Carlo Gualandri, founder and CEO of Soldo, explores how solving problems that businesses face in the finance department is putting cash-flow management at the forefront of effecting huge change.
Traditional banking has long languished in the dark ages, shackled by legacy systems, and until relatively recently, these banks have managed to maintain a monopoly over our financial lives. But powerful alternatives are now emerging at a rapid rate.
Many of these fintech disruptors have been focused on the consumer market as a soft target of sorts. As consumers, we are already used to – and hungry for – tech innovation, even in our financial lives; with PayPal and banking apps now commonplace. Implementing consumer technology is almost barrier-free – you don’t have to tussle with the trickier levels of company regulation, compliance, security and product offering issues that accompany B2B services. Consumer adoption of fintech services is now a fait accompli: a new report by PwC, 80 per cent of respondents believe that consumer banking will continue to be the epicentre of disruption over the next five years with personal loans (64 per cent) and personal finance (50 per cent) most at risk of moving to a new fintech company from traditional suppliers.
Yet low-hanging consumer ‘fruit” will neither feed nor do justice to the incoming fintech revolution. Not only that, the return on investment for future-ready Finance Directors who choose to ride the B2B fintech wave will add an increasingly critical margin of success, across industries.
At, Soldo we decided to take on the road less travelled and determined to become the engine behind the B2B fintech wave. We are challenging the inefficient (and now antiquated) status quo of business spending, payments and expenses.it Other fintech players are also taking aim at the B2B sphere, and the result is an historical moment in which technology – and the right technology at that – is now decisive in separating winners from also-rans.
Soldo eliminates the inefficiency and chaos of employee and company spending, by uniting corporate cards, expense reporting and the funds themselves into one elegant payment control platform. Through our own research conducted independently by YouGov, we discovered that in Britain alone, up to £102.6bn is being left unreconciled each year by a fifth of SMEs. Furthermore, a third of all FDs embark on a significant amount of financial detective work at the end of each month to identify unexplained spending. At the same time, employees are citing the expense process as a key pain point, with its tedium negatively impacting morale and productivity. Despite this, less senior employees are still not entrusted with a corporate card, a change that would make the practice less arduous for all those involved. Imagine the growth-orientated activities that employees could alternatively be undertaking if liberated from tedious, inefficient financial reporting!
We saw that the inefficiency of the status quo results entirely from its utter fragmentation, which forces human beings to waste precious time connecting cards, payments, receipts, reports and categories, not to mention the funds themselves. All over the business world, enormous effort is being exerted simply to join up the dots and create a balance sheet that does just that – balances. We decided to address the problem of spend management at source: when a payment was actually made. From the minute your employee uses a Soldo Mastercard card, our platform automatically connects the purchase to every single relevant point in your company expense ecosystem.
If tackling spend management wasn?t a sizeable enough challenge, we also decided it was important to operate in different country markets and in multiple currencies. As you can imagine, the compliance rules in other countries varied, for example the way receipts are invoiced and processed is a fussier in Italy than in the UK, but more than worth patiently working through. There haven?t been many innovators thus far who have decided to take on this challenge but we wanted to be multi-currency from day one.
There is currently lot of confidence in the fintech sector, especially here in the UK where startups such as Transferwise and World Remit are planning an IPO in the next five years. EY and Innovate Finance recently researched 250 UK fintech businesses and discovered that more than half of leaders at these companies also said they expect revenue to more than double over the next 12 months. Collectively, they also expect to raise more than £2.5bn in their next funding rounds, having already raised £3.5bn to date. Fintech startups are generating significant revenues, have millions of customers and many are profitable.
However, many of these well-known success stories in fintech have so far revolved around consumer payment services, leaving a tremendous opportunity in B2B payments a market worth approximately worth $250bn today. Of course, there are also other underserved areas beyond payments too such as credit, infrastructure and data services.
Entrepreneurs and investors are starting to seriously take note of these potential gold mines according to research from Innovate Finance and Pitchbook, in 2017, European B2B fintech investment has reached $948m so far, outstripping 2016’s $741m total by 28 per cent.
Traditional institutions are turning to startup partnerships to fuel their own journeys on the fintech wave. 82 per cent of those surveyed by PwC are expecting to increase fintech partnerships in the next three to five years. Already some consumer-focused fintech companies have pivoted towards B2B in order to scale.
But although there are huge opportunities in the fintech B2B sector, it is vital to remain mindful of the risks. You must be prepared for the regulatory uncertainty, legacy technology issues and the various management and culture differences between businesses. At Soldo, for example, we realised that in order to make our service as appealing to businesses as possible, it needed to seamlessly integrate with major accounting software packages, which it does users can export expense reports from the Soldo dashboard and upload them seamlessly into whichever accounting software their finance department uses.
It is a thrilling time to be part of the fintech sector and 2018 promises to be a standout year that will see businesses directly benefiting from ever smarter fintech services, as initiatives such as Open Banking and PSD2 take flight.