Prospering in the API Economy Peter Hunt FLA digital conference 24 - - PowerPoint PPT Presentation

Prospering in the API Economy

Peter Hunt FLA digital conference 24th October 2017

www.growcap.co.uk

What is “The API economy”?

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API = Application Programmer Interfaces = transfer of data and commands APIs aren’t new – payment infrastructures and clearing houses have used them for decades The API Economy can be defined as “a set of business models and channels based on secure access of functionality and exchange of data” (1) but APIs are enablers of every business. Technical advancement and digitisation drives API ubiquity.

(1) Source: https://www.gartner.com/smarterwithgartner/welcome-to- the-api-economy/

Driven by regulatory change, the ecosystem is changing rapidly; banks are opening up, data is increasingly available; the pace of change is accelerating; new business models will emerge. The asset finance market is not immune.

Drivers and constraints on digital adoption

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Drivers Drivers  Effortlessness  Resolve a (repeated) point of pain  Tech-friendly mindset  Relationship / trust / brand  Stage of relationship  No need (including value add < hype)  Need human comfort (infrequency)  Caution of data security / sharing  Consent (explicit) Constraints Constraints

• Who will self-select?
• In what circumstances?
• Why?
• How quickly?
• In what scale?

Using APIs in niches and for points of pain; adoption will set new market expectations

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New business models, new competition, new routes to market for asset finance

• New functionality is supported by regulatory change, heavy investment and

increasing adoption

• Data becomes the currency of these businesses, enabled by APIs

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Bank accounts Cloud accounting Management apps Credit ref agencies Asset finance products & suppliers Other financial

• ptions

Selection apps Bank products On-line comparison Other data providers Data & analytics

Aligning API strategy to buyer behaviour (1)

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Source: McKinsey Quarterly, August 2017

• In most business finance situations,

making a first sale through a digital channel is unlikely

• For most finance companies , digital

/ API strategy should either facilitate “human” sales or support repeat/in- life activity

• B2B requires a great sales force +

great digital capabilities, not either or

• Simplification of an asset finance

proposition is likely to drive increased on-line sales

• Frequent asset finance users are

more likely to buy on-line

4% 15% 52% 76%

Never - always prefer digital Same product or service as before Previously purchased but with different specifications Completely new product or service

% of B2B buyers who find it useful to speak with someone(1)

(1) Face-to-face or telephone

£17m

Example of applying APIs in face-to-face sales – working capital products, commercial banking

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Scenario plan benefit

• f reduced working

capital cycle Informed client decision with quantifed evidence Calculate client’s overall working capital cycle and interest cost Calculate client’s working capital cost saving “Best question prompts” to support RMs, sector-specific Benchmark client against peers and competitors’ working capital performance

• Integration of Companies House, credit

reference agency and product information

• Interactive charting designed specifically for

to working capital calculations, embedded ratio analysis

£1.8m

Impact of applying APIs in established sales process – potential to create benefits at speed

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 Lead generation   Conversion ratios   Sales time   Non-sales time   Relationship value

Concept Design Build Test Host Go live 4 weeks 4 weeks

Source: Radical Company

Aligning API strategy to buyer behaviour (2)

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Source: McKinsey Quarterly, August 2017

• B2C timescales are the benchmark –

the new normal?

• Digital / API strategy should give

sales people more time with customers

• Main reasons for switching = slow

troubleshooting, re-orders are not timely, sales contact is not pro-active

• Half of B2B buyers rely on sellers to

remind them to re-order – but many disappoint; role of “Internet of Things” relating to assets, or a vendor finance support activity?

• Acceptability of speed on repeat

sales of direct v broker introduced finance? Is there another delivery & remuneration model?

7% 7% 14% 19% 40%

Poor comparison capabilities Lack of on-line capabilities Lack of face-to-face or phone interaction Pricing issue Slow reponse time

What frustrates B2B buyers most, % of respondents

Opportunities & threats for asset finance

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• There are significant strategic, operational and performance benefits to be

gained

• Doing nothing is not a good option

Will asset finance distribution stay the same?

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“Personal” “Pioneers” “Partial”

 Distress / comfort / delegate  1st time / infrequent buyers  Non-flow or complex  Local  Niche expertise  Demographics  Increased product range? Level of API adoption Digital drivers Digital drivers  Customer journey  Immediacy (STP)  Insight  New products & services  Efficiency – lower cost  Pricing benefit  Transparency potential Personal service

Models of