#BeyondFintech with Spiros Margaris: Are fintech’s best days behind it?

Recently, it was a huge privilege to be able to welcome a major fintech influencer to the Fintech & Payments Club when Spiros Margaris joined us for a Clubhouse discussion.

Spiros is a venture capitalist, futurist, keynote speaker and senior advisor who has achieved “The Triple Crown” ranking of No.1 international FinTech, Blockchain and Artificial Intelligence (AI) influencer with Onalytica. I was joined in this discussion about how fintech has developed and where it is going in the future by my co-moderator Darren Franks, the Founder & CEO of TalentintheCloud.

If you weren’t able to join the conversation, here are the main topics we covered and the key learnings I took from it.

There’s much more to come from fintech

So far, fintech has picked all the low hanging fruit in terms of innovation that incumbents should have really done themselves. That is not to say that fintech companies haven’t broken new ground or achieved important things but more that we are still at the beginning of what can be achieved. 

The most progress has been made in improving the customer experience across banking, payments and financial services in general. Fintech shook up the industry by providing opportunities to the masses that had previously been reserved for the privileged few. All of a sudden, services like sending money to relatives cheaply were opened up to ordinary people.

The fact that fintech has progressed so much can be seen in how little fanfare comes with the announcement of a new challenger bank or robo advisor. This doesn’t mean that fintech will not have any more ‘TikTok’ moments, where something unexpectedly huge appears from nowhere. These will come and the key will be cooking up the right blend of technologies to provide customers with what they want.

Embedded finance will win the fintech wars

In all likelihood, it will be a company that isn’t an established provider of financial services that will win the fintech wars and they will do so by using embedded finance to offer services that satisfy customer needs.

Identifying exactly who that will be is hard. Without doubt, the tech giants and the biggest mobile network operators will take some of the market from the banks, who will likely be the biggest losers in whatever new market structure emerges. Banks will be less visible and less powerful but they will still provide the pipes behind the scenes. 

Unfortunately, this will mean many thousands of jobs are lost in banking and it will not be the career choice that young people aspire to, as they have for many years. The big banks know this too and are aware that many other players, including fintechs, are in the driving seat now.

Essentially, this major change boils down to the fact that people will care less and less where their finance comes from. Like with an iphone, where you don’t understand the complexity in the computer but you do understand that it gives you what you need, the same will happen with mortgages, loans and other financial services. 

Banks must be brave to not lose out

Fundamentally, banks must be courageous in their approach and be ready to cannibalise their own business. The faster they do, the faster they will win. In fact, if they had done this earlier in certain areas, there would have been no space for fintech to move into.

Having courage to fail is important. Some banks are too scared to progress in this way because they do not want to bet the bank on these initiatives. However, they must at least be ready and willing to try and possibly fail. 

Goldman Sachs is an example of a bank that is being brave right now by building its Banking as a Service offer. It’s a slightly unique case because it is starting from scratch but there are still many opportunities in Banking as a Service and Embedded Finance which other banks are failing to seize. 

Just getting started can have a major impact and the future may look very scary for them if they don’t. Just look at how much progress Shopify or Grab have made recently. Two years ago, they were nowhere in financial services but now it is bigger for Grab than delivery and restaurants.  

Regulators will always have a big part to play

Regulation should always focus on protecting the consumer but, if you overregulate, you may kill fintech innovation. 

Failure happens but, as the Singaporean regulators have said in the past, you have to have room for failure. A clear example of where regulators have helped fintech is the UK, which has developed into a great hub because it allowed startups to flourish. If you overregulate, these companies just move elsewhere. 

China is an interesting case study for regulation. Right now, they seem to be saying that there has been enough financial services innovation for now and that what has happened so far needs time to be digested. This seems like it might be a dangerous move. 

If the regulators take away the innovation powers of people like Jack Ma from Alibaba it seems inevitable that the industry won’t advance in the future as it has up to now. We’ll just have to wait and see if China proves this wrong though. 

Trust matters but so do great services

You can’t grow if you don’t have a brand that people can connect to emotionally. That’s because branding is all about trust and credibility rather than advertising and marketing. Furthermore, trust really boils down to providing great services that consumers need.

If you think of a company like Amazon, many people might be able to identify some ethical issue they have about privacy or workers rights. However, the same people will still buy from Amazon because it is providing a great service and they simply don’t care enough about the other things. The solution the company provides is the main thing and, with the finance of the future, this will be all about who can supply the loan or other product that fulfills the consumer’s dream.

