Someone was attacking the premise of digital bank change the other day, by claiming it only refers to consumer banking. Nothing is changing in corporate or investment banking, they claimed.
All areas of financial processes, products and services are being attacked by some new start-up company somewhere. I realise this every day when I see so many bright young things creating a new model using direct connectivity over the net, and thus displacing the trusted intermediaries through technology.
Disintermediation is finally happening; it’s only taken twenty years to get there.
So, in the spirit of lifting the veil on my favourite companies changing things in other spaces, let’s take a look at a couple of really interesting things happening in the world of commercial banking.
First, Currency Cloud, especially after this announcement on October 30th:
London-based currency payments business Currency Cloud has partnered with XE.com to launch a transparent global payments platform for businesses.
Currency Cloud, which launched in 2012, delivers a cloud-based platform to different providers making international payments, from banks to foreign exchange services. Founded by former forex traders and payment specialists, it has built its name on offering a transparent service through its API, which shows clients the original currency purchase price and its added fee.
The new platform, XE Money Transfers (XEMT) will stand to expand a business that's gone from 50 to 70 employees in the past year. Currency Cloud is now also processing $600-700m every month, compared to a handful of transactions two years ago. XE is one of the most popular currency exchange rate checks in the world, and now wants to give business customers the chance to check for a fair rate, then transfer it on the spot with XEMT — due to roll out in the UK in 2015.
A youthful cloud-based company shaking up the whole FX marketplace in just two years. Neat.
In fact many firms are attacking the FX space, with Traxpay one of the other major movers to watch.
Traxpay, a leader in business to business payments, has announced an alliance with MasterCard to use the payment company’s global network for connecting buyers and suppliers. Traxpay combines information about invoices with the payments and supports supply chain financing, factoring, and dynamic discounting. The company also announced it has closed $15 million in series B funding led by Commerzbank and Software AG.
Then there’s the announcement I picked up at Sibos of Coloredcoins.
Colored Coins is a colored bitcoin minting and exchange protocol that works on top of the Bitcoin blockchain infrastructure. Colored coins allow you to store assets on the Bitcoin blockchain. There are many interesting applications to colored coin. You could have an IPO on the blockchain by issuing shares as a colored coins, and send them to your shareholders. The shares can then be traded almost instantaneously and for free through the Bitcoin blockchain. You could have smart properties represented by colored coins. You could store your house on the blockchain by issuing a single coin, then the ownership of the house can be transferred with a simple Bitcoin transaction.
Not forgetting other cryptocurrency enablers for corporates, with perhaps the most interesting of these being Ripple.
Ripple is a payment system, currency exchange and remittance network by Ripple Labs. It is built upon a distributed, open source internet protocol, consensus ledger and native currency called ripples (XRP). The Ripple network purports to enable "secure, instant and nearly free global financial transactions of any size with no chargebacks". It supports any fiat currency (dollars, yen, etc.), cryptocurrency (bitcoin, litecoin, etc.), commodity or other unit of value (frequent flier miles, mobile minutes, etc.).
At its core, Ripple is based around a shared, public database or ledger. In addition to balances, the ledger holds information about offers to buy or sell currencies and assets, creating the first distributed exchange. Participants in the network agree to changes in the ledger via a process called consensus which is reached every 2–5 seconds. The consensus process allows for payments, exchanges and remittance without the need for a centralized clearing house. The consensus ledger makes the Ripple network energy efficient and robust against attacks compared to cryptocurrencies like Bitcoin that are secured by mining.
As of 2014, Ripple is the third-largest cryptocurrency by market capitalization, after Bitcoin and Litecoin.
Then there are the new crowdfunding and credit enablers for businesses, such as Funding Circle which, of particular note, appears to be doubling its funding network every six months. In April 2014 I took a screenshot of Funding Circle’s homepage and they had funded just over £225 million of business loans. At the end of October, they had burst through the £400 million mark, with the government officially supporting their efforts.
In this context, we also cannot ignore Holvi for SMEs.
Holvi bank accounts are free to set up and devoid of monthly fees, although the firm does take a €0.90 charge for incoming/outgoing payments and a 3 percent fee for credit card transactions. The key, however, is that Holvi also offers a number of integrated services aimed at small businesses, entrepreneurs, freelancers and sole traders; users can get a real-time view of their company finances, as well as manage expenses and tackle invoices. Holvi accounts also comes with a built-in online store for selling physical and virtual goods.
These are just a small few of the 100s of companies that have seen opportunities to better serve businesses with direct technology enabled financial services or, if you prefer, fintech. For this reason, I’d say there’s quite a lot happening in the commercial banking corporate space.
(apologies to any companies I should have had on this list, but time ran out)