EXCLUSIVE: ‘Meet ‘The Enablers’ – Ray Brash, PPS; Miikka Hätälä, Talenom and Jinesh Vohra, Sprive in ‘The Fintech Magazine’
PPS, Talenom and Sprive are three very different financial services but they have more in common with each other than they do with traditional banking models. They are all enablers of modern finance, and Ray Brash, Miikka Hätälä and Jinesh Vohra appreciate the power in their partnerships.
Meet Susan. She’s in her late 50s, and the typical 25-year mortgage term didn’t pan out for her. She was looking forward to easing off work, but due to house moves, supporting her kids through university and two weddings, she’s still at least 10 years from paying off her home loan. Then there’s Scott. He exports tractors for a living – a niche area but he makes it pay. Since Brexit, though, the paperwork his business generates has become a nightmare, and he has less than a week to get his income tax return submitted.
Banks historically haven’t really been much help in either of these situations. Lenders haven’t encouraged their customers to pay up early, and small business accounting services weren’t really the banks’ bag, either. But now the game has changed for our hypothetical pair. Open banking has spawned fintech solutions for Susan, Scott and millions of other ordinary folk in similar spots. In the brave new world of partnerships, the solutions can be multi-layered, too, with several fintechs collaborating to fully meet these customers’ needs. This is the era of the enablers and to illustrate how they can help our fictional characters Susan and Scott, we’re calling on the very real services of PPS, Sprive and Talenom.
PPS, with offices in the UK, Brussels, Dubai and Berlin, is a back-end banking-as-a-service (Baas) powerhouse, offering payment processing, e-wallets, compliance and fraud detection services, programme design and management. PPS’ banking services can link Susan’s current account to her mortgage lender via the Sprive app, which sweeps surplus cash across each month to clear her loan faster, without her having to think about it. For Finnish accounting firm Talenom, PPS provides a bank account for SMEs like Scott’s, so he can automate his bookkeeping and concentrate on selling tractors. Ray Brash, PPS chief executive, says such partnerships are increasingly the way the world works, and open banking and the revised Payment Services Directive (PSD2) were the keys that unlocked a myriad of possibilities.
“At PPS, our core skills are around payment processing and regulation,” he says. “Talenom’s core skills are connecting with SMEs and providing professional services. This best of both worlds is what creates the value here, seamlessly. We sit behind our customers and provide a service so that the end user wouldn’t even know there was a third party involved. We take care of all the regulation, so companies like Talenom and Sprive can focus on providing the best user experience and best value proposition for their customers.”
Talenom has been in the business of providing accounting services for 50 years, but has recently targeted sole traders and SMEs, which were traditionally poorly served by Finland’s mainstream banks. Accounting Alex (or TiliJaska in Finnish) is a Talenom product created for such clients – a ‘self-service’ app that combines accounting and banking. It launched the accounting features in October 2020. The banking element arrived in April and will be rolled out to customers throughout this year.
Without guidance from PPS – the enabler of this enabler – Accounting Alex would have taken a decade, rather than two years, to achieve, says Miikka Hätälä, who helped develop and launch the standalone service and endearingly goes by the job title ‘Dad of TiliJaska’.
“Our story began in 2019, when our CEO, Otto-Pekka Huhtala, and I started to look at fintechs. We had zero know-how – no idea about PSD2 legislation or banking-as-a-service. PPS taught us everything we needed to build this awesome solution.”
A lack of electronic bank statements (or, when they were available from a Finnish bank, the high cost incurred in getting them) was a barrier for SMEs who wanted to adopt digital tools. That was the first challenge to overcome, says Hätälä. “To automate bookkeeping you need bank statements in an electronic format – you can’t do anything with paper. And there’s no value to the SME in paying hundreds of euros to get them from a bank.”
TiliJaska’s API-enabled solution delivered them to users as if by magic. And the relief for SMEs was palpable.
“We see only glad faces when we tell people that it’s free and bundled into our banking,” Hätälä laughs. The core banking services provided by Accounting Alex are also free, but customers pay for higher transaction volumes or for more comprehensive support, such as invoicing. SME customers have use of physical and virtual payment cards, an IBAN account, SEPA payments and, of course, electronic account statements that can be integrated into bookkeeping.
“We’re having a big impact on fees for SMEs. Also, the onboarding can be done in minutes, 24/7. While that’s normal for ordinary consumers, it’s not normal for SMEs. In Finland they had been forgotten,” adds Hätälä.
Jinesh Vohra, founder and chief executive of Sprive, raises a similar point – his business provides a solution that lenders had little incentive to build themselves because they weren’t focussed on the end customer. Sprive’s app, currently in beta phase, allows users to set limits on how much or little is transferred from their bank account to clear down their home loan faster. It currently works with 12 UK mortgage lenders.
Vohra explains: “There are around 10 million people in the UK with a mortgage and the average person will spend 30 to 40 years paying it off. It’s not in the lender’s interest for you do that because they will earn less money, but it’s amazing how much interest you can save by making smart overpayments. Money is put aside in an e-wallet and, with one tap, Faster Payments moves it to your lender. “We launched an MVP (minimum viable product) in October and existing Sprive users are already on track to save £32,000 and pay off their mortgage eight years early”
Vohra says the UK has around 5,000 mortgage intermediaries from which Sprive could take market share, since, with app users’ data, it can point them to the best loan for their personal circumstances.
He adds: “If our algorithm can help people pay off their mortgage, why stop there? Why can’t we expand to credit card debt? Car finance? Student loans?” Why stop there indeed? Brash, Hätälä and Vohra all agree it probably won’t be the incumbent banks racing to create innovative solutions like these. Brash says: “For banks, making money from their lending was the core business, everything else was a distraction. Essentially, everything in the bank became focussed around risk management, which followed a rigid model with no real flexibility, and, to be frank, not a lot of consideration for the end user.”
As a result, he says, there aren’t many good examples, even now, of banks ‘doing fintech’. Those that exist are often standalone entities, such as NatWest’s Mettle small business account, which PPS supported, while Vohra points to Marcus, the savings app launched by his former employer, Goldman Sachs. He says it’s telling that Marcus had ‘different policies, processes, and tech infrastructure, compared to the rest of the organisation’.
“I think the more banks do that, the better off they’ll be. I also think if they see exciting fintechs that could add value to their proposition, they’re not going to be shy of buying them and absorbing them later. We’re already starting to see that.”
Brash credits the regulators for creating an environment in which Sprive and Talenom’s TiliJaska even exist; one that allows players like PPS to take and hold money on their behalf.
“These two guys don’t want to be worrying about what the National Bank of Belgium or the UK’s Financial Conduct Authority is saying, or making sure the platform is doing 300-400 transactions a second, 24/7. I focus on that, so they don’t have to. They can focus on product and the user experience. Sadly, banks have so many things to worry about that sometimes that product and customer focus is never going to get to the top of the list. And focus is what’s important here.”
This article was published in The Fintech Magazine #21, Page 24-25
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