When it comes to how this plays out with Gen Z consumers, it seems highly likely that a fintech rather than a traditional bank will serve their needs best. The big banks may follow but they simply aren’t agile enough to take advantage right now. 

Want to follow more discussions like those?

1.Visit the Fintech & Payments club website to be informed of daily events. The Fintech & Payments club comprises 30,000 members and followers on Clubhouse, growing every day. We run events every day on a variety of Fintech topics!

2. Follow me on Linkedin for new updates and live session write-ups.

3. Subscribe to my substack to follow my new series Beyond Fintech, exploring how Brands leverage Fintech to unlock new growth opportunities.

🔮#BeyondFintech with Spiros Margaris

Join Sophie & Darren for the next episode of the #BeyondFintech series exploring how the world’s brands are embedding Fintech. This week we will be talking with leading VC Spiros Margaris.

Link to event: ⁨https://www.joinclubhouse.com/event/MdQDKzQV⁩

🔮 #BeyondFintech: recurring series produced by @SophieGuibaud

🎟 Need an invite for Cubhouse? We’ve got a 1,000!

⁉️ Q&A + live polls via
⁨http://Sli.do⁩ using event ID #FPCH1

💬 Chat live with others in the room

✳️ Sophie Guibaud (@SophieGuibaud) & Darren Franks (@Franksy)

#BeyondFintech: How Technology is Leading a Purpose-driven Business Revolution

By Sophie Guibaud, Chief Growth Officer at OpenPayd ✨ BAAS & Embedded Finance

In the latest #BeyondFintech discussion for the Fintech and Payments Club on Clubhouse, I was able to speak to two great thought leaders about the topic of purpose-driven businesses and how this important trend is affecting banking and finance.

Theodora and Brad Leimer are the authors of ‘Beyond Good: How Technology is Leading a Purpose-Driven Business Revolution’ and the Founders of Unconventional Ventures. I was joined in this discussion by my co-moderator Darren Franks, the Founder and CEO of TalentintheCloud International. 

If you weren’t able to join the conversation, here are the main topics we covered and the key learnings I took from it.

How banking needs to change

While energy companies have accepted they are the worst offenders when it comes to climate change and have turned to renewables in response, banking hasn’t had the same Aha moment about resolving financial inclusion. As a result, it can seem from the outside like only profit matters to these businesses. Current profits look obscene to many people and this needs to be talked about, with banks asking themselves “how much is enough?”

Big banks also need to address the fact that they no longer seem interested in wealth generation for most individuals. Already, around 15-20% of financial services have been ceded from large global banks to fintech, with the banks turning their focus to niches they view as profitable.

What is needed is more community banks, building societies and credit unions that are solving a fundamental local problem and have ‘doing good’ for the community embedded into their structures. Sunrise banks in the US are good examples of this because their employees reflect the people they serve, with half being female, 30% coming from communities of colour and 30% from a low or middle income background.

Embedded finance and fintech disruption

Embedded finance is all about bringing the core value of finance into another business model so it can empower the community. For example, purpose-driven businesses can bring the store of value service that banking provides to a community that needs it most. The banking and finance elements disappear almost entirely so that what is left is the value being delivered. 

In this way, embedded finance can help to bring financial management tools to the mass market. This seems like a real missed opportunity right now even though it can be done profitably. If finance providers are willing to help individuals grow over the long-term, they can also grow their profits alongside the people they serve. 

The key enabler in achieving this is how financial institutions embrace ‘empathy as a service’. This will lead to real disruption, rather than the type that many fintech startups claim to champion. After all, what is disruptive about offering a new credit card if the structures at the back-end are exactly the same?

Purpose-driven businesses to follow

Companies like Patagonia and Ben & Jerry’s were founded on the principles of ‘doing good’ and have this embedded into their structures. As a result, it doesn’t require a PR disaster or investigation to occur for it to take the spotlight. 

Right now, the technology giants who leverage personal data for their advertising businesses demonstrate the models to avoid if you want to be purpose-driven. In finance though, there are already examples of companies and individuals who are showing the way forward.

These include organisations like Mojaloop, the open source software foundation creating financial inclusion through interoperable payment systems, which is clearly dedicated to who it serves and why it serves them. The foundation’s Chairperson, Konstantin Peric, is a great example of someone who has moved up through the financial system but always focused on broadening who is served by finance how this is achieved. 

What leaders can do to help

Over the past year, when many economies have experienced a recession and many people have lost their jobs, the image of CEOs receiving record pay is not a good one. Therefore leaders who want to start a purpose-driven revolution in their businesses need to look at the people who are making the decisions. They should ask if these decision makers represent the people a business serves and whether they really know how to serve their community.

