Interview with Peter Vessenes, Founder & CEO of ProfitSee

Fiscal management is one of those phrases which, as someone who does not have formal financial training, I would have once found myself nodding my head to in conversation without really understanding what it entailed. I feel OK about that, because I’m sure if I had of said the phrase ‘single-electron transfer living radical polymerisation’, the topic of my honours thesis, most people would have done the same. So quid pro quo.

However last year I did get interested in fiscal management after meeting Peter Vessenes, founder and CEO of ProfitSee, at XeroCon in Brisbane. Peter, you see, is on a mission to make fiscal management accessible and understandable to small enterprises. Using smart algorithms and AI, he and the ProfitSee team want to serve up financial insights that help drive better decision making. The types of insights once only accessible to Fortune 100 companies.

And he certainly has the pedigree to play in the space. Since 1983 he’s worked as a turn-around specialist, assisting corporates and multi-nationals with their fiscal management. Alongside that he’s also contributed to policy development in Washington and somehow managed to learn to code and author a number of books along the way.

With ProfitSee having expanded into over 6 markets globally, the big accounting firms are now coming knocking on Peter’s door in their desire to find value and returns in the SME advisory space. ProfitSee’s white label approach makes it a potential weapon in these sorts of strategies.

But the real magic is hearing Peter talk about what he does and, more importantly, why he does it. His global perspective on the SME advisory space is something no aspiring B2B fintech startup or investor should miss. So when he was in town this week, I made sure to lock him down for an interview, which you can listen to below.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business.

Financial wellness in the workplace

Workplace wellness is a booming business, especially at the corporate end of town. In Australia, property groups like Dexus and CBRE are embracing wellness initiatives to differentiate themselves in the office leasing space. Not only are they incorporating wellness principles into their building standards (WELL by Delos being one example), a friend of mine in asset management now tells me property companies are developing wellness platforms and portals for tenants, allowing building users to tap into a network of on-site yoga instructors, nutrition experts and chiropractors, as they seek to help their tenants create healthier and more productive workforces.

Of course, many of us know that wellness in the workplace extends beyond the purely physical. Along with mental health, financial wellness is an area that is now increasingly gaining the attention of employers. According to a study published by AMP last year, 1 in 4 Australian workers experiences financial stress, with a lack of confidence in their ability to make ends meet. Business owners and managers are under no illusion that this type of stress has an impact on workplace productivity.

50 percent of stressed workers site bad debt as the trigger for their sleepless nights while 35 percent are worried about saving for their retirement. The study also found 30 percent of females are more likely to experience financial stress, compared to 19 percent of males. In the US the numbers are similar, with a Bank of America report finding 75 percent of employees suffer from some degree of financial pain.

Last year I wrote a post for Daily Fintech detailing a number of companies operating at the edges of the financial wellness spectrum. Companies profiled at the time – PayActiv, SalaryFinance, Ziero Financial, Zebit and Kashable – mainly focused on salary advances.

More true wellness players are now emerging, such as TRUSTIVO, an online hub that allows employees to access a national network of financial professionals, educational tools, as well as other financial wellness support resources. But strong examples of technology led innovation are thin on the ground. It is clear that this is a wide-open space for innovation, supported by a business community that is increasingly receptive to ways to enhance their workplace offering. Sounds like a no-brainer, doesn’t it?

Ask yourself this – when was the last time your employer offered you a product or service that could have a meaningful, positive impact on your finances? If you work for a large corporate, you’re probably more likely to have had some exposure to something over the past year. But if you work for a small business, a retirement fund option when you signed on is probably where your employer’s involvement in your financial wellness started and stopped.

With cloud services now embedded in many emerging small businesses, delivering wellness options and platforms for employees on top of this is now viable. The idea of employers being active participants in reducing employee financial stress is where PFM needs to head. At the end of the day, salary is the primary source of cash flow for the vast majority of workers. So managing this monthly flow of funds in a responsible way benefits both the employee and the employer. There is no question it is a fine line to tread – not everyone will see value in being told how to spend their money. But for those that are lost at sea, it could be exactly what they need to truly start getting ahead.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business.

Symbiotic channel strategies key to making B2B fintech scale

Small business owners tend to be incredibly difficult to get hold of, and, even when you do manage to pin them down, they probably have a grand total of 5 minutes available in their busy day to devote to hearing your meticulously rehearsed product pitch.

That’s why, as those of you who’ve done it will know, selling to small business can be a real slog. You need serious patience, plus a willingness to really get to know their business and the problems they face. After all, that’s what they’re doing for their customers. They expect the same in return. You have to care.

