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This episode is a special one, as it tangibly illustrates one of our hypotheses around fintech startups serving small businesses moving up the stack to differentiate their offerings beyond basic digital banking services. In the case of Airbank – an all-in-one finance hub that connects via PSD2 bank feeds to collect transaction data in one place – the beyond banking beachhead is account aggregation. In many cases, SMEs use several accounts, e.g. a Revolut Business account for international payments and a HSBC account when incorporating the company. Staying on top of finances can quickly get messy once you add online payment gateways into the mix, such as Stripe or PayPal. In order to avoid tedious Excel sessions, Airbank enables CFOs or business owners to get an overview of their transactions and cash positions – in real time!
Together with Alex, we evaluated the waves that underpin Airbank’s growth, such as increasing API connectivity via Open Banking feeds. The oil of Airbank’s growth machine is transaction data, as the engine of the economy are business transactions. The player owning SMB client’s transactions gains a huge opportunity to facilitate cashflow, build value-adding services around receivables/payables and thereby create a very sticky product on top of a businesses’ payment infrastructure. While expense management providers, such as Payhawk, Pleo or Moss, opted to go after card payment rails (Visa/Mastercard), Alex remarked that the opportunity to go after bank-to-bank transfers (SEPA/wire) is a much more attractive one, at least across the EU: In Europe, there are nearly €300 trillion transacted every year, yet card rails only cover about €4 trillion. The remaining transactions are covered by SEPA transfers. Selling digital expense tools to digitally savvy small businesses, such as digital agencies or dev shops, seems to be easy. However, once early adopters are covered, expense tool providers operating in a market that has become a heated red ocean need to cross the chasm by convincing traditional businesses to install an empty spend tool that they need to learn and populate. To my knowledge, the only fintech start-up that has proven to be able to do so is Payhawk by closing incumbent repair chain ATU as a customer. Now contrast this with a bank-account-first approach followed by Airbank, which allows its users to facelift their online banking providers by plugging into PSD2 APIs and having a useful cash management interface that is immediately ready to use. In short, Airbank is after the underserved long tail end of the SME market – almost every SME already uses a business current account – and utilises the tooling to address their needs in radically improved ways via the API feeds that are available now via PSD2.