Changing expectations among Small and medium enterprises (SMEs) will force banks to acquire new technology and drastically change their development culture, according to Louis Carbonnier, co-founder of SME insurance firm Hokodo.
SMEs have at times been left in a no man’s land, without insurance, funding, or proper services, says Carbonnier. “People are beginning to realize that the small business owner or the CFO of the SME, is also a customer and a consumer. As consumers we are starting to get used to the Amazon one-click experience and we have certain expectations when it comes to user experience or user interfaces.”
Business banking is still very much a “sticky” sector: according to data from the British Business Bank, around half of UK SMEs tend to consider just one provider when looking for new finance options. But that could change, suggests Carbonnier.
He says the industry will see the emergence of an ‘SME cockpit’ – a single platform through which small businesses will be able to do all their accounting, send invoices, have cashflow visibility and obtain business loans quickly. These are all services that fintechs and agile accounting firms have begun to integrate, says Carbonnier.
“The ones that have the best shot right now are the accounting ledgers because they have an entrenched tech culture and a big client base. When you look at initiatives like QuickBooks Capital, which has already lent more than $1bn to SMEs in the US, you can imagine that the rollout of something similar in Europe would be absolutely transformational.”
“When we opened a subsidiary in France it took us three months to open our BNP Paribas bank account and three minutes to open our Revolut bank account,” he says. “For a level of functionality on the day-to-day, it’s also much quicker to do a transfer out of Revolut – 15 seconds. It takes me three minutes with the BNP Paribas accounts.
Technology and experimentation
Replacing systems and infrastructure isn’t the only answer, however. “The change required is half technology and half culture. When your incentive is not to fail it’s very hard to innovate. If you don’t solve problems with your culture, then no matter how much technology you put into place you’re still going to be held back.
“There is a lot that can be done to catch up and create leverage, especially by having a marketplace approach, piggybacking on the best tools that others might have developed. For example, if your invoice financing product is not that great, distribute MarketInvoice. If you think your loan product and underwriting process is too slow, why not piggyback on Funding Circle? This is a big way of catching up and with key technologies like cloud and APIs, and with a very small team you can have a big impact.”
Putting together those teams can be troublesome for banks. “What I’ve seen from many financial services institutions is that they no longer have good developers, or good engineers. There is a lot of outsourcing to Accenture, to BearingPoint and to Capgemini. They are great companies, but overreliance leaves some very large institutions with 10 guys who can code.
“Today as the founder of a startup, I find it much easier to recruit a skilled senior developer in Python than I did when I was in the corporate world. A lot of the very good talent prefers to freelance than be inside corporate control.”
A solution to this problem, says Carbonnier, is to create spaces within a bank and allow developers to run experiments alongside the core business. “For banks it can be very hard to run these two types of speed within their business,” he adds. “But I don’t really see how you can really innovate if you’re not giving your teams the tools to create something that could rival a QuickBooks.”