Business

THE NEXT WAVE OF FINTECH IS HERE

Published

1 year ago

September 13, 2022

Much has been made of the ‘second generation’ fintech movement recently, but what have these businesses learned from those entering the market for the first time?

In this article, Lena Hackelöer, founder and CEO of Brite Payments provides some clarity on the subject. Specifically, Lena provides insight on what second generation companies should keep in mind when looking to grow.

Who remembers the early days of the fintech wave? Cast your mind back to the beginning of the 2010’s, when the term first began to filter into the broader business lexicon. At that time, there was still a big question around the sector’s true potential.

In the ten years since, the fintech sector has been on an incredible journey. Following impressive funding rounds, record-breaking IPOs, and skyrocketing usage rates, it’s now abundantly clear that fintech plays an important role in our everyday personal and business lives.

So, on that topic, now that fintech has reached a new stage of maturity, what comes next?

I believe the answer to that question is underlined by second generation fintech businesses. Across the world, a new wave of companies is emerging who want to learn from the experiences of the businesses that came before them and transform sectors for the benefit of merchants and consumers alike. The question is, what should they consider?

SOLVING PROBLEMS TODAY AND PREPARING FOR TOMORROW

In the past, we saw many fintech business models enter the market, and quickly gain popularity by addressing very tangible consumer preferences and transforming these into broader, valuable consumer propositions.

BNPL is a strong example of this, where a business model was developed in response to consumer preference. Online shopping was a relatively new phenomenon for the mass market, and customers wanted a way to ensure they would receive what they paid for. Early BNPL providers capitalised on this with innovation in the payment process which meant that customers could now pay for their products once they had arrived. Furthermore, and crucially, the business models allowed for evolution to suit changing consumer preferences – in BNPL, we see this today with the varied payments options current providers are offering, including pay later and pay in 3. Furthermore, significant revenues in the BNPL space today are also generated from the additional value-added services they have provided, such as moving payment due dates for a fee or converting invoices to instalment payment plans post-purchase.

PayPal is another great example, again addressing the complexities of online shopping, but this time focused on streamlining the input and sharing of card details across multiple websites. PayPal created its first product based on a tangible consumer pain point, but again, created a great deal of scope for product development in subsequent years, pioneering an express button which offered a true one-click checkout experience. Following the evolution of consumer needs, the company now offers a variety of additional payment services, including debit cards, BNPL and credit card readers.

It is clear to see the advantage that this approach afforded first wave businesses to build from. For second generation fintechs, prioritising solutions for immediate, tangible consumer needs, can help to garner quicker gains in terms of sales, market share and revenue. However, this must be teamed with a strong assessment of market evolution forecasting of consumer needs. Ultimately, as we have seen, this dual approach supports diversification and can help to generate more reliable demand in the longer term.

BUILDING ON STRONG FOUNDATIONS

The foundations on which the fintech sector has been built are now solidified, which is a relatively modern phenomenon. When the first wave of fintechs entered the market, they were typically building their products with more fragmented infrastructure, which was much more technologically intensive but also created a competitive advantage if you could build a superior product to your competitors. Whereas, for second generation fintech companies, a great deal of the infrastructure required is now readily available as a standard across the industry, for example – white label credit cards which can now be issued with little effort, and consumer lending services which can be built on out-of-the-box ledger systems.

This development has significantly levelled the playing field for fintechs in terms of product functionality, therefore the competition is fiercer than ever. For the market, this is a very positive development because it drives companies to be more innovative and pay even closer attention to their customer’s needs. Second generation fintechs must focus on creating and evolving their unique value proposition, looking at wider aspects of the business to leverage strengths against competitors in order to grow their market share.

FOCUS ON TALENT

During the first wave of fintech, there was naturally an environment where particular skill sets were not yet available because the industry had not previously existed to develop them. Whereas now, second generation fintechs really have an advantage to capitalise on building teams with talent that has worked in the same field or performed particular skills in a similar role previously.

These talented individuals have in-depth experience to draw from on both in approaches to follow, and lessons to learn from previous employers. A big consideration for fintechs now is building a diverse team – with a great mix of both industry experienced experts, and driven individuals who may be new to the sector but bring a fresh perspective and may be able to switch to a consumer mindset more easily.

BRITE PAYMENTS: THE QUINTESSENTIAL SECOND GENERATION FINTECH

It’s these considerations which have really helped to shape Brite Payments into a quintessential second generation fintech. As a company, we’ve leveraged the points mentioned in this article to create a service, and a business model, which simply wouldn’t have been possible during the first wave of the fintech movement.

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The rise of automation and its impact on the CFO & CIO

Business

How can law firms embrace automation and revolutionise their payments?

