The fintech revolution is more about collaboration than competition, Alex Campbell, Managing Director, Asia at Xero writes in an essay for finews.asia.
The financial services sector has long been associated with cut-throat competition. In a zero sum game, one bank’s market share advance is another’s setback, and one counterparty’s gain is another’s loss. There is little incentive for collaboration and banks have tended to operate as closed systems, viewing all information and data as a proprietary advantage.
The rise of fintech over the past few years has further advanced this zero sum view of the world. Fintech companies set out explicitly to disrupt banks with the apparent advantages of having the ability to innovate faster, use modern technology and design, and operate outside traditional regulatory frameworks.
But the financial services revolution heralded by these fintech companies has - for the most part - not yet transpired. It has become clear that just as fintech companies have their set of unique advantages, so banks have theirs - established and trusted brands, strong balance sheets with cheap access to capital, and distribution to their large existing customer bases.
«Fintechs bring new ideas and technology, banks bring infrastructure, distribution and scale»
The logical answer is not ruthless competition between banks and fintech companies, but collaboration and partnership focused on how they can combine their inherent advantages to create new and valuable solutions for customers. Fintech companies can bring new ideas and technology, and banks can bring infrastructure, distribution and scale.
From day one at Xero we have been focused on building the first financial services ecosystem for small businesses through strategic and collaborative partnerships with banks - what we call «The Financial Web». We know that our place in the ecosystem is to provide a beautiful software platform for small businesses - and the banks provide financial services. Together we can create incredible value for our customers.
The best example of this is how we work with banks to provide direct integrations. These connect small businesses’ bank accounts directly to Xero, so they can see their cashflow in their accounting system every day, from any device, anywhere in the world.
«Make it easier for banks to make faster and better loans to their small business clients»
In the past, many small businesses have leveraged third-party aggregators to gain this access to bank statement data - an approach which is neither reliable nor secure. Using direct bank feeds means that the daily transaction details of a small business are instead sent over a secure channel directly to their accounting software - enabling them to manage their bank reconciliation activity daily and providing cash flow visibility in real time. Direct bank feeds avoid any of the security and reliability issues associated with aggregators.
Direct bank feeds also make it easier for banks to make faster and better loans to their small business clients, something that has historically been difficult and time consuming for both the bank and the small business. Cloud accounting connects banks with their customers so that rather than printing and submitting PDFs of old statements to show their financial position, small business owners can opt to share their up-to-date, accurate consolidated financial information directly with the bank to facilitate the loan application process.
«Secure, free flow of financial data is the foundation of the financial services ecosystem»
The secure, free flow of financial data is the foundation of the financial services ecosystem that Xero has been building with our banking partners, and bank feed integrations are at the core of this. In the past 12 months in Asia alone we have partnered with leading banks across Singapore, Hong Kong and Malaysia including HSBC, DBS, UOB and CIMB - and we are working on a strong pipeline of further partnerships to roll out over the course of this year.
The Financial Web is about enabling greater connectivity between small businesses, accountants and banks, which opens up further opportunities in access to capital, insurance, currency services and more. Getting ahead of the digital wave and collaboratively engaging with technology companies is crucial for banks stay competitive and to offer their customers the next generation of financial management solutions they expect.
Alex Campbell is the Managing Director, Asia for Xero one of the fastest growing Software as a Service companies. He leads Xero’s growth into Singapore, Hong Kong, Philippines and Malaysia and across the Asia region. He brings together a background in technology with a passion for helping small businesses.
