This week saw the release of The Fintech 100, a collaborative report put together by H2 Ventures and KPMG. The report takes a global look at the 50 established fintech businesses and 50 emerging stars and is a must read for anyone wanting to understand the industry landscape.
Behind lending and payments, it won’t surprise many to see insurance start-ups now make up the third largest industry category on the list. The report also highlights the fact 92 percent of companies covered consider themselves disruptors, rather than enablers. The growing confidence in the sector by investors and the traction some of the bigger players are achieving is clearly helping embolden new entrants.
One company that stood out in the report was Tink, a Sweedish startup looking to create a virtual bank off the back of its personal finance app. The company is hoping the new Payment Service Directive (PSD2) will eventually give them the authority to initiate payments into a bank directly. Daily Fintech took a deep dive into PSD2 back in June, and it is well worth a read. If Tink can indeed leverage PSD2 to become a virtual bank, it will be a huge fintech game changer.
European regulators are no doubt hoping the PSD2 initiative will be the start of many ‘Tink like’ enterprises. If this is the case, then by 2020 some analysts predict up to 9 percent of retail payments revenues could be stolen from banks by companies leveraging this type of payment framework.
So, if Tink does achieve virtual bank like status, and they chose to extend their offering to businesses, how could small enterprises benefit compared to what they have today?
Here are some thoughts.
- Many businesses today deal with more than one bank. Executing instructions on these multiple bank accounts would be much easier from one interface, rather than 3+ apps
- Today business logic around payment instructions is rudimentary, with some basic workflow capability available in cloud accounting systems that connect to banking services. However if apps like Tink could offer simple If This Then That (IFTTT) logic and recipes from one interface, this would be highly advantageous
- Settlement between different financial providers is generally ad-hoc and different. If a virtual bank could aggregate this and smooth cash flow, this would be a highly attractive solution
Finally, if a virtual bank could provide a centralised KYC layer, that made applying for new bank accounts and products more easily, this would be a hugely attractive feature for businesses who are tired of jumping through compliance hoops, and fintech providers who are wary of ever increasing compliance costs.
Tink could be a true disruptor, changing the way we interact with our banking providers entirely. They will own the customer, with banks simply providing a wholesale service in the background. Tink and its success in leveraging PSD2 will certainly be interesting to watch.