Lisa Shields, CEO of FI.SPAN and former founder of Hyperwallet, spoke to bobsguide about how she groups fintechs into services and the ease with which banks can access them through APIs. Think Android app store but for banks.
Tell us about FI.SPAN.
I’m responsible for founding, building and running a full-stack fintech that’s disintermediary and directly competitive against banks. FI.SPAN is my second fintech after Hyperwallet back in 2000, a global mass B2C payout company serving Airbnb and Uber, for instance. We realised when we were pitching this payout solution to CFOs that they came back to us and asked if we had a solution for, say, cash management or domestic B2B vendor payments. I was fascinated by their appetite for the enterprise to look for best-of-breed solutions even from non-bank service providers.
That was part of the epiphany that led to to formation of FI.SPAN. The other part was in 2012 when we took Hyperwallet to sophisticated, Silicon Valley customers who demanded we exposed ourselves through restful APIs, and we did just that because the fintech industry as a whole was following suit.
Fastforward to 2015, when I sold Hyperwallet and the fintech landscape looks different. API banking is a hot topic yet the dialogue is fixed around banks exposing themselves through APIs including PSD2. And this bearing in mind that fintechs had been exposing themselves through APIs, I kind of thought, why hasn’t anyone looked to aggregate and stitch together these fintechs into arrangements or catalogues of services for banks?
We are that aggregator at FI.SPAN.
What sort of fintechs do you look to add to FI.SPAN’s catalogue?
I exclusively look at business services so I’m not necessarily looking at the fintech with the greatest and latest product but B2B fintechs who can provide a useful service that will typically compliment rather than compete with the capabilities that most vendors already offer.
Case and point, low value global payments. Most businesses will have a decent domestic ACH, BACs faster payments services but few will have a good global SEPA like services. The first fintechs we look at are payment companies that are curating services and products that are complimenting bank systems, initially mid-market US banks. We’ve integrated a wave of ten fintechs within payments and AML.
We moved on to looking at fintechs that offered loan servicing including direct integration with accounting systems. When I started FI.SPAN my mantra was ‘we just need to kill SSTP’ (an excruciating hoop-by-hoop process to integration) but I soon realised that we still need to kill the fax machine in loan servicing within banking. The next wave looks to integrate lending tech fintechs to this end.
In sum, we look for fintechs that aren’t necessarily the newest or most innovative, but that offer a wide range of services that compliment banks.
It sounds like FI.SPAN is a pick ‘n’ mix of fintechs with a single API access point for banks to plug into.
That’s exactly right. FI.SPAN does one integration with the banks to pair up that single access point. It’s our speciality to integrate with the core legacy platforms, typically the DDA, COM or AML platform. Once we’ve done that and to torture your metaphor, we’re essentially a lolly bag of different fintech solutions that are already integrated through APIs that we take care of.
It’s not like banks don’t see the benefits of partnering with fintechs - it’s more the amount of regulatory vetting that needs to be done on new partners that’s off-putting. It’s also pretty expensive spooling up the technology to provide access, the operations to go with it and, to educate the workforce. FI.SPAN removes the technology, integration and operations impediments. Banks still have the freedom to choose who they work with and how they do their diligence on them, we just take care of the technical aspects.
The most important aspect of FI.SPAN is our fintech orchestration engine which means that we add fintechs to our catalogue in a way that complies with regulations and risk appetites that banks might have. Part of recruiting fintechs to our catalogue is that we have certain ideas of combinations so our service isn’t a pure pick ‘n’ mix app store but slightly more bespoke and orchestrated in combinations that work.
Part of that orchestration is staying on top of the fintech market and taking the hassle out of choosing fintech services and ensuring continuity of service. We might reach out to several competing fintechs offering similar services and customise it into the ‘best of both worlds’; it’s the banks that benefit from that.
It’s our end goal to ensure that banks become the data custodian of the enterprise. They collect and use their data through our orchestration of fintechs, and it’s passed back to them through their API access point. This is how they can leverage their data whilst bypassing the the inefficiency and time consumption of their legacy systems.
FI.SPAN sounds well equipped to take advantage of PSD2 and Open Banking.
When I started FI.SPAN in May 2016, the first comment I got was to move to London as European banks would be the first to need these kind of services with PSD2. I decided that I didn’t want FI.SPAN to be positioned to banks as an obligation to meet regulators’ demands. Rather, I wanted the FI.SPAN product to appeal to the business lines of the bank as a revenue opportunity.
How do I see PSD2 evolving? My personal view is thank you very much to the European regulators, this is a wonderful piece of legislation to bring to the world. This view evidently isn’t shared by some financial institutions, certainly US ones, but the reason I think it’s a good development for society is because it is forcing a discourse around what open banking looks like. In my view, it’s a necessary step to the ultimate end state that is beneficial for banks, customers and fintechs.
The challenge right now with Open Banking is that the implementation has all been one way - i.e. data coming out of banks and banks facilitating that. The cost flow and opportunity flow are being held by different parties - the cost is for the banks and the opportunity is for the fintechs. So far, Open Banking has been concerned with this and placed an immediate priority on complying to the PSD2 deadline.
After 2018, banks will start to see the services that their customers are adopting and that is when the most forward thinking bankers will begin to leverage the data coming back to them through APIs. In this way, banks will concurrently produce and consume data.
I think this process will take a full seven years before the consumer market and, subsequently, the banks begin to notice the benefits of PSD2.