UK: C-Suites from the UK Business Banking Ecosystem discuss an industry on the Tipping point of Change

UK business, from small to large, are the backbone of the economy and therefore supporting business owners with their finances is essential for stability and growth. Whilst digital innovations have transformed the merchant experience, are financial institutions doing enough in their own technological revolutions to support the industry? Are the current financial offerings diverse enough to suit this big pool of clients? Finally, are the traditional players doing enough to keep up with new innovative players?

These questions were discussed at the UK Business Banking Forum on 1st February in London. A selection of the speakers came together to share their views on the future of the business banking sector.

"The trick is to build the infrastructure first, to take advantage of these services, and I am very pleased with how ready we are for open banking next year.
Ian Rand, CEO, Business Banking, Barclays"

What is having the biggest impact on the market today?

A couple of years ago I became frustrated with people coming into the office and talking excitedly about blockchain, bitcoin, or 3D printers, without really having thought through how large the impact of such technologies would actually be on SMEs.

On the other hand, when we sat down and reviewed the horizon for all the emerging technologies, we quickly realised that the ubiquity of APIs, and the emergence of open banking legislation, had far greater potential to lead to new products and services, and competitors, and much more quickly. Therefore, we focused our strategic investment on open banking and data. The trick is to build the infrastructure first, to take advantage of these services, and I am very pleased with how ready we are for open banking next year.

How are advances in data analytics changing the SME landscape?

It is interesting because as banks are on a journey with this, so actually are SMEs. Some business owners spend a lot of time analysing their client data and industry data, many do not.I think it is one of the roles of the banks, like Barclays, using our relationship model, to have people on the ground talking to clients about ways in which they can run and grow their business through learning how to use these tools.

What gives Barclays the edge in business banking?

It is important to specialise. But then you need to underpin that with fantastic technology and online banking services. The business will also want a relationship manager available in their community that they can talk to, and a good telephony model. With our scale, digital service as well as having specialisation, that’s where our advantage really comes into play.

"There are plenty of other fintech services which we will be introducing to our members in the next few months.
George Bevis, Founder & CEO, Tide"

What do you think is driving the change in the business banking space?

Apart from Tide, there is very little change sadly. The change that Tide is driving is about instantaneous access to services which remove SME’s admin overhead. Banking is the least interesting of these services, but the most universally required so it’s where we’ve started. There are plenty of other fintech services which we will be introducing to our members in the next few months.

How is open banking going to transform the market?

A bit, but not a lot. Easier accounting integration will have widespread takeup. I’m less convinced about other services. The most useful services have little do to with APIs.

What is your opinion on the interplay between FinTechs and incumbents in this space?

Business banking has seen little product innovation when compared to personal current accounts (PCAs), and SMEs were experiencing many pain points such as lengthy account opening processes, portability of transaction history and simplified fee structures.

"It enables customers to own their data, instead of the banks, and gives them the ability to securely share it with other financial technology providers should they want to.We are asking customers to extend trust to companies that are promising to safeguard their data. This requires trust.It enables customers to own their data, instead of the banks, and gives them the ability to securely share it with other financial technology providers should they want to.
Anne Boden, CEO, Starling Bank"

What do you think is driving the change in the business banking space?

Business banking has seen little product innovation when compared to personal current accounts (PCAs), and SMEs were experiencing many pain points such as lengthy account opening processes, portability of transaction history and simplified fee structures. This was evidenced in a 2016 CMA review. There was a need for change, and Starling is already investing heavily in technology to launch an innovative business current account to our customers in early 2018.

How is open banking going to transform the market?

The Competition and Markets Authority have mandated that banks open their APIs to enable customers to securely share their data with third parties, as of January 2018. This transforms the market because it increases competition and innovation. It enables customers to own their data, instead of the banks, and gives them the ability to securely share it with other financial technology providers should they want to. This, in turn, gives customers seamless access to alternative financial products not offered by the banks. Starling has become the first UK bank with approval from the regulators to offer customers direct access to a wide range of financial products, all from within the app.

What is your opinion on the interplay between FinTechs and incumbents in this space?

Given that FinTechs can better compete with banks under this regulation, it will enable more competition to the benefit of customers, meaning they can access better products with better prices, while simultaneously motivating banks to improve price and user experiences. Banks have realised that they can't keep doing what they've been doing for decades and see the same results - they need to evolve their company, their culture, and their business model as technology changes and creates new possibilities. At Starling, we wholeheartedly believe that giving customers ownership of their data is a good thing, and simply want to help them to share it securely, which is why we were the first licensed UK bank to have open APIs.

"We are asking customers to extend trust to companies that are promising to safeguard their data. This requires trust.
Katrin Herrling, CEO & Co-founder, Funding Xchange"

Who is set to benefit most from open banking regulation?

Open Banking has the greatest transformational potential where the access to live, transactional data enables an ecosystem to work more efficiently. In particular, the SME funding ecosystem is ripe for transformation – access to banking data has the potential to enable greater automation of credit decisioning and slash the costs of risk assessment. Critically, the automation of underwriting will create much greater transparency and competition as it becomes easier to compare different offers for funding. Open Banking, together with initiatives stemming from the CMA review, has the potential to shake up a space that has for too long been difficult to navigate. Small businesses will be big beneficiaries by making easier to assess and access different funding solution.

How can business banks seize this as an opportunity?

We are asking customers to extend trust to companies that are promising to safeguard their data. This requires trust. If you look at the customer research that has been done on this topic, it is clear that customers still trust their banks more than almost any other institution with their data. So when it comes to adoption of new solutions, customers will trust banks more than almost any other party. The challenge for banks is to carefully choose how to build on this trust and bring innovative solutions to their customers – this will require banks to think about the bigger implications of what ‘Open Banking’ means for their own relationship with customers.

Who do business owners want to turn to for help? Will we see this change?

It is quite interesting to see that banks seem in two minds about whether want to be advisors or just sell products. On the one hand, the focus on reducing frontline costs and the move towards digital banking have killed the traditional relationship customer management model for smaller businesses.

Apart from some niche players, the frontline engagement model has largely disappeared in all but name. This is not really a problem if the banks had a self-serve model for smaller businesses that tend to be more digitally enabled and prefer the 24/7 model that online banking offers.

"As a result, the business banking operations are lagging behind in digital capabilities – if you look for example at basic online facilities like account opening or lending. So more investment is needed."

Unfortunately, the business banks have been starved of investments as consumer banking has benefited from digital funding. Asa result the business banking operations are lagging behind in digital capabilities – if you look for example at basic online facilities like account opening or lending. So more investment is needed.

On the other hand, the High Street banks have made substantial investments in being able to help and support start-ups and fast growth companies. It is clearly ‘cool’ to start a business – and probably one of the things where both government and banks agree that everyone benefits from the UK becoming a Start-up Nation. Banks want to be seen as actively supporting individual companies but also creating an environment that makes it easy to start a business.


To read more interviews by RFi Media in all past UK Retail Banker editions, follow @RFiMediaGRB on Twitter or feel free to visit the archive centre on our website: www.rfigroup.com/rfi-media/magazines

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