Published

21 hours ago

September 28, 2023

editorial

Attributed to: Ed Boal, Head of Legal at Shieldpay

Once again, AI is dominating international headlines. This time, it’s due to a closed-door meeting this month between tech leaders and US senators to discuss the technology’s regulation.

AI and automation isn’t just for the likes of Big Tech. We’re seeing predictive and automated technologies transform almost every sector and the legal industry is no exception. In fact, recent research from HBR Consulting found that 60% of law departments had implemented a legal data analytics tool last year and more than 1 in 4 indicated they were using AI for at least a single use case.

However, adoption isn’t without its challenges. Reticence remains among some and there’s also the danger of ‘transformation fatigue’ slowing real progress. If law firms want to reap the many benefits of automation – including revolutionising their payment processes – these challenges need to be carefully considered and thoughtfully addressed.

An area of great opportunity

Often seen as conservative, the legal industry has been gradually warming up to the idea of automation and technology.

While some pioneering firms have been quick to embrace automation tools, others remain cautious about disrupting their established workflows. As we navigate this landscape, it’s clear that certain areas of legal services are ripe for innovation.

One area is contract management. The process of drafting, reviewing, and managing contracts has traditionally been time-consuming and prone to human errors. Automation can alleviate these pain points by streamlining the entire lifecycle of contracts, from creation to renewal, thereby enhancing efficiency and reducing risks.

Another promising domain is legal research. Thanks to advancements in natural language processing and machine learning, legal professionals can now leverage AI-powered research tools that analyse vast volumes of legal data to provide accurate insights and case precedents swiftly.

But, while progress is undoubtedly being made, the legal sector still lags other sectors when it comes to innovation.

What’s getting in the way of progress?

This isn’t always down to a resistance to change. Often, it’s a result of firms spreading their resources too thinly across numerous technology initiatives.

Ed Boal

Attempting to tackle everything at once can result in ‘transformation fatigue’, where the benefits of individual innovations get diluted – leading to frustration and slower progress.

Before legal firms embark on digital transformation projects, a critical first step is introspection. Recognising and acknowledging areas where legacy processes and manual tasks still hold sway is paramount to optimising the impact of automation.

For many firms, archaic practices continue to consume valuable time and resources, diverting attention from higher value, billable tasks. One often-overlooked area is payments.

Legal firms play a critical role in complex transactions, from M&A and real estate deals to litigation and arbitration payments. The associated admin and processes represent a drain of firms’ time and resources. Spanning everything from collating stakeholder payment details and verifying payee identity to ensuring compliance with Know Your Customer (KYC) and Anti Money Laundering (AML) regulation, this adds unnecessary stress for lawyers – who would rather dedicate their time and expertise to their clients’ legal needs.

The repercussions of such time-consuming financial processes reverberate throughout the entire organisation. Administrative burden weighs heavily on the team, affecting productivity and ultimately, the bottom line: recent research from Shieldpay, surveying the UK’s Top 100 law firms, found that almost 1 in 3 (32%) say KYC collection and verification checks take 4-9 working days.

At the same time, firms are exposed to significant financial risk which can make handling client funds a costly endeavour. Not only are they penalised with fines if found to be in breach of stringent client account rules but firms are also subject to hefty premiums for Professional Indemnity (PI) insurance. No wonder 73% of all legal professionals and 90% of junior law professionals are concerned about the risks and time costs associated with holding client funds.

Revolutionising payment transactions

In short, manual payment processes are more than just an inconvenience for modern law firms. They can damage relationships with clients – who have come to expect a fast, painless and automated payout experience in a digital world – and impede revenue generation by tying up top talent in an endless cycle of paperwork and (unbillable) admin.

So how can firms take the pain out of legal payments?

Fortunately, new payment technologies have emerged as a formidable ally. Third-party payment providers offering solutions for law firms, such as escrow and paying agent services for specific transactional deals, or more embedded payment solutions such as managed accounts (TPMAs) – i.e. outsourced client account functions – offer secure and instant transactions, while prioritising transparency and automation.

TPMAs operate as an escrow payment service in which the third-party – a licensed external payments partner – receives and disburses funds on behalf of a firm and their client(s).

With advanced encryption ensuring data security, working with a regulated payment partner means legal professionals and their clients can engage in financial transactions with peace of mind – while law firms benefit from improved operational efficiency.

And the advantages don’t stop there. Enhanced transparency builds a sense of confidence and trust, while the elimination of manual data entry and repetitive tasks allows legal professionals to devote more time to legal services and fostering stronger relationships with their clients.