The truth is that everyone has leadership qualities in them but it requires strength of character to question an existing paradigm. The past year’s events have driven some to challenge the status quo but the onus should not be on individuals to fight their corner. It takes a village to change and it’s something that everyone is responsible for. 

A leader’s mindset should be to set a course with a purpose and keep moving forward in that direction. If they don’t, they should be aware that their employees can and will move to make sure the changes they want to see do occur.

Want to follow more discussions like those?

1.Visit the Fintech & Payments club website to be informed of daily events. The Fintech & Payments club comprises 30,000 members and followers on Clubhouse, growing every day. We run events every day on a variety of Fintech topics!

2. Follow me on Linkedin for new updates and live session write-ups.

3. Subscribe to my substack to follow my new series Beyond Fintech, exploring how Brands leverage Fintech to unlock new growth opportunities.

#BeyondFintech Episode 3: Where Does Insurtech Fit into Embedded Finance?

By Sophie Guibaud, Chief Growth Officer at OpenPayd ✨ BAAS & Embedded Finance

Last week, it was my pleasure to speak to Jonathan Larsen, the Chief Innovation Officer at Ping An Group, about where insurtech fits into the embedded finance stack and how insurance providers can remain relevant in a digital customer experience. 

I was joined in this Clubhouse discussion for the Fintech and Payments Club by Florian Graillot, Founding Partner at astoryaVC, and we were able to cover a wide range of topics affecting global insurtech innovation.

If you weren’t able to join the conversation, here are the main topics we covered and the key learnings I took from it.

China shows the way once again

Insurance in China operates against the backdrop of a leading digital finance economy where cash has more or less disappeared. AliPay and WeChat Pay account for over 90% of eCommerce and peer-to-peer payments, with the country as a whole having used digital, mobile and cloud technologies to leapfrog modes of commerce seen elsewhere.

Chinese consumers live their lives through digital platforms like nowhere else and embedded insurance must live within these experiences. At the same time though, Ping An’s business existed long before these customer trends appeared and it has had to navigate the changes they produced. 

The company has gone about merging and integrating traditional products with digital models while also innovating from scratch in a digital-first way. As a result, Ping An Group includes brands like Good Doctor, the largest telemedicine provider in the world with a market cap of $15bn, and Lufax, a personal wealth management and lending platform that started out with 900 branches but is now totally digital. 

It will be interesting to see how things develop as the Chinese regulatory landscape evolves too. The light touch approach of ‘letting all flowers bloom’ has been useful up to now but, as various digital services become more structurally important to the economy, the government is less likely to take a hands off approach.

A cloud strategy that enables innovation

As mentioned, Ping An was around long before the digitisation of eCommerce and payments that Alibaba and Tencent led, and it knew it had to plan for the future as it saw these trends emerge. 

The key decision Ping An made early on was to embrace cloud technology. It was a long and costly process to digitise its core businesses and is one that never stops. It may also make Ping An the largest financial institution in the world to have embraced a full cloud transformation.

It was a fundamental move though, as it allowed the company to re-engineer its processes and technology within its legacy businesses. Now, it is a tech-first company that is thoughtful in the way it applies technology. DevOps is a key part of the company culture, with teams building microservices in a modular way so they can be reused via APIs in a ‘plug and play’ fashion across the Group.

It has been able to build an ecosystem of services around customer activity, while leveraging traditional business models to ensure they also benefit from digital. As a result, Ping An now has 600 million digital users overall.

Innovation that is driven by bold leaders

Incumbent insurers and financial service providers that want to drive digital innovation need bold leaders who have a vision of the customer experience they want to create and the user problems they want to solve.

Peter Ma, the iconic entrepreneur who is the Group’s founder, saw that the digital revolution Alibaba and Tencent were leading represented a revolution in how consumers would run their lives and that it would be a huge challenge for traditional finance. In particular, he saw that digital would transform distribution channels that had been used to categorise finance and insurance products up to that point.

His approach contrasts with that of many leaders within financial services, who often have too much of an administration mindset and not enough of an innovation mindset. Conservative boards with too much focus on regulation or shareholders who only focus on earnings will never be able to react to the potentially existential threats brought about by major shifts in customer behaviour. 

Therefore, these businesses need courageous leaders who are able to react and make changes that fuel sustainable innovation.

Next-gen commitments must be meaningful

As a result of its cloud transformation and tech-first strategy, Ping An has been able to navigate the tension caused when a traditional insurer approaches building new digital business models. 

