Andrea Melville, Managing Director of Commercialisation and Propositions, Global Transaction Banking, Lloyds Bank, explores how the adoption and development of fintech solutions has been affected by Covid-19.

Covid-19 has underlined how fintech enabled solutions can support businesses.

This year, business leaders have reached for tools that give them a deeper understanding of their company’s financial health, so they can plan ahead with confidence and adapt to fast-moving trading conditions.

Many firms are also exploring how technology can help them manage working capital more effectively, as lockdowns and supply chain disruption squeeze cashflow.

We know seismic events like Covid-19 can hasten the adoption of emerging technologies and drive innovation. Here are four key areas where the pandemic has shaped fintech trends so far.

Application Programming Interfaces (APIs)

While by no means a new technology, the pandemic has re-emphasised the value of APIs in the commercial banking space.

API-driven systems are enabling faster payments, as well as providing clear working capital and operational benefits to businesses facing Covid-related cashflow pressures. They are also being used to deliver new propositions that help companies boost their competitiveness in crowded marketplaces and improve their customer experience.

A good example of this is our recent partnership with the fintech ConnectedFi. We integrated our asset finance API into ConnectedFi’s asset finance customer relationship management (CRM) platform. This expedited the time-to-decision for asset finance requests and gave brokers an edge on their competitors by significantly reducing the amount of manual processing required in a credit application.  

As the pandemic creates a new environment for the application of API-driven solutions, the technology’s wider implementation is continuing to gather pace.

Respondents to our latest Lloyds Bank Financial Institutions Sentiment Survey - which gathers views from major banks, asset and wealth management firms, insurers and intermediaries - cited APIs as one of their top three tech investment areas in the year ahead, along with cybersecurity and the Cloud.

Data – enabling insight

Covid-19 has made it more important than ever for businesses to have strong insight into their operations. Many are taking a granular look at the data locked in systems and supply chains to gather information they can act on amid complex trading conditions.

Fintech solutions can provide this capability. For example, Open Banking – underpinned by APIs – can help businesses better understand their financial position by enabling greater access to their own banking data.

The development of Open Banking-enabled propositions is already well underway. At Lloyds Bank Commercial Banking, we are currently testing an intelligent book-keeping solution that combines Open Banking data with other operational data, such as invoices and expenses. This will help to reduce the administration load for small and medium businesses and enable them to make better financial decisions through real-time cash forecasting and profit and loss information.

The Open Banking ecosystem is complex, and driving deeper, widespread, adoption will continue to take some time. However, the latest data from the Open Banking Implementation Entity shows a positive trend in Open Banking engagement, with the number of users of Open Banking-enabled solutions now surpassing two million, growing through the pandemic and doubling since January.

We hope to see a continued upwards trend in engagement with Open Banking as new propositions are developed – including those that offer businesses enhanced operational insight.

Doing business in a changed landscape

The pandemic has changed how the world does business, and fintech is helping firms and their customers adapt.

This is particularly relevant in the retail and hospitality sectors. Amid a shift away from the use of cash in transactions, we’re seeing new opportunities for the deployment of tech enabled payment systems, particularly concerning solutions that support social distancing and help businesses manage overhead costs.  

This includes options such as pay-by-bank, which allows customers to pay merchants directly through their banking app. Pay-by-bank supports merchants’ working capital by providing fast payment settlement, and removes the cost of card transaction fees, thereby helping to reduce overheads.

The technology can also be integrated with e-commerce channels – a solution that fits perfectly with a rise in demand that we’ve observed from merchants for opening up new sales channels and developing their online capability.

Other solutions, such as pay-by-app and pre-ordering systems, are also having a role to play. With the impact of coronavirus set to be felt for some time to come, we expect to see continued opportunity for innovation and new propositions in this space from both fintechs and financial institutions.  

Partnerships between fintechs and financial institutions

Exciting and fruitful collaborations between fintechs and traditional banks have become more common in recent years. This trend has persisted throughout the pandemic, and is set to continue, particularly for partnerships that seek to develop solutions for coronavirus pain-points.

An example of this is a pilot that we conducted during the early stages of the pandemic with the fintech Validis. This helped us speed-up the processing of applications for loans through the Coronavirus Business Interruption Loan scheme by enabling us to standardise clients’ account information before it was sent to our relationship managers for review – ultimately helping them serve more businesses faster in a situation where time was very much of the essence.

The development of new, effective propositions is hugely aided by financial institutions and fintechs drawing on each other’s unique strengths, and the benefits are recognised – a third (32%) of respondents to the Financial Institutions Sentiment Survey said that they will increase their fintech capability, either through partnering or acquisitions, in the next 12 months.

Technology helps us overcome new challenges, and this pandemic is no different.

We’ve already seen providers develop new offerings in response, and new appetite from consumers and businesses for the technology in their day-to-day lives.

No one can say for sure what the coming months will bring, but what is for certain is that fintech will continue to have a part to play in helping businesses navigate these uncertain times.