Digital transformation projects in banking come in all shapes and colors. To grasp the evolving space, I like to think of service providers focused on consumer banking transformation projects and those focused on SME digital projects. In consumer banking, those involved are incumbents or startup digital banks (challenger or neo or other acronyms depending on the region). For SME banking, there are digital spinoffs of banks realizing that technology now allows them to profitably serve small businesses and also standalone startups.
For both of these types, I like to think of service providers that offer Banking as a Service and those offering Cloud based Core banking. Banking as a Service goes with a white label banking license that usually includes KYC, AML, and back office needs; leaving the marketing and customization to the “client” (Solaris and Fidor are two examples). Cloud based core banking service providers don’t offer KYC, AML or a banking license; they are focused on the back-office infrastructure (Mambu and Temenos are two examples).
In this space, most service providers and B2B clients are focused on the deposit part of the banking business. The credit and investment aspect is taking off now.
For me what is more interesting in this space is that it is ideal for all sorts of partnerships.
Re-bundling is happening;
Marketplaces are being launched;
API connectors are being used to integrate deposits, credit, investments!
Growth, convergence, innovation!
Digital banks integrating credit and investment Fintech products
There are more than one noticeable moves in this direction out of the UK.
FinanceBay is the new marketplace that Fidor Bank in the UK has just launched. I like to think of it as a banking app store or a marketplace that curates relevant fintech partners. The first two fintech partners are Seedrs and Nutmeg. Seedrs will be the first and only equity-crowdfunding “app” on FinanceBay that gives access to such investment opportunities (i.e. equity funding of UK SMEs). To date through Seedrs accredited investors have allocated 200 mil pounds through 500 deals. A touch of Nutmeg will be added soon so that Fidor Bank customers can open fully managed investment portfolios on Nutmeg. According to Business Insider, Nutmeg is the largest UK robo-advisor with £600 million AUM which is more than its competitors, Moneyfarm and Scalable Capital.
In April, UK bank Starling announced an integration with savings and investment app Moneybox, after its earlier partnership with Transferwise.
The foreign exchange app Revolut has launched a partnership with property investment platform Bricklane to offer its clients a tax-efficient way to invest in property, and with Lending Works to offer its clients consumer P2P credit up to 5,000 pounds.
Watch the Fintech startup world, blurring the lines between digital consumer banking and WealthTech, much faster than the established incumbents can. The race is on!
Efi Pylarinou is a Fintech thought-leader, consultant and investor.
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