Typically, this sort of business will see open, digital distribution channels as a threat. Digital can rapidly commotise their business models, reduce the margins they are used to in traditional channels and relegate product providers to the bottom. However, Ping An has been able to set up new digital businesses in parallel to its existing ones without cannibalising what they do. 

If you look across the top 50 largest financial institutions in the world, the number of successful new businesses that have been created is close to zero. That means an entire industry is not reinventing itself successfully. In contrast, Ping An is creating unicorns like ZhongAn, which has a market cap of $10billion, because it is putting capital and effort towards them. 

It is not afraid to go into competition with itself if it sees a 10x opportunity in a market that could grow substantially in the future. It does this by incentivising managers who will be rewarded as stock owners and who are willing to put meaningful amounts of their own money into the business. 

It also accesses third party capital, which in ZhongAn’s case comes from it being a partnership between Ping An, Alibaba and Tencent. Finally, Ping An supports the business without constraining it but is more than willing to take tough action to correct its course or close it entirely, if necessary.

Health insurance provides a big opportunity

As mentioned, Ping An already owns the world’s biggest telemedicine provider in the shape of Good Doctor and health insurance is seen as a huge opportunity.

China has a large ageing population and there is a big focus on health for this reason. The population is experiencing the same issues with chronic diseases related to diabetes, heart issues and obesity as the West. It will not be able to support these growing needs through the traditional offline health system alone.

China currently spends around $700 per capita on health, compared to between $3,000 and $5,000 across Europe and as much as $12,000 in the USA. Building a system that would support this increased need would be unaffordable without technology. Good Doctor is Ping An’s solution, which has been built without reimbursement from the state. 

Health insurance for individuals and corporates also provides one of the biggest opportunities for insurance businesses outside China and is likely to be an area where we see more and more embedded insurance. One example of a successful implementation in the US that gives us a taste of what may come in the future is Amwell, which is allowing corporations to pay for their employees’ by delivering doctor visits at 75% of the usual costs. 

Life insurance remains a challenge

How to sell life insurance digitally, at scale and as a natural extension of other consumer services remains one of the biggest problems the industry is yet to solve. 

For Ping An, this is part of a bigger discussion about how it refocuses all of its financial advisory services to fit into the right context and be more intuitive for customers. It wants to help them think more holistically about life insurance and financial security and to solve these problems within a mobile and digital experience. It is a challenge that all life insurers around the world face, mainly because customers don’t really understand the products. Embedding it within other products, so that it is a service customers can understand in the right context, is one obvious way of doing this. 

At the same time though, life insurers have generally been slow to digitise and this may also be holding them back. Tackling their underlying infrastructure issues is long overdue and also very necessary if they want to be able to deliver attractive customer propositions that ensure they are not displaced by newcomers.

Want to follow more discussions like those?

1.Visit the Fintech & Payments club website to be informed of daily events. The Fintech & Payments club comprises 30,000 members and followers on Clubhouse, growing every day. We run events every day on a variety of Fintech topics!

2. Follow me on Linkedin for new updates and live session write-ups.

3. Subscribe to my substack to follow my new series Beyond Fintech, exploring how Brands leverage Fintech to unlock new growth opportunities.

#BeyondFintech Episode 2: The Embedded Future of eCommerce

By Sophie Guibaud, Chief Growth Officer at OpenPayd ✨ BAAS & Embedded Finance

There are so many interesting ways in which finance is being embedded into commerce experiences right now. It was therefore a great privilege to cover this subject in our latest #BeyondFintech discussion on Clubhouse for the Fintech and Payments Club. 

I was joined in this discussion by Tui Allen, Senior Product Lead at Shopify, and by my fellow moderator Scarlett Sieber, Managing Director at CCG Catalyst. Tui was the perfect person to talk us through the embedded future of commerce because of the market leading position that Shopify holds.

If you weren’t able to join the conversation, here are the main topics we covered and the key learnings I took from it.

Product development is ‘merchant obsessed’

Embedding finance into commerce is all about being ‘merchant obsessed’. This means trying to find ways to empower merchants with business finance tools and developing these tools by engaging with merchants throughout the product life cycle.

The product development process should define a problem to be solved, build prototype solutions and put them in front of merchants to test. At Shopify, low-fidelity and high-fidelity designs are used to gather feedback from merchants, so that product teams can iterate, improve and test them again. In this way, Shopify is acting like a startup by shipping quickly, moving boldly and engaging with customers throughout.

It is an approach that many banks should be looking to emulate too. While there are always regulations to be aware of, financial service providers need to evolve their product development processes so they engage their customer base and do not get stuck within their own headspace.