So given this state of affairs, rather than go direct, some of the most effective B2B sales strategies leverage channel models instead. The idea is that if you can get in the ear of a small business advisor or existing technology vendor who is already ‘wining and dining’ your prospective customer, then the ripple effect through to their customers will be a highly cost effective route to market.

It’s a sound model – but also a well-worn one. It also doesn’t help that more and more B2B fintech and banking startups are vying for the same advisors ears. At some point, something will probably have to give.

Pushing business banking products to small business through third parties is notoriously difficult. Primarily because banking products are complex and, given they physically ‘touch’ the finances of a business owner, tend to invoke a far higher degree of caution than a loyalty or rostering app recommendation would. This is mostly because the latter can be easily deleted should it turn out to be less than satisfactory. But changing banks or finance providers? Everyone knows that’s painful. So as an advisor, you need to have a particularly compelling reason to put someone through that sort of open heart surgery.

Business advisors are often also uncomfortable about receiving commissions for recommending banking products. One advisor has mentioned to me in passing that they would far rather use their relationship with a fintech provider to offer preferential pricing to their customers, rather than pocket commissions. Unlike traditional technology vendor channel partners, not all advisors see a commission stream as a ‘valuable enough’ source of revenue compared to preserving the aura of independence a commissions free stance provides in support of their broader client advisory work.

So if channel models aren’t the most elegant distribution channel for small business banking products, what is?

Well, it’s probably less a case of chucking the baby out with the bathwater and more a case of rethinking what banking channel models are. Channel models where no money changes hands, but where a business advisor’s life and a business owner’s life both get better as the product becomes more embedded is probably key.

Taking this from a philosophy to a reality is a huge challenge. As a result there is plenty of smoke and mirrors around the concept of ‘mutual gain’ in B2B partnership pitches today.

But if you can build a product with both sides of the channel equation in mind – customer and advisor – then you are likely to build a highly defensible channel strategy that can make itself heard above the noise of all the rats and mice B2B fintech players pitching into the advisory space.

We often talk about understanding the problems of small business owners. You actually need to go deeper than this – you need to understand the problems of the people that advise to them. There will be commonalities, and your goal should be to uncover these and build your product accordingly. While not really fintech directly, companies like Receipt Bank do this very well today.

In my opinion creating a truly symbiotic product that helps improve a relationship between an advisor and their client is better than tapping an advisor on a per transaction basis. It’s also something a traditional bank would never do.

In all fairness I don’t really know of any B2B fintech startup that has mastered this at scale. Some are certainly trying in the cash flow advisory, bench marking and forecasting space, and could very well crack it. But if you do, I’d love to know about them to further my research!

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business.

Program your own bank – the power of APIs

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This week I joined a panel of four experts to discuss Open Banking at Australia’s APIdays conference. Expert API commentator and author Mark Boyd, who recently wrote an extensive market report on emerging API strategies being used by banks around the world, led the panel. You can read his report here.

Joining me on the panel was James Bligh from NAB, who announced a select number of NAB APIs were now available, for the first time, to fintech startups. While the meaty APIs are still pending (transaction history, customer identification details etc), it marks progress in what has been a slow burn in Australia to get APIs from a major institution made publicly accessible to the fintech community. You can check out NAB’s developer portal here.

While the concept (or misnomer) of Open Banking is gaining traction in the UK and Europe thanks to directives from governments, no such mandate exists in Australia. Momentum however is building for a more hard line stance.

In November of last year a parliamentary committee report recommended that deposit product providers ‘be forced to open access to customer and small business data by July 2018’ via APIs.

And in its draft report, issued earlier that same month, the Productivity Commission also indicated that while it is likely to continue to grant ownership of data to private companies (like banks), it will look to increase customer access to data. This suggests reforms may be in the works that would allow consumers to authorise third party access without facing recriminations from their bank.

Of course if Australia doesn’t act, it will be left behind. Last week UK challenger bank Starling announced it was “opening the doors on #openbanking” making it, according to a blog post on its website, “the first UK licensed bank to have a public, open API.”

This is extremely exciting stuff and great for consumers. You could argue secure, consumer facing banking innovation lags even further behind small business banking innovation. Thanks to proxy banking aggregators like Xero, fintech startups in markets like Australia and the UK have been able to securely access account data without requiring a direct connection to the bank.

Finally, if you’re after something a little more on the fringe of banking API land, I’d highly recommend you check out teller.io. It promises to allow an application to connect to a user’s multiple bank accounts via one API. Aggregation providers and APIs like this are interesting as they could help a fintech service connect a consumer’s fragmented banking world. In the UK one report suggests as many as 1 in 4 consumers hold current accounts with more than one bank, making them prime targets for aggregated account management tools.

