Where is all the behavioural thinking in SME fintech?

Behavioural psychology and economics is a huge passion of mine. It combines three of my favourite disciplines – science, finance and psychology – so it’s hard for it not to be exciting. Plus, who doesn’t love understanding why we do the dumb things we do? Awareness then becomes an opportunity to undo them, or at least blame them for our bad money behaviour. Can’t save for the future? It’s hyperbolic discounting’s fault, not yours.

This morning our Chief Behavioural Officer at Zuper, Kris White, ran an amazing workshop on how financial product designers can apply behavioural economics (BE) principles. There are plenty of examples of behavioural economics principles and thinking being used in the consumer fintech world (Lemonade, Qapital, Decision Fish, Acorns etc), but very few (at least to my knowledge), in the small business space. However, that doesn’t mean there isn’t a need for this thinking to be applied here too. A potential opportunity for sure.

During the workshop I also jumped in briefly to talk through how we need to reframe traditional financial challenges and problems using BE, so we can find truly innovative and creative solutions.

Re-framing comes about when you use a tactic called ‘frame-storming’. I first came across this on a Fast Company blog post, and I’ve used it ever since to tackle product and marketing problems.

Let’s consider a typical small business owner challenge where we could apply frame-storming to come up with a route to a financial product – to pay yourself a wage or not. A Commonwealth Bank survey in 2016 suggested 50 per cent of SME owners opted to not pay themselves a wage one or more times over the course of a year due to cash flow issues.

If we took that question at face value, the simple solution would be to fix cash flow issues. But that’s hard, messy and there are many problems that hide within that problem. Plus – it’s where everyone arrives, because the answer is practically baked into the way the problem has been defined.

But if we reframed it, we would more likely than not come up with much more interesting product ideas that still helped to solve the problem. Some reframes will be good, some will be bad. But the point is, one could eventually lead to a breakthrough innovation.

Here is my crack at it below for the problem above:

“Let’s accept cash flow will be bad sometimes. How then can we help business owners prepare in advance for times when it’s tight?”

Jumping to solution stage, then here we could employ something similar to how the Qapital + IFTTT recipes work for rule based saving.

“How can we control personal expenses so that wage stress is less of an issue?”

Here we are thinking deeper into why not having money becomes an issue. Usually it’s because we can’t pay our bills. Well, if our bills are less, wage stress is less of an issue…

“How can we reduce our expenses automatically in the months our personal cash flow is weaker?”

Here we are adjusting our budgeting our outgoings in line with our incoming earnings. Maybe we need to cancel Netflix, Spotify and lock our Uber Eats app for the month, to avoid temptation.

Once you start down this path, it becomes evident there are multiple ways to skin what seemed like an insurmountable original problem. That’s why I love this technique, and why ultimately, many of the solutions can then be unpacked further with BE principles.

Happy frame-storming! And if you want to watch the BE session Kris did today, I’d highly recommend it. It’s available on our Facebook Page.

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.

Why side-hustlers should be the new target market for SME digital banks

There really is no shortage of people in fintech espousing ideas and concepts like ’emotional banking’, ‘human banking’, ‘simple banking’ and ‘easy banking’.

And I get it, I really do. Banking in 2017 still remains, for the most part, the complete opposite of all of these things. So it is intellectually romantic to indulge the idea that we can start a bank fresh today that can truly translate these adjectives into actual products.

But here’s the problem I’m noticing. Everyone’s adjectives seem to be ending up as the same feature sets – mobile apps that help you categorise your spending habits, help you track where your money is spent. And while it’s a solid foundation, I can’t help but wonder whether this is enough anymore. Sure, this concept felt novel 3 or 4 years ago, but perhaps product developers and designers should be pushing the envelope just a tad more with their MVPs. It doesn’t get me excited when I hear about it, and I’m convinced we can collectively do better.

It also worries me that as a competitive advantage, this is pretty much dead. When everyones talking about, chances are, the ship has well and truly sailed.

The big connection that I think everyone is missing in digital banking, is the emergence of the “employee come side entrepreneur’. How often do you bump into millennials that are doing a side gig? Whether its driving Ubers, running workshops for General Assembly or freelancing in their weekends. In my case – all the time.