Partnerships should be win win

Shopify has partnered with Affirm for its ‘buy now, pay later’ offer. It has also partnered extensively with Stripe, including using the financial service provider’s Treasury service for Shopify Balance, their money management solution, currently in beta with select merchants and launching later this year.

Embedded finance partnerships within commerce need to offer mutual benefits for both parties if they are to be successful and companies should work with firms that share a similar DNA. Financial services is a complicated industry made up of many different layers, so the best finance partners are those with great reach who can minimise the number of layers an ecommerce provider needs to operate at.

Shopify has partnered with Stripe for a long time. The partnership works because Shopify wants to reinvent the banking experience for merchants. Therefore Stripe’s API-first strategy, as well as its innovative approach and willingness to ship products quickly, make it the perfect partner.

Embedded finance works in context

Making payments seamless for merchants was the starting point for Shopify but now it is providing a range of financial services to help its customers sell more, grow more and generally be more efficient and effective. 

It does this by embedding these financial services within the context of the overall commerce experience. For example, it has Shop Pay to make the checkout process more efficient and to make it faster, easier and safer for consumers to manage delivery details, payment options and account settings all in one place.. It has also introduced Installments, its ‘buy now, pay later’ product, which allows customers to split payments at checkout. Installments is currently available to select merchants in beta and will launch later this year.

All of these developments tie in with the company’s aim of bringing commerce to where consumers spend their time. With main street becoming more and more digital, Shopify has partnered with Facebook, Instagram and TikTok to help sellers across North America, Europe and Asia  develop their infeed shopping experiences.

Help to run a business, not just a shop

Part of being ‘merchant obsessed’ is understanding that the average entrepreneur or small business owner can struggle to manage their businesses finances. This is why Shopify is developing tools to help its merchants to understand their cash flow, access funding for growth and iron out any issues caused by delayed payments.

Shopify Balance, a money management tool, will include a Balance Account, fast access to funds, a Shopify Card, and a rewards program that is uniquely built for merchants and their business essential spending. This is also just one example of how data enables Shopify to help its merchants to make smart decisions about their money and rewards them for doing so.

Because a small business owner may be a creator, builder or seller before they are a finance specialist, Shopify is trying to help them with this important area of business. Therefore it uses data to highlight when it might be a good time for a merchant to access some extra cash through its funding solution, Shopify Capital, and then reduces the barriers that might stop them from accessing this funding, such as lengthy applications or credit review processes.

Financial services that meet business needs

As mentioned, data is what enables Shopify to help its merchants with the specific financial services they need and to do so in the context of the ecommerce experience. 

Shopify Capital enables merchants to access funding for growth and uses data to help suggest the right solution for a business’s specific circumstances. This might involve highlighting seasonality in sales or cash flow, such as when a fashion brand could access funding to buy fabric and prepare for its main sales period. In 2020, it involved extending the product to businesses in Canada and the UK for the first time and providing an additional $200 million in funding, to help merchants deal with the effects of the pandemic. As of February 2021,, Shopify Capital has provided $1.7 billion in funding to merchants since its launch in 2016. 

Shopify Balance has also been designed around merchant needs rather than to compete with what existing financial service providers offer. Traditional banking products are often designed for big institutions but Shopify wants to help small business owners gain control of their money and manage it in a way that helps boost growth.

Social shopping is a major global trend

Global expansion is a major priority for Shopify and the social shopping trend is likely to play a big part in how that occurs. The partnerships with Facebook, Instagram and TikTok are all examples of this and they will result in fintech being provided in the context of where customers are engaged. 

Achieving this will look different in different parts of the world because of the different audiences involved and because the world is still siloed when it comes to financial regulation. For this reason, moving into a highly regulated region could mean that partnering with a financial service provider is a better option than building a solution organically.

Regulation will always dominate how financial services work around the world and it’s something that commerce providers must always consider. Even though global payments and cross border selling have become easier in recent years, the finance industry as a whole still has work to do to make embedded finance possible on a global scale.

Want to follow more discussions like those?

1.Visit the Fintech & Payments club website to be informed of daily events. The Fintech & Payments club comprises 30,000 members and followers on Clubhouse, growing every day. We run events every day on a variety of Fintech topics!

2. Follow me on Linkedin for new updates and live session write-ups.

3. Subscribe to my substrack to follow my new series Beyond Fintech, exploring how Brands leverage Fintech to unlock new growth opportunities.

#BeyondFintech Episode 1: Are technology platforms the new banks?

#BeyondFintech Episode 1: Are technology platforms the new banks?