AI and automation has much to offer the legal sector. But its adoption must be carefully planned in order to avoid transformation fatigue that risks stalling progress altogether. With typically shallower pockets than Big Tech giants, it’s important for law firms to focus their efforts on specific areas that could benefit from automation, rather than rush to overhaul their entire way of working, all at once. This controlled phase-out is the key to avoiding adoption frustration, seeing a real impact on profits and productivity and setting firms up for real, lasting change.

Business

In-platform solutions are only a short-term enhancement, but bespoke AI is the future

Published

2 days ago

September 27, 2023

editorial

By Damien Bennett, Global Director, Principal Consultant, Incubeta

If you haven’t heard anyone talking about artificial intelligence (AI) yet, then where have you been? Conversations about AI and its advantages to society have been a key talking point over recent months, with advances being made in the generative AI race and ChatGPT opening a whole plethora of possibilities. Many have highlighted the advantages of AI, but notably it’s ability to create human-like content.

But these discussions have only scratched the surface of what AI is capable of doing. It is for far more than just essay writing, adding Eminem to your rave and photoshopping dogs into pictures.

In marketing, we have been using AI for years, for everything from analyzing customer behaviors to predicting market changes. It’s enabled us to segment customers, forecast sales and provide personalized recommendations, having a huge impact on how our industry works.

It is even, for the more savvy marketers of the world, becoming a key tool in maximizing budget efficiency – which is apt, considering over 70% of CMOs believe they lack sufficient budget to fully execute their 2023 strategy.

Now, as AI becomes more intelligent, the number of efficiencies it can unlock continues to rise. Not only can it help brands get the most out of their available resources and identify any areas of waste, but it can also help highlight new opportunities for growth and maximize the impact of your budget allocation.

The trick, however, is to veer away from the norm of using in-platform solutions with a one-size-fits-all approach and create your own, bespoke solutions that are tailored to your business needs.

Pitfalls of in-platform solutions

In-platform solutions aren’t by any means a bad thing. In fact, built-in AI tools have become increasingly popular, owing to their ease of integration, user-friendly interfaces and minimal set up requirements. They come pre-packaged with the platform, offering the user the ability to leverage AI technologies without the need for in-depth technical expertise or the upfront cost of building a solution from scratch.

However, the streamlined and accessible nature of in-platform AI solutions comes at the expense of complexity and customization. They are designed to serve a broad user base, but for the most part are built using narrow AI solutions with predefined features and workflows.

This makes them great for assisting with common AI tasks, but they lack the flexibility to tailor functionality towards unique business requirements or innovative use cases, limiting the potential efficiencies and cost savings that can be unlocked. Additionally, if a business’ competitors are using the same platform, they are probably using the same AI solution, meaning any strategic advantage gained from these will be reduced.

Bespoke AI solutions, on the other hand, may carry a higher initial investment – but can offer a significantly more attractive ROI over a short amount of time.

Why customized and adapted AI is the key

The difference between bespoke AI and in-platform solutions is similar to that between home cooked food and a microwave meal. Yes, it is more time consuming to prepare, and yes it likely carries more of an upfront cost, but the end result is going to be far more appealing and will carry more long-term value (financially… not nutritionally).

That’s because bespoke solutions, by nature, will have been tailored to address your brands specific needs and challenges. These custom-built tools allow for much greater efficiencies by streamlining workflows across different channels, automating more complex tasks, and providing deeper, more relevant insights.

The increased level of optimization can significantly improve productivity and reduce operational costs over time, offering a higher ROI. The increased flexibility of bespoke AI also allows brands to implement innovative use cases that can significantly differentiate them from their competitors.

The data analyzed can be specifically chosen to match business requirements, as can the outputs of the AI tool, providing a significant advantage when understanding and acting on the insights provided.

Additionally, these tools are, by nature, more scalable. They can be updated, upgraded and expanded as needs change, ensuring they continue delivering value as the business grows. They can also be designed to integrate with any existing IT infrastructure, from CRM systems and databases to marketing platforms and sales tools – leading to more efficient and effective decision-making.

Managing finances with AI

It’s no secret that AI in marketing automation has, and will continue to, revolutionize the way marketing is done. It has a bright, if slightly terrifying, future and can help CMOs to unlock new efficiencies, maximize the impact of their budgets and increase their ROI. And as this technology becomes more advanced, its impact will only increase.

But we already know that…and so does everyone else.

So, in order for businesses to make themselves stand out from the crowd , they must look to fully adopt the power of AI. Creating a customized and unique AI solution could be the way to set yourself apart from your competitors. A bespoke AI tool can provide brands and businesses with features unique to them and their business needs. As a result, companies will benefit from more useful data and better results to make more data-driven decisions for their business. Ultimately, this will help brands to maintain a competitive edge over their competitors, deliver ROI and most importantly optimize their budgets.