You say B2C, I say B2B
From banking to investment management to 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 should instead focus on the B2B market.
The biggest and most recognisable brands in fintech have all begun life focused on the retail and B2C sector - Nutmeg, TransferWise, Ant Financial, SoFi 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 introduction of open APIs 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. Meanwhile regulators across the globe are mandating the use of open APIs – Europe has introduced the revised Payment Services Directive 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 their own institutional clients. These APIs enable banks to offer corporate customers the bespoke, value-added and digital services they crave.
Finastra has recognized this trend and made its entire suite of products API-enabled. It has also developed FusionFabric.cloud, an API-enabled platform-as-a-service, to allow third-party developers to build services on top of its own offerings.
It is this collaborative ecosystem that is 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 can APIs create the technology interface and facilitate a new generation of innovative corporate financial services, at last.