By Sophie GUIBAUD, Chief Growth Officer at OpenPayd ✨ BAAS & Embedded Finance

As part of the #beyondfintech series, we invite guests from some of the most forward thinking brands, who are living and breathing embedded finance in their day to day, to join us for a chat. We dig into their vision for the future, and how they see businesses and consumers interacting with financial services over the next 5 to 10 years and beyond.

In the Ep.1 of #beyondfintech series hosted by the Fintech & Payments Club on Clubhouse, I was able to speak to Ben Johnson, Director of Financial Partnerships at Xero. 

With my fellow moderators – Darren Franks, CEO at TalentintheCloud International, and Olivia Segsworth, SDR at Truelayer – we had a wide ranging discussion about how Xero and other technology platforms are using embedded finance to serve their customers.

It was so interesting to hear how Ben sees Xero interacting with financial services in the future and what this means for the future of banking. If you weren’t able to join us, here are the main topics we covered and the key learnings I took from our conversation.

Not the new banks (for now at least)

Technology platforms like Xero are not planning to become the new banks. They see themselves as business platforms that offer an ecosystem of services with financial propositions embedded within them.

One of the main reasons for this is an understanding that banking is hard. For a start, it’s a heavily regulated industry that involves a lot of risk and compliance. Also, building banking infrastructure is difficult and not something that technology platforms will attempt lightly. 

At the same time though, there are examples where platforms are dipping their toe into this area. Google Plex, which is set to integrate a checking account into the Google Pay app, and Shopify Balance, which will offer account services to business users, are two examples.

It will be really interesting to see how comfortable banks are about partnering with these technology platforms to facilitate these services. The rise of bank APIs demonstrates that some financial institutions are already comfortable but letting go of the customer experience in this way may feel too daunting for others.

But banking is being unbundled

The various different elements we have referred to collectively as ‘banking’ for many years now are being unbundled at a staggering pace. It’s now much more helpful to consider banking in terms of three separate layers, covering the customer experience upfront, the API-enabled data pipes in the middle and the bank infrastructure at the back end. 

Using this framework, you can see how companies like Xero, Shopify, Google and Apple own the customer facing layer. They are therefore well placed to embed finance into this experience, so that banking comes to the place where the customer spends time. 

New challenger banks are also competing in this space through features that really appeal to customers with specific needs. The growth of this sector has been enabled by friendly regulations in the UK and Europe but these companies have also progressed by offering slick and easy onboarding that some traditional banks are now starting to catch up with. 

We will have to wait and see how these challenger banks progress and whether they decide to take on the really hard bits of banking, such as insured deposits, investments, infrastructure, licenses and the extra compliance this all requires.

Embedded finance partnerships matter 

For Xero, the financial services it seeks to embed into the platform can broadly be categorised into three areas, based on what their customers need to do. 

The first question a user might ask is “how much cash does the business have?” and this is where bank APIs are most important. The second question is “How can the business make payments and get paid?”, which is where services such as Stripe, GoCardless and Transferwise come into play. The final question is “how can the business access working capital when it’s needed?” and this is where Xero is working with banks and lenders to help businesses access the credit they need.

As mentioned, Xero doesn’t intend to become a bank or build a payment network anytime soon, which is why partnerships are important. A partnership makes sense if they want to offer a service but realise they don’t have or don’t want to have a core capability in that area.

Build or buy based on core capabilities

Deciding on whether to build, buy or partner with others when it comes to adding services to your customer experience should be dictated by what you see as your core capabilities. If a service is core to the engineering of your product and one where you need end-to-end ownership, it should be built. 

In the case of Xero, this often relates to building the accounting ledger in the background, as this is the really tough bit that matters most. The focus within the team is on being customer and design led so that, even for a boring area of business like accounting, the problems can be solved in a beautiful and seamless way. This is why they’ve brought a lot of designers in house and why these employees spend a lot of time with customers.

On the other hand, buying a service to embed is an accelerated way of bringing something into your experience that your customers want. Xero’s recent acquisition of Planday is a case in point. Some of the most complex issues a business has to deal with are those related to employee management and Xero wants to offer services that solve these problems. Even though it already has a payroll product, Planday helps to build on its employee management capabilities.

Payments are crucial for business customers

Payments are so core to what Xero does because invoicing and point of sale are so important to business customers. This is why they have an engineering roadmap that is focused on invoicing and payments. 

They have also seen the importance of partnerships when offering payment services within the experience. Bank feeds are one of Xero’s most important unique selling points and have been for some time. As a result of this feature, bank reconciliation is quick and easy in Xero. 

