumer protection against fraud, improved consumer protection for payments made outside of the EU or in non-EU currencies, two- factor authentication and perhaps most excitingly, the introduction and regulation of third party payment service providers (TPPs) including Payment Initiation Services Providers (PISPs) and Account Information Service Providers (AISPs).
The latter will disrupt payment services massively. With the API and the merchant having direct access to the bank, they also have the opportunity to consolidate your account information in one place and harvest insightful data about you. This opens up lucrative cross-selling opportunities.
As you can see, there is a lot happening in the fintech industry that has kept me up over the past three years! We’re on the cusp on a total revolution in the way we do business from a raw ‘financial transaction’ point of view. It’s incredibly exciting.