When I sit back and think about the power of APIs, then what strikes me is the ability for a business owner or a consumer to program their own bank. That is, instead of choosing an institution first, in the future we’ll choose a number of banking ‘components’, for a truly tailored banking experience – not just a marketing pitch. If like me you’re already part of the 1 in 4 stat above, then you’re already trying to achieve exactly that, just in a clunky, and hard to manage way.

The programmable bank era is here to stay. And personally I can’t wait till I get to build mine!

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business.

Can proptech mixed with fintech save Generation Rent?

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Thanks in part to low interest rates and globalisation, property markets in many urban centres across the world seem to be spiraling out of control. Sydney’s median house price has shot past the AU$1.12M mark, surpassing even that of New York, while across the Tasman New Zealand’s largest city, Auckland, has seen median dwelling prices drift close to NZ$1M.

The market dynamics are similar in the UK, with research from the Resolution Foundation indicating there is a significant ground shift occurring, from owning a home to renting one instead, amongst working-age households. In the year 2000 around 55 per cent of households lived in an owned, mortgaged property, a figure that has since dropped to 41 per cent in 2015. Over the same period, those in private rentals climbed from 11 per cent to 25 per cent. The social ramifications of this shift are profound.

Generation Rent, as they have come to be known, now find themselves stuck between a rock and a hard place, facing a potent mix of stagnant wage growth and skyrocketing house prices. Perversely those that have scraped together a deposit face the risk of long-term low inflation, potentially locking them into a possible debt trap for years to come.

Once, owning a home was considered a safe and sure bet for building long-term wealth for the middle class. However with this asset now out of reach for most, some fintech start-ups have spotted an opportunity to service the appetite for property via a range of more accessible and affordable vehicles.

BRICKX in Sydney is one such fintech (or proptech) startup. Via fractional property investment, the company allows investors to purchase units, or ‘Bricks’ of a home. The investment also entitles investors to a fixed share of any rental income generated.  The upside of fractional investing is that investors can spread their risk across a basket of rental properties, plus cash in on capital gains at any time by selling their Bricks to another buyer.

For those lucky enough to have significant equity stashed away in a home today, fintech startups like Point in the US are providing an alternative to the traditional banks when it comes to accessing stored wealth, specifically for reinvestment back into the property market. Point, an Andreessen Horowitz backed startup, purchase’s a fraction of a homeowner’s dwelling, only collecting this back (plus capital gains) when the original property is sold. Homeowners also have the option to buy out Point at any time.

While Generation Rent might not be able to access services like Point directly, parents, who are increasingly financing children into their first home, could. Data from the Reserve Bank of Australia shows the proportion of first-home buyers borrowing from their parents to finance their first property purchase has more than doubled since the 1970s. With many in the Baby Boomer generation under financial pressure themselves through tech driven workplace disruption, any financial solution that doesn’t impact monthly cash flow is a bonus.

Building societies and small banks have a great opportunity to partner with fintech startups in the proptech sector to propel innovations like these forward, scale and bring them to the mass market. These types of partnerships can have real social impact if executed correctly – there is even scope for government involvement. One thing is for sure, we need to creatively rethink how home ownership works and take this opportunity to address the real long term problems uncertainty and insecurity around housing can cause.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business.

Embrace uncertainty to give your fintech start-up the edge

If there is one thing I’ve learned during my time working for a growth company, it’s that you have to get comfortable with uncertainty. In start-up and growth-stage land, uncertainty is a place you should actively want to inhabit.

As I write that, it strikes me how counter-intuitive this concept is to the daily rhetoric we are exposed to via our media and business peers. Uncertainty is the destroyer of stock markets, economic policies and sound decision making. Give me road-maps, requirements documents, hierarchies and the three year road-map. Most people crave certainty – it’s human after all.

And while there is some truth to the ripple effect of the downside of uncertainty in particular domains, the negative press the word has received has possibly blinded many in business to its hidden, positive traits. Especially when it comes to creatively outwitting your competition.

While uncertainty with respect to ‘what is the purpose of our company’ is negative, uncertainty at a ‘how do we get from A to B’ can be a healthy thing. Why? Because it forces you to continuously experiment and tinker with your operational model until your growth engine is humming satisfactorily. In fact, continuous innovation requires you to be completely uncertain as to whether your tinkering will make anything any better at all – that’s the point of hypothesis testing. For many people, that’s a really scary place to be. ‘I don’t know if this will work’ is a brave phrase in business.

When you move from a quasi-regulated institution to a fully-regulated institution, as we are at Tyro, plenty of headaches arise. Many fintech’s will encounter this as they move into a more banking-esque world. Lack of consistent data on your customers or systems that don’t interface smoothly is one such headache, creating unforeseen blockages in your growth engine. And, thanks to Murphy’s Law, they usually arise the day before you plan to launch something.