As mentioned, this focus on payments does not mean Xero is about to become a payment provider anytime soon. It has seen the extraordinary progress of Stripe over the last decade in achieving this but realises how complex this journey has been. For this reason, the Xero strategy is to aggressively seek out and work with payment partners who are API-led.

Data will power SME finance in future

Technology platforms, who are the custodians of vast amounts of customer data within their ecosystem of services, can use this data to help businesses access services they have struggled to access in the past.

The best example of where this can make a real difference in the immediate term is working with banks and lenders to improve credit lines to small businesses. This process will differ from lender to lender, with the most straightforward implementation allowing users to prefill application forms with their accounting data. At the more advanced end, lenders like Waddle and Iwoca are using debtor ledgers and customer portfolios to change their underwriting models. 

In the case of Waddle, which Xero acquired to expand its lender partnerships, this is already enabling them to test with NatWest how they can get rapid cash to UK SMEs. In the future, payment data from high density customers might also be used to develop debtor scores that can be ingested by an API and would transform credit decisions for businesses.

AI, AML and KYC innovations are possible

Xero is already using machine learning to help customers reconcile bank transactions by learning how users do it and automating the process. This AI-enabled process will improve over time along with other areas of the customer experience.

One important area is Anti Money Laundering (AML) and Know Your Customer (KYC) checks. Xero does not require these checks for users but, if a customer interacts with a regulated financial institution via an embedded service, they are required. In this way, the Xero platform is essentially embedding the AML and KYC checks into its experience.

How can this process be made as frictionless as possible? One solution might be based on how a regulated service that is embedded in a regulated platform should not require the same checks to be performed twice. As such, compliance confirmation could be ported across from one to the other. 

For now, the focus is on providers partnering with providers who share a similar goal of frictionless onboarding. However, if a technology platform could build a KYC service in one place, users would not need to upload documents multiple times and the customer experience would be enhanced even more. 

Want to follow more discussions like those?

1.Visit the Fintech & Payments club website to be informed of daily events. The Fintech & Payments club comprises 30,000 members and followers on Clubhouse, growing every day. We run events every day on a variety of Fintech topics!

2. Follow me on Linkedin for new updates and live session write-ups.

3. Subscribe to my substack to follow my new series Beyond Fintech, exploring how Brands leverage Fintech to unlock new growth opportunities.

What Can The World Learn from Chinese Fintechs?

By Sophie Guibaud, Chief Growth Officer at OpenPayd ✨ BAAS & Embedded Finance

Last week, I was fortunate enough to moderate a fascinating Clubhouse discussion about Chinese fintech that involved some of the leading thinkers on the topic.

First to speak was Chris Skinner, the renowned financial services author and commentator who most of you will know from thefinanser.com and as non-executive director of 11:FS. Chris was joined by Rita Liu, Chief Commercial Officer at Mode Group Holdings and a 10-year AliPay veteran, and Yassine Regragui, a fintech and China specialist who has worked for Deloitte, AliPay and AliBaba.

I was moderating with James Sherwin-Smith, GM of International Managed Services for Real-Time Payments at Mastercard, and we were joined later by Ron Shevlin, Managing Director for Fintech Research at Cornerstone Advisors, and Neel Garg, the fintech investor and advisor known on Twitter as @fintech_nerd

For anyone who was unable to join, here are the key learnings I took from our 90 minute discussion.

Chinese fintech exists in Super Apps

While the UK and US have specific fintech apps, fintech in China lives within Super Apps. 

Super Apps like AliPay provide a whole range of consumer services, including financial ones, in an end-to-end experience delivered through one platform. These integrated social, financial and commercial apps were allowed to grow in China but could also be shut down by the government if it chose to. 

The breadth and depth of these Super Apps is far wider and deeper than elsewhere in the world and this is particularly true in terms of the scale they can achieve. For example, AliPay is used by 800 million Chinese people, which is more people than live in the whole of the US and the EU combined. 

There were two major milestones that stood out in the development story of these Super Apps in China. The first occurred roughly a decade ago, when AliPay express payment was introduced to build direct connections with Chinese banks and establish a quality ecommerce experience. The second occurred from 2013, when AliPay added its Yu’e Bao money market fund, transforming the app into more than just a payments platform and marking the start of its journey to becoming a Super App.

This whole evolution means that it’s probably more appropriate to think more in terms of Chinese techfin, where technology companies offer financial services, than fintech. 

Customers matter above all else

A ‘customer-first spirit’ has been an extremely important factor in transforming AliPay into a Super App and the focus that Chinese technology firms place on the customer is the driving force behind their evolution into Super Apps. 

This is particularly noticeable when compared to European firms, who might focus on which financial services they can offer rather than which services their customers want.

