Why Fintech Startups Should Drive The Next Wave Of Innovation In The B2B Space
From banking to investment management and insurance, institutional and corporate customers seem to be more poorly served by fintech than their retail and consumer counterparts. We look at why many fintechs in Asia should instead focus on the B2B market.
The biggest and most recognizable Asian brands in fintech all began life focused on the retail and B2C sector – Ant Financial, Paytm, JD Finance, and so on.
While this trend has seen the successful startups get maximum brand exposure and a large customer base, it has left many corporate and institutional buyers feeling neglected and poorly served by the fintech movement. Corporate treasurers want real-time payments and account balances, and institutional pension funds want their own robo-advisors.
At the top of this list though are the corporate insurance buyers – risk managers dedicated to managing a company’s multimillion insurance budget. The insurtech market has brought innovation to personal lines such as health, life, motor, and home contents insurance, creating peer-to-peer insurance platforms, on-demand coverage and the use of telematics and wearable technology.
Yet none of these innovations have made it to the corporate world where professional insurance buyers have been left feeling that the digital revolution has passed them by and wondering if they’ll ever see a (paper) copy of their policy within the same calendar year. “Where’s our Steve Jobs?” has become a familiar refrain.
One of the obstacles cited by banks, asset managers, insurers and fintech startups is that corporate transactions, from investments to payments to insurance, are often more complicated, higher value and less standardized than their retail equivalents. The same can also be said for the systems involved, decades-old legacy systems held together by a hotch-potch of applications and platforms built up over years.
But now the launch of the Hong Kong Monetary Authority’s Open API framework for the banking sector could be a game-changing development. The same APIs that have powered smartphone services like Uber and Google Maps are being applied to financial services. Regulators across Asia are mandating the use of open APIs – Hong Kong’s regulator recently introduced the Faster Payment System, while in India the government has introduced the Immediate Payment Service.
For corporate treasurers, the use of open APIs to connect to external systems and data sources could lead to the end of overnight batch processing and a move to something resembling real-time. Corporate treasurers would no longer have to receive account balances at set times via Swift messages. Using an API, they could access up-to-date balance information via an online banking portal or treasury management system.
APIs also enable banks to develop a richer set of products for their corporate customers. In 2017, Citi launched its Request to Pay service, an API for corporate treasurers that enabled real-time account balances and digital cash collections. Meanwhile, HSBC is using APIs to work with third-party developers and to offer these services to its own institutional clients. These APIs enable banks to offer corporate customers the bespoke, value-added and digital services they crave.
API-enabled platforms such as FusionFabric.cloud, which allow third-party developers to build applications faster, are likely to help boost the B2B side of the fintech movement where banks and fintechs work together. Bank-backed corporate venture capitalists such as Citi Ventures and Santander Innoventures are the new power brokers in the fintech market and they are increasingly investing in B2B rather than B2C startups.
Similarly, mainstream asset managers are launching their own fintech accelerators and partnership programs, for example offering office space and advice on the institutional market to aspiring startups. Insurers may even be next.
Just as these partnership initiatives are designed to create a business interface between institution and startup, so too can APIs create the technology interface and facilitate a new generation of innovative corporate financial services at last.
About the Author
Mitesh Soni is a Senior Director of Innovation and fintech at Finastra, the world’s third largest financial technology company. He is a global banking industry expert with more than 20 years’ experience driving business transformation, digital disruption, and business model redefinition. He has spent a number of years in the risk management and trading technologies space holding a Financial Risk Manager qualification from the Global Association of Risk Managers. He is also an investor, advisor and fintech mentor with an active interest in building fintech community ecosystems.