But when you’re still small, you don’t have the luxury of time to fix them over 3 -6 months. You need to think up creative solutions fast, some hacky, some possibly more elegant, to unblock those growth stoppers within days. And you need to have the courage to try the hacks, uncertain as you are as to their effectiveness. They will sometimes surprise you, in a good way. And that’s why I love the phrase, ‘why don’t we test it and see what happens’. Kills it in meetings every time.

People often ask me, ‘what will X look like in 3 months?’, or ‘how will the sales process for Y operate in the future?’ They ask me that because they want to build processes that are future proofed around this. I get it. But when you can’t give this to them, because you’re really discovering as you go yourself, this can be hard for many people. Especially if they are not used to ‘feeling’ their way towards a shared goal.

But if everyone can align around the fact that there are degrees of uncertainty as they collectively march towards that common goal then, as a team, you can achieve amazing things. Not only this but you’ll all somehow feed off each other and become far more open to thinking up more creative solutions to get there. This is because as a team you’re autonomously forging your own path and not following dictated directions.

I like uncertainty. I enjoy continuously being surprised by things no one ever envisaged would work. It’s like a continuous state of discovery, or a learning adventure that never really ends. I believe this mentality, when executed on at a start-up or growth-stage company is a distinct advantage. Even more so in financial services, where your opposition will for a long time to come have unavoidable tissue rejection, right throughout the organisation, to the very word.

But that means you have to choose your teams incredibly carefully. You need to place those that like the cut and thrust of the new in the parts of the engine where there is a high degree of uncertainty, and move the more stable ones to the periphery where the cogs move smoothly against each other and only need a little oiling now and then.

Simon Sinek has a great quote that sums up what I think I’m trying to get at. ‘We crave explanations for mostly everything, but innovation and progress happen when we allow ourselves to embrace uncertainty.’ Couldn’t agree more.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business.

Xero opens the door for fintech banks to become SME advisors

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Rod Drury, CEO of cloud accounting platform Xero, penned a blog last week discussing the impact Xero’s financial web is, and will continue to have on the small business community. For those of you who aren’t in the know, Xero’s financial web provides banks with access to Xero customer data via a suite of APIs. Use cases include direct bank feeds into Xero, payment instructions initiated out of Xero for AP, payment buttons on invoices for AR and sharing of financial data for lending decisions.

These are only a few financial use cases. The opportunity for banks to innovate around how this data is used is endless. In my opinion, the big opportunity for banks is in tapping into this data to become true advisors to small business, beyond the financials.

Banks realise this, the execution is just extremely difficult. In Australia, CBA is the only bank who has come close to implementing a business analytics function for its customers, as an advisory conversation starter. The product, known as Daily IQ, delivers ‘unique insights about your business and customers, helping stimulate ideas that can enhance success.’

Xero’s success is built for the most part on the back of the accountant and advisory community. So Rod naturally sees accountants and bookkeepers as the natural conduits for SME banking advisory as well. Helping SMEs move from that ‘now what’ moment that occurs once business insights are revealed, to taking action. He sees banks partnering with this advisory channel to deliver the goods, as per the extract below.

“Accountants are an amazing channel for banks. In the majority of situations, a small business owner who is a cloud accounting platform user is connected to an accountant. Across all these accountants and small business owners, there are hundreds of thousands of conversations about financial services happening every month. Banks need to educate accountants on their services, and accountants are open to this training. Accountants want to know how they can take banking services and add value to small businesses.”

He’s not wrong. But it’s also not necessarily the only option all banks have at their disposal. Thank’s to the emergence of fintech, banking is swiftly moving to being more than just a numbers conversation with an SME. Banking is now a technology + numbers conversation.

What will be interesting is if very focused, tech first, SME only banks emerge as advisors in their own right, not necessarily removing the need for a traditional advisor, but plugging a niche hole that exists to day – namely advisors lack of knowledge about fintech services. This will be an extremely natural place for tech banks to play, as given the nature of their business model, forming relationships with tech vendors embedded in the SME community has been critical to their success from day one. They’ve been advising on tech and banking since their inception.

Understanding how technology knits together with banking is not a natural space for an accountant to enter, yet. But for a tech bank to understand the best practice way banking should and can work with cloud accounting is not a stretch at all. So when a business owner calls into to discuss best practice AP and AR practices for their 4 hospitality venues, the tech bank expert can quickly map out the tech add ons and banking plug ins they need to make everything work.

Legacy banks will struggle with this for years to come. It’s just not in their DNA. It’s not impossible an SME could easily equate tech advisor with bank in the near future. Xero has made this possible. It’s up to tech first banks to now grab the opportunity at hand.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business.