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March 3, 2017

Canadian start-up throws a spanner in the B2B works

What the FI.SPAN? A new Canadian connector platform is enabling banks to integrate open APIs from B2B banking and payment fintechs to serve their corporate clients. Robin Arnfield talks to Lisa Shields, CEO of the Vancouver-based firm, about its origins, plans and strategy

By Robin Arnfield

What the FI.SPAN? A new Canadian connector platform is enabling banks to integrate open APIs from B2B banking and payment fintechs to serve their corporate clients. Robin Arnfield talks to Lisa Shields, CEO of the Vancouver-based firm, about its origins, plans and strategy

Lisa Shields has an impressive track record in payments, having founded Vancouver-based global mass payments service provider Hyperwallet Systems. “I ran Hyperwallet for 15 years, and it saw a lot of growth,” she says.

In June 2014, private equity firm Primus Capital became Hyperwallet’s majority shareholder, and Shields exited the firm. She founded FI.SPAN to target the business-to-business (B2B) banking and payments space in August 2016.

“The genesis of FI.SPAN was visits to Hyperwallet clients six to eight months after they had started working with us,” explains Shields.

“These large corporations would ask if we could provide services such as cash management, foreign exchange or vendor payments. Clearly, they had unmet needs that their banks weren’t fulfilling, and were willing to work with third-party fintechs to meet these needs.”

APIs

“2015 was the year fintech APIs became topical,” notes Shields. “Initially, banks were told by industry publications that fintechs were the enemy as they had modern development tools which would provide a more compelling user experience.

“Then banks were told they needed to join the fintechs and expose themselves to their APIs, as this was the only way to ensure ongoing market relevance.”

“My response was that banks need to open up to fintechs, as this will be good for the banks’ customers, the overall market and the economy,” Shields explains.

“But, taken in isolation, it is not a good strategy for banks to expose their core services such as ‘get balance’ or ‘move money’, or their customer information to fintech APIs, as this will accelerate their revenue erosion and the erosion of their relevance to their customers.”

According to Shields, commercial banking and core transactional services in North America are worth $1.2trn in revenue to banks.

“A PwC survey in 2015 found that banks estimated that just under 30% of this revenue will transition to independent service providers,” she says. “So around $360bn of bank revenue is at risk of erosion over the next few years.”

When more and more businesses adopt best-of-breed services for foreign exchange, cash management or vendor payments from different providers instead of the ‘one size fits all’ offering from their bank, revenue and relevance erosion will follow.

“Customers will not look to their bank first, or even at all, when they have a core transaction or service need to be met,” Shields says.

Industry initiatives  

Two current banking-industry open API initiatives are the Open Bank project, and IBM’s API access management platform, which banks can license and implement.

The Open Bank Project is “an open-source API and app store for banks, enabling them to securely and rapidly enhance their digital offerings using an ecosystem of third-party applications and services,” says IBM.

“To facilitate collaboration across the banking industry using open standards for developing and using banking services, IBM has defined and published a set of banking APIs on a self-service API portal,” IBM adds.

FI.SPAN’s approach

“FI.SPAN has the opposite approach to these initiatives,” says Shields. “FI.SPAN isn’t about helping banks expose their core services to third parties.

“Instead, FI.SPAN helps banks leverage APIs from independent service providers that have developed innovative, viable B2B services for banks’ enterprise clients. Fintechs connected to our platform don’t have direct access to banks’ core systems.

“Take the corporate purchasing card space. Should a bank look for the best corporate purchasing card fintech and do deep integration with its API?” Shields asks.

“The problem with that approach is that it provides the bank with a fantastic product for maybe 15% of its corporate clients, but the remainder will go elsewhere to find a corporate purchasing card solution that’s appropriate for them.

“Banks need to recognise that there are going to be five or six innovative corporate purchasing cards providers in the market in 2017-2019, and find ways to leverage these companies.”

Best of breed

“FI.SPAN surveys the market for the best-of-breed purchasing card providers or low-value international payment providers, and integrates each of their services and APIs into a software as a service-based platform,” says Shields.

“We vet these companies in terms of risk management and regulatory compliance. Then we enable banks to utilise one or more of these service providers, in an App Store-like way, for their commercial clients.”

If a bank integrates with a single best-of-breed fintech, it takes a risk.

“I hear repeatedly from banks: ‘We want to work with fintechs, but are concerned about how well they are funded and whether they will disappear in a year or so,’” Shields says.

“Banks have a continuity-of-service commitment to their customers, so making a bet on a single fintech is a risky play for them.

“FI.SPAN wants to greatly reduce banks and enterprises’ single-vendor dependency. I’ve heard complaints from CFOs at multi-billion-dollar firms about a service getting summarily terminated by a provider that they had significant dependency on.”

For fintechs, FI.SPAN offers access to banks as a sales channel and helps with client onboarding. “We enable banks to become sales channels for fintechs instead of being market impediments,” explains Shields.

“Also, our platform streamlines and automates enterprise client onboarding. Using our platform, banks can use their expertise in KYC/KYB [know your customer/know your business] and data security, to validate the identity of enterprise clients for fintechs, instead of the fintech having to do client screening.”

For example, there are around 10 international money-movement fintechs, including Hyperwallet, Western Union Business Solutions, Earthport and Currency Cloud, according to Shields.

“The problem for these fintechs is how to find potential clients, sell to them, and perform regulatory tasks such as KYB and due diligence,” she says. “It’s economically not viable for most of these companies to target SMEs, so they tend to target corporate clients.”

Target market

FI.SPAN targets North American banks with assets of $5bn+, giving it an overall target of around 250 mid-market and large banks across North America.

“We plan to expand to Europe, but not for at least two years,” says Shields. “Currently, we’re talking to a number of the top 20 North American banks, and we’re also working with several banks’ innovation groups.

“For one of these banks to do a deal with a specialist/niche fintech wouldn’t make sense. The banks wouldn’t have enough customers who would use the fintech’s service to make it worthwhile to sign an agreement with the fintech, do the API integration, and work out the compliance and data-sharing issues.

“We see a market opportunity to act as a specialist connector,” Shields continues. “But our clients are the banks, so we don’t get between them and their commercial customers.

“Our technology reaches all the way to the commercial clients’ applications. We offer plug-ins to enterprise resource planning applications typically used by banks’ commercial clients, such as Oracle and SAP, to modernise the often inefficient data exchange between banks and their enterprise clients,” Shields continues.

“Our vision is to enable rich information exchange between banks and corporates for payments files.” FI.SPAN expects to go live with its first bank clients and offer general availability of its platform in the summer of 2017.

“We are integrated with a number of global B2B payments specialists currently,” Shields notes. “Our first module will automate global B2B payments, providing banks with three different service providers so they don’t have single service provider dependency.

“Our next module is likely to integrate corporate purchasing card APIs, followed by analytics for our third module.”

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