Are we going Full Circle?
The phone rings. It’s 5pm our time, 9am in SF. I pull my mind back from trying to unravel blockchain, and instead try to pick the brains of Albert Periu, Head of Global Capital Markets, Funding Circle. The global leader in online B2B lending. A Stallion Unicorn with one of the biggest horns in town.
I want to find out the big picture, to see inside the intention of the company, what’s it all about. What’s their vision?
First of all, what do they do?
“We are doing a very old thing – providing small businesses with finance – in a totally new way. We leverage technology and big data to better underwrite loans and automate processes to help more businesses get the financing they need to grow. Our vision is to build a better financial world. The traditional financial system is broken and restricted by legacy issues, and we think small businesses deserve better.”
Ok, but this is England, and I’m from Yorkshire, so let’s not pretend this is a fluffy sector, this isn’t. This is a once in generation opportunity to build billion pound companies that become the new financial institutions. Being the biggest and best in the sector, seeing exactly what that sector is, then owning it, all of it, as much as possible of it, is not criticism, it’s a normative approach; it’s about transparency of purpose. And if the purpose is to bring borrowing facilities to as many businesses as possible across the World, then so be it. Full on capitalism.
“We see access to SME funding as a Global systemic problem, caused by two key issues, infrastructure and regulation.” I dig for more. What infrastructure? “Bloated infrastructure, legacy systems. For some of the Banks. Bottom line, they can’t profitably underwrite and manage these loans. Looking to the future, we see ourselves as a global exchange.” What does that mean, what does that look like? “Any investor in the world can lend to any of the business in any geographies we service.” Is it ever finished? “This can continue almost indefinitely, to every small business on Earth.”
Do you intend to be completely global?
Diversify into other areas of lending?
I was thinking maybe they have plans to provide micro loans to entrepreneurs in developing countries.
Here’s the pain point Funding Circle stepped in to address.
With a traditional lender, their bank, an SME looking for a loan can expect to wait between 8 weeks to 3 months, no transparency in the process. It’s a ‘black box answer. Computer says yes, computer says no. With Funding Circle, 48 hours decision, 10 days for actual capital transfer. Transparency throughout.
Do banks have a future in SME lending?
“Originally there may have been that perception, but we have a collaborative perspective, we now partner with Santander and RBS in the UK.”
Really? So if I go for a small business loan with RBS, they might actually refer me to Funding Circle? Is this correct? I’m wondering if this is a ‘White Label’ service, do I know I’m dealing with Funding Circle? “Yes, it’s not a White Labeled service, although for other banks, that could be a possibility.”
That’s pretty big. But I feel disappointed. It’s too…Simplistic. Where’s the artistry, the poem, the innovation? Ok, it’s innovative in that it cuts out the middlemen and gatekeepers who take advantage of information asymmetry – and it uses technology to connect supply directly with demand for a fraction of the cost. But it still feels like the innovation has already happened, and it’s now all about scaling up, by partnering with the institutions that have been failing to deliver the service for decades. It disrupts the HOW, but not the WHO.
I want Funding Circle to be more than a money moving instrument. I want it to be disruptive, and it kind of isn’t. It’s just fixing something that wasn’t working. It’s too simple. Maybe that’s what getting the formula right looks like. But I’m still trying to find the angle.
Could banking brands find themselves repositioned as brokers? They provide the established and mostly trusted face of finance, and the challenger fintechs provide the mechanics of the actual service? I want to see the new replace the old.
I see the logic of collaboration, the banks have access to customers, and the challengers have the tech, and the infrastructure. It’s better to collaborate than compete, if it makes more money. It’s just a bit… boring.
I thought there was going to be a fight, a revolution even. Nothing like that. Ah.
By Bird Lovegod
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