The reality is, these people need business banking apps that feel like consumer apps. It seems very few digital banks have isolated this market and considered it as a marketing and acquisition strategy. It is the perfect uncrowded, underserved entry point for a longer term consumer banking play.

The irony is, it’s all about inverting the traditional banking model. Once you have them on a great ‘side-hustler’ banking platform, chances are, you might actually earn the right to their personal banking. Generally banks do the reverse, starting with personal and moving to banking. As an attack tangent, a side-hustler angle has serious merit.

Wannabe digital banks need to stop looking at the Monzo’s of this world and trying to imitate. They need to think bigger and harder about the problems that really exist in the marketplace. And if they watch what is happening outside of the fintech and finance bubble, they will realise the nature of work is fundamentally changing, and therefore, so to must the financial system that underpins it.

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.

An Interview with CEO of collectAI – for working capital management

Fintech for too long has been focusing on UX, and with the advent of AI, there have been many firms focusing on customer journeys, that would lead to closure of a transaction. However, in recent times, the focus has shifted to back office operations, and adding efficiencies to these processes.


Image Source

Germany based collectAI ​​automates ​and digitizes ​invoices, ​dunning ​and ​debt ​collection ​processes ​and ​is ​the ​first ​digital ​end-to-end provider ​in ​receivables ​management. They have achieved significant traction in Europe by processing €25 Million since launch in 2016.

We had a chance to talk to Mirko Krauel, CEO of the firm on their progress and plans, and here are the key points he mentioned about his journey with collectAI.

What led you to collectAI?

After a Diploma in Business Administration, I was working as a management consultant within digital innovation of Banking and Payments industry. During my corporate experience, I noticed inefficiencies in various back office processes. I also noticed that the Fintech startups at that time were mostly focusing on customer experience. I chose the problem to solve and I felt AI would have to be my go-to technology for the problem.

What was the best part of the journey and what were the challenges?

The best part of the journey was getting the team together, the initial days of getting the product design and getting to the MVP. We had quite a few challenges with the Go-To-Market strategy and our sales cycle was also too long. So we had to sit down and work out a way of going after mid-sized clients to have a few closures and build credibility. We also employed a few project managers who were able to bring deployments to closure on a plan.

The other challenge we had was getting access to quality data to build the software, but with time, we are getting better at that too. 

Tell us about the AI software you have developed

The AI software has got better over time as we have learnt and the software has done so too. It now evaluates

  • The best timing to send a message for the payment collection
  • Payment methods to include
  • The tone to be included (friendly, neutral, strict tone)
  • If SMS, Post, Email is better for a customer
  • If a payment plan should be offered

And as a result we end up with a customized communication strategy for every customer.

How do you measure performance of your AI program?

I think it would have to be based on the efficiencies achieved. We have introduced an intelligent​ email ​functionality that led ​to ​an ​increase ​of ​the ​collection ​rate ​of ​33%, ​while ​processing ​costs have ​been ​reduced ​by ​up ​to ​41%. 

It is a big market in Europe alone where about 23% of debts are not paid on time. We have managed £25 Million processed through collectAI in the last 12 months.

Those are big milestones that we have achieved within 12-18 months, and they wouldn’t have happened without the hard work of the team in building a capable software.

Where do you go from here, what is in pipeline?

We need to scale the team across various functions. We need a bigger IT team, enrich our operations team and also get a few PMs. I have also plans for developing some self service features within the product, which will help customer experience and conversion. 

There are a number of AI startups coming up across Europe focusing on back office operations. However collectAI are well funded by their parent company Otto Group, Germany’s largest online retailer, and they have also demonstrated execution in the last 12 months. There is serious competition across the Atlantic, however, they seem to have the advantage in the European markets.

Arunkumar Krishnakumar is a Fintech thought leader and an investor. 

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.


Curve + Xero on a mission to make you love expenses

Today I sat down to process roughly two months worth of expenses – that has to be the bane of any small business owner’s life – bookkeeping. It still makes zero sense to me how manual the whole process still is.

And I’m probably closer to the cutting edge of technology than most. At least I’m clued in enough to use apps that allow me to take photos of my receipts and extract data from them, to cut down as much as possible the data entry element.