As a result, Chinese Super Apps have developed into an ecosystem of consumer services that include both core and non-core businesses. This means that a user can access financial and other services that are offered by the platform, as well as those offered by partners like Uber and AirBnB. This is true for other Super Apps both inside and outside China, including WeChat, Grab and PayTM.

The concept of a consumer-focused ecosystem is crucial for Super Apps and is based on them responding to exactly what the customer wants and what the data shows. This is so much the case that, when asked about how AliBaba’s management works, CEO Jack Ma said the team is not managing a company but governing an ecosystem on a digital platform.

Finance is truly mobile-first

Just as these Chinese Super Apps are customer obsessed, they are also truly mobile-first. 

The reason for this may lie in their emergence into a market where card providers had not established a dominant position. Before apps, cash was the dominant payment method in China, and this enabled mobile to leapfrog into pole position. Also, as mentioned earlier, card schemes weren’t paying attention to ecommerce a decade ago, which enabled AliPay to do something unique and significant.

The mobile-first experience was also important because it provided the ‘10x better’ experience compared to cash that PayPal pioneer Peter Thiel has identified as so important for disruptive technologies. Mobile payments are totally dominant in China now and have been since at least 2017, when it was already virtually impossible to pay at a local store with a western card. Quite simply, you pay with AliPay or you can’t pay.

One final interesting point to note about the mobile experience of these Chinese Super Apps is that, while they work for Chinese users, the user experience (UX) and user interface (UI) design probably looks complex to westerners. 

Speed of innovation is key

The Chinese technology companies behind the Super Apps have huge ambition, capability, speed and agility that you won’t find anywhere else in the world, and their execution is second to none.

This is because of the brutal environment for product development that has developed in China, which can be thought of as a gladiatorial fight to the death, in which entrepreneurs learn to grow rapidly.

These companies need to make their product better at lightning speed, changing and optimising it for what the customer wants, while honing their business model until it is impregnable. As a result, the technology industry is constantly churning out new features at pace and this has played a huge part in the journey from niche services to Super App status. 

It’s clear that this feature overload means there are some that are more important than others but it’s crucial that Super Apps make all the most important ones accessible from a single app.

For those looking from the outside, there are a couple of important feature trends within Super Apps that are worth noting too. Firstly, QR codes, which are widely used in China and could potentially form the foundations of a new payment network for Chinese users when abroad. Secondly, there is the ‘pay by smile’ functionality, which allows Chinese users to pay or access services using facial recognition alone.

Could the US have a Super App?

One of the most interesting points of discussion that developed was why the growth of Super Apps had occurred in China and Asia rather than in the US.

The equivalent in the US would look something like a merger of Facebook, Amazon and Paypal. The main reason this hasn’t happened is because the US government clearly wants to separate financial, commercial and social giants.

While the US doesn’t have any Super Apps, it does have companies with ecosystems that connect across industries. Amazon is probably the best example of this and is the company that comes closest to being a Super App because of these integrations.

It’s also important to remember that US technology giants have avoided trying to connect their apps because the market has not wanted them to. For example, Facebook has kept Instagram and Whatsapp separate because they’ve thought of the user groups as separate and wanting different user experiences.

Finally, it’s worth noting the move that Walmart is making into fintech right now, with the appointment of two Goldman Sachs bankers who have worked closely with the bank’s consumer division. However, this is more about Walmart focusing on cutting costs and improving its offer to low and middle income customers than it is about taking the first steps towards becoming a Super App.

Trust concerns remain

The main concerns that our Clubhouse participants brought up were focused on surveillance and privacy. 

It’s worth considering that it might be a little naive to trust US companies like Facebook and Google to not abuse user data, while thinking the opposite of Chinese firms. After all, these US tech giants offer their products for free so they can sell data to advertisers and third parties.

For the most part, these Super Apps have a purely domestic focus, with AliPay being the main exception. It has moved into Asia, Africa and Europe, providing the technology behind mobile wallets for various fintech companies.

The lack of trust these firms come up against may to do with the fact that so few people outside China speak Mandarin. As so many people speak English, you are often not trusted if you’re not an English speaking company or nation.

Want to follow more discussions like those?

1.Visit the Fintech & Payments club website to be informed of daily events. The Fintech & Payments club comprises 28,000 members and followers on Clubhouse, growing every day. We run events every day on a variety of Fintech topics!

2. Follow me on Linkedin for new updates and live session write-ups.

3. Subscribe to my substrack to follow my new series Beyond Fintech, exploring how Brands leverage Fintech to unlock new growth opportunities.