Payments and Lending: a marriage made in PSD2

Following our sponsorship of Money20/20 and NACFB, Slide’s CCO – Simon Lyons – looks on PSD2’s impact on the future of payments and lending.

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“Banking” is one term for many things. There are numerous types of banking from securitisation to syndicated finance, asset finance, payment processing, agency banking and more. For a business, the first need of their bank is a place for income and expenditure to be processed and recorded. It’s a complete record.

After that, perhaps that business lends from their bank, and as the business grows they need more complex lending instruments and differing methods of payment: a credit card; a BACS facility for wages and suppliers; maybe even a credit card terminal to accept payments.

Lending: banking’s pillar of salt

Now the banker – that last bastion of pinstripe – is by profession a lender. That’s what they qualify for and what they do. The pillar of salt of banking is and always will be lending. It makes more money than most other things. Yes, areas like FX and treasury make money, but the underlying principle of a bank to is take deposits and lend them out. That is not going to change.

Last month we sponsored two expos: Money 20/20 Europe in Amsterdam and The National Association of Commercial Finance Brokers (NACFB) conference in Birmingham. The difference between them was startling. Money 20/20 is what people like myself have been waiting for all my career. I have been involved in digital banking and payments since 1994. On my first day at a bank I worked out how we could send a paper report to a customer of their failed direct debit payments in a data box. How it has changed.

Traditional bankers would not consider payments and transactions as even remotely important. It was administrative work; not for the critical job of lending. That was me they were looking at. All the customers who acquired digital services from me with wide ranges of data being delivered straight into their businesses were not seen as key deliverables. As the role grew, some of the bankers started to take notice that this is quite important. Maybe it’s helping us win business. It was.

The time of the payment nerds!

The time of the payment nerds is now. Money20/20 was full of people describing themselves as gurus and thought leaders in payments. The reality is a lot of them won’t be around in twelve months. My most valid observation was that many established technologies play in the payments space. Payments need a record, and payments people think about settlement and balancing. People who make payments need to know where the payment has gone and to whom.

“Money20/20 was full of people describing themselves as gurus and thought leaders in payments. The reality is a lot of them won’t be around in twelve months”

It was fantastic to see how relevant our big brother software – Cashfac Virtual Bank Technology (VBT) – proved at Money20/20. Some of the dialogue with some very bright young things was amazing. You cannot criticise someone for what they do not know. If a scheme has been developed with a need in mind, the surrounding supporting kit is organically grown. At Cashfac we found the payments population were very interested in what we do, just as those bankers did with me many years ago.

At NAFCB, suits and firm handshakes were the order of the day. We had returned to a very traditional, unchanging industry. I absolutely loved it. Everything that is great about banking was in the room. I saw lots of old friends and made many new ones. The commercial broker business is quite a simple model: they find customers and place the lending with a panel of bankers who can try and fulfil the deal depending on their risk profile and sector needs. Quite unchanged to be honest. The big difference was the value that the brokers and  banks are putting on building relationships with the end consumer. They want to get closer to the borrower. As such we at Slide were quite busy, no we were very busy all day of the conference. We had many banks that just lend and do not carry out transactional banking approaching us and asking if we could enable a forecast view of their customer. The answer was yes.

“The commercial broker business is quite a simple model: they find customers and place the lending with a panel of bankers who can try and fulfil the deal.”

PSD2: bringing banking together

The big change for me is PSD2 (sorry to everyone I work with, it’s all I prattle on about). Here’s why, whilst the payments folks can access any account to make a payment and fulfil it the best way possible, the lenders can actually access a business bank account and make behavioural decisions on a client. The enabler is PSD2. A lot of people see the regulation as standalone, as a technical development. I don’t, I really don’t. I see the PSD2 regulation bringing all the different areas of banking together to finally deliver the ecosystem that retail and business customers deserve. At Cashfac and Slide, we are very excited to be part of that ecosystem and facilitate the yesterday, today and tomorrow of the bank account and payments all in one place.

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