But of course when you think about how easy life is outside of business related apps, nothing ever feels fast or seamless enough. There really is no Uber Eats of business banking and financial applications. At least not yet.

Which is why I got excited (for UK residents) when I heard about Curve’s latest integration with Xero, and its ability to streamline expense tracking for small business owners like me.

Curve is one of those seemingly micro-innovations that cleverly straddles the digital wallet and physical card world incredibly well. Rather than extreme disruption, it has found a comfortable and acceptable middle ground for the pragmatic and realistic consumer. This is really brilliant when you think about it, and not something a lot of fintech providers do well. While disruption is romantic and exciting for investors and founders, there is a danger in being too unorthodox, especially in financial services. You can be too far ahead of the curve, so much so there are no customers out there at all, willing to join you.

Unlike Apple Pay and its peers, instead of trying to get us to convert overnight to paying for everything with a tap of our smart phone, Curve simply asks us to roll our multiple credit cards into one plastic card, then control which card we are really paying from via the Curve App. It’s innovation the average punter would actually get.

The company has now signed up more than 75,000 users, with around £70 million pounds in transaction volume having gone through its platform.

But back to its latest direct Xero integration. The Curve platform can now send all expense related transactions directly into the accounting software through one feed, from whichever card (or cards) a user nominates as having business expense related transactions.

What is even better is that via their ‘financial time travel’ feature, if a user accidentally purchases a business related item on a personal card, they have the ability to push it to another card after the payment has already taken place. This seems like a smart way to game credit cards that offer high rewards points but are often surcharged at the counter by merchants.

The user still has to photograph the receipt to attach this to their transaction, which means the technology isn’t the exact expense nirvana I’m still hunting for. But perhaps in the future Curve will find a way to marry tax and POS data with payments data, so I never have to touch or photograph a piece of paper again in my life. That would be something.

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.

JP Morgan beefs up small business payments with Bill.com

Jamie Dimon may think Bitcoin is a fraud, but it seems he’s still Ok for JP Morgan Chase to drop some ‘real’ money on other more mature fintech ideas in the B2B space.

Yesterday Bill.com announced JP Morgan Chase had made an undisclosed investment into its automated billing platform for small businesses.

Unlike C2C payments, where the likes of Venmo have made inroads – and now Zelle – the B2B sector is still relatively nascent, and little innovation can be found.

Today Bill.com allows its 2.5 million business customers to email or upload bills directly into its platform, initiate approval workflows if required, then authorize payment from the business’s bank account, removing any need to log in to a separate banking platform.

And for those businesses who’ve made it to the cloud, bill data can also be synced through to an accounting system, like Quickbooks or Xero, eliminating double handling.

What is interesting is that this workflow is essentially reversed here in Australia, and New Zealand. Here business owners typically upload invoices into their accounting platform first, then manually upload payment files to their bank, which is incredibly cumbersome. Very few banks offer automatic syncs between accounting platforms and banks for the purposes of initiating bill payments, making Bill.com a serious step ahead in terms of functionality.

Alongside its direct offering, Bill.com is building out a more comprehensive banking play, Bill.com Connect. The Connect platform launched in 2016, and has allowed Bill.com functionality to be effectively embedded inside a vanilla business-banking platform. One premise behind this is that it can help banks move a business from cheque to online payments. And not only does this offer the allure of reduced processing overheads, but it potentially presents another fee revenue stream.

Some research bodies suggest up to 50 percent of small business payments in the US are still being paid by cheque, however use is declining. But it is still significantly slower than many would like. According to the Bank of International Settlements, Americans make on average 38 cheque transactions each in 2015.

It’s not clear if Chase will use Connect or will develop a more customized solution for their customers, however the functionality will live inside Chase’s platform, with the potential to reach the bank’s 4 million small business customers. No doubt Chase are hoping it will win them some more too.

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.

Square sets its sights on SME banking

Over the weekend I visited a small country town in Southern New South Wales, Australia, called Kangaroo Valley. As you’d expect, given the name, you’ll find plenty of the famous jumping marsupials wandering the countryside. But if you grab a torch and head out after dark, you’ll also bump into a surprising number of very large wombats waddling about the place. And they are very odd creatures indeed.

