If you’re a small business data junkie, then chances are you’ve heard of finweb.
For the uninitiated, I know you’re thinking ‘finweb’ — yet another buzzword invented by some dude (usually a guy) to sound clever. Although I didn’t coin the word myself (I wish I did!), the concept of finweb is the “idea of connecting banks and small businesses to assist business owners in getting services”. Services such as access to bank loans, which is required for growth.
However, banks are not directly plugged into the inner workings of firms — startups can help to bridge that gap.
One excellent example of a startup bridging the gap while showing the enormous potential of finweb is Xero. Xero is an accounting software that’s now connected to over 84 banks around the world. From Xero, you can process payroll, raise invoices, get invoices paid, access bank feeds, etc. Banks connected to Xero now use that information to make loans to small businesses.
In Nigeria, we have startups working hand in hand with small businesses in areas such as HR/Payroll (e.g. Revova), point-of-sale and inventory (e.g. PrognoStore – my firm), loyalty and customer retention (e.g CityCard), school management (e.g. Klipboard), to name a few. Just like Xero, these startups have valuable data about the core components of business — critical information such as employee payroll deductions, sales turnover, revenue from loyal customers, students school fees, etc., are no longer fiction figures (usually provided as paper ‘evidence’ to obtain loans). They instead become verified data that can be trusted and relied upon to make business decisions.
Is it safe to assume banks will be delighted to work with non-fintech startups to service these small businesses? No — this is most likely not the case. Pessimistic as it may sound; but here are a few specific Nigerian factors to consider:
- Banks don’t regard small business as big priority: Despite content of marketing materials, the stats don’t lie, and they paint a damning picture about lending to SME in Nigeria by banks, showing a steady decrease from 2000 to 2013, even while deposits increased.
- Banks have displayed a tendency to own rather than collaborate: We’ve seen this on numerous occasions from banks having their own food festivals, runway shows, e-commerce platforms, etc. The truth is if you go into partnership with a bank in the evening; expect to be eaten by morning.
- Security will always be a concern: Banks rightly hold the security of customer data in high importance. I’ve advocated that a paranoid approach should be taken by startups when it comes to security. This is a big deal because the whole finweb concept relies on interconnection via APIs – that are secured.
- Legacy systems are the norm in most banks: This is not limited to Nigeria, but the obvious disadvantage is that it’s difficult to roll out APIs on legacy platforms. It will require significant resources (including political), to build the necessary infrastructure to connect to external points.
If the banks are unlikely to collaborate because of above reasons, the next logical step is for startups to work with other startups. And yes, I agree that the banks are slowly coming around to the idea of working with startups (especially in the fintech space evidenced by this recent well-attended fintech submit organised by KPMG). And I know it’s particularly tempting to partner with them as they can deliver much coveted growth, but reality matters.
In all, I believe finweb can indeed be the jet engine that will increase productivity which helps boost profits. This will happen if startups work together to unlock value for small businesses.
The only caveat for startups to keep in mind about collaboration: be excellent at your core purpose – integration wouldn’t save a bad product. As a wise man once said ‘nobody will build your business for you’.