There is more to fintech than meets the eye

Financial technology goes way beyond the flashy apps facing consumers and into the depths of the back office

Digital transformation at banks is not just about the flashy mobile apps and funky biometric authentication facing consumers – the unsung hero is the financial technology (fintech) used in the back office for business-to-business operations.

While being able to bank by just pressing your thumb against the home button of a smartphone is an overt example of fintech’s impact, back-office digital transformation is quietly seeing swathes of repetitive processes automated, saving time and money.

Take DueDil’s cloud service, for example. The service automates some of the due diligence that businesses have to do before they embark on new strategies or work with other businesses.

This process is traditionally heavily manual and fragmented, with staff checking various sources, including spreadsheets, to get a full picture of a business’s financial health or to understand a potential market. DueDil collects information on public and private companies and automates the process for customers.

Business customer on-boarding is a good example. Financial services companies have a huge overhead related to checking that business customers are good for loans, and so on. They also have a regulation called know your customer (KYC), which means they have to understand the companies or individuals they are dealing with.

To this end, DueDil’s cloud-based service is already being used by Spanish banking giant Santander to streamline customer acquisition.

Jonathan Holman, director of transformation at Santander Global Corporate Banking, said that in the UK, the company conducted a pilot in early 2017 to look at a number of problems, mostly around acquiring corporate customers.

“The traditional problems are on-boarding and financial crime-checking processes, as well as credit risk decision-making around whether or not to lend money and then execute a deal,” said Holman. “All of these take lots of time, cost money and are painful for customers. We looked at DueDil as an information source to help solve KYC issues and to streamline the credit risk process.”

Some fintechs to watch

Using the software, application forms from businesses are automatically filled in (pre-populated) using data from various sources.

The pilot worked on the idea of taking external sources that can be used in Santander’s internal systems and processes, and it has been a resounding success, said Homan.

“We are not doing anything different, just doing it faster,” he said. “The on-boarding forms were completed three times faster than if they had been completed internally, and the credit risk spreading process was five times faster.”

Santander is now taking the idea of pre-populating forms even further. “That idea of pre-population then became a lot bigger, and the bank in the UK is digitising the entirety of the on-boarding process for corporates,” said Holman.

Some 40 PDF forms are now combined into “one dynamic online form”, he said. “We get information about companies and, through pre-population, we do not have to verify against what businesses tell us; we are asking them to verify that the public data is still accurate.”

And it could go even further. Holman said Santander’s UK project will create the template for the bank globally.

Fintech for fintech

But the technology is not just for large companies. The scalability of fintech means DueDil’s software is just as accessible to smaller companies. While Santander is a huge global bank, challenger financial services firms are also utilising DueDil’s platform.

Take business insurance as a service application programming interface (API) provider Hokodo, for example. The insurtech startup offers businesses easy access to cargo insurance and credit insurance, for example. These are normally only bought by large corporates, but Hokodo wants to extend this to small and medium-sized enterprises (SMEs) that are uninsured.

Hokodo’s business model is to embed its service within the tools that SMEs use, such as accounting software, which can make taking out insurance as easy as ticking a box. It can provide a competitive insurance quote in milliseconds, which customers can agree to immediately by ticking a box.

The insurance is provided by global reinsurance company Scor through a Lloyds of London firm. This aims to simplify the process of buying insurance for SMEs and make insurance products less complex.

Such products are traditionally sold through brokers, but they are not profitable and so are of little interest to brokers. This has resulted in a huge level of underinsurance in the UK.

Hokodo founder Louis Carbonnier said that at the core of the business is risk selection and pricing, which is where DueDil comes in. “When you are distributing through the likes of Xero and Amazon, you want to have real-time answers,” he said. “We needed a partner with APIs that were robust enough, had enough uptime, and had low enough latency to allow us to deliver answers in milliseconds.”

Hokodo, which just raised €1.9m in seed funding, will launch its service with invoicing company Centrifuge in the coming weeks.

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