But aside from the entertaining fauna to be found in this part of the world, the next best thing about country towns like Kangaroo Valley is the opportunity to peruse the Saturday local market. Here you’ll find yourself treated to paddock to plate sausages, homemade pickles, grandma’s afghan biscuits and vegetables straight from the back garden.

Of course if you’re a city girl like me, chances are you’ll forget to bring cash. But thanks to technology, even in isolated places like Kangaroo Valley, enjoying the historical charm and village atmosphere doesn’t have to extend to inconvenient payments anymore. As it turns out, even Square has infiltrated this part of the world, with their small and handy card readers. I paid for more pickles, olive oils and cheeses than I probably really needed to thanks to this little white box.

And hasn’t Square had an amazing trajectory from its early marketplace roots, now a real contender in the payments and small business finance market. It’s latest Q2 results saw it post revenue of $552M, with the business adjusting its full year revenue outlook for 2017 upwards, to $925 million to $935 million, up from earlier guidance of $890 million to $910 million.

Compared to a year ago, the stock is up 140%, with many expecting it will continue to outperform. While it currently trades at around the $27 mark, some analysts think it can push to $33.

What will be interesting to watch is whether Square’s latest move into banking will convince the market it can make more inroads into the small business sector, beyond payments and lending. One thing is for sure, damming up those payments in the form of deposits, so as to access cheaper funding will be something on its mind for sure.

But the bigger play, and something Square has been positioning itself for, for sometime now, is the integrated ecosystem of services game. Because Square is much, much more than just the financial component. It encompasses all the other services these rivers of money flow through – from point of sale, to payroll, to analytics services and more. It’s the ecosystem a bank wishes it could build, just can’t.

In this day and age, the secret sauce, which no doubt Square is hoping will prove to be true, is that you have to start the other way around. No use attacking a bank by becoming a bank. First become everything else a bank isn’t from a market place offering perspective, then become a bank. Then perhaps one day you’ll have a powerful enough model that can truly unseat an incumbent. And with this latest news, maybe that day is close to arriving.

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.

airBux launches digital currency for small businesses

The danger with following people in a certain industry on social media i.e. fintech, is you end up with a very warped view of the world.

If I just went by what my Twitter feed algorithmically displayed to me, it would seem the current flavor of the month is all things ICO. Is everyone just going slightly nuts for these right now? Speaking of ICO, whenever I see that acronym, I can’t help but think of Frank Underwood’s version of ISIS from House of Cards…

Yesterday someone even joked on my Twitter feed that ICO was also the new ‘we’ll be in touch’ from VCs. While we may not have we reached ‘peak ICO’, my gut tells me we are somewhere on the spectrum.

But ICOs aside, digital currencies are certainly here to stay. And one startup in Australia looks to be finding a hybrid payment/loyalty application for them in the small business space.

airBux went to press this week with news they had started a pilot of their non-blockchain digital currency platform with a pilot group of businesses in Cairns, a city most famous for it’s proximity to Australia’s Great Barrier Reef.

More than 35 business owners are taking part, allowing shoppers to pay for goods and services entirely with airBux , or a combination of cash and/or card and airBux.

The platform even looks to be integrated with a few point-of-sale systems, meaning there isn’t some annoying ipad next to the till that the cashier has to separately input the order into, or the customer has to tap or scan a QR code. airBux are also generated per transaction, similar to a traditional loyalty program.

There is serious merit to the concept of being able to use your reward points across various businesses, especially offline. And unlocking liquidity, a central premise of ICOs in particular, is long overdue for the loyalty space. I have so many points languishing in various rewards programs that I would love to be able to make them cross-purpose and actually get some real benefit. Of course, to get a big brand to agree to do this is near impossible (no chance those Emirates points are going to become Virgin points anytime soon). But in the small business space – where loyalty programs today amount to not much more than a punch card or software slightly more sophisticated than Excel – well, that is possible.

But scale is of course key, as is getting the pricing right. Today airBux looks to put the cost burden on the small business owner, which is always a tough one to sell (especially around payments). However if the utility is there and the value can be articulated, then instead of my local café putting up a sign telling me they’re surcharging my $8.50 purchase, maybe soon they’ll be asking me to airBux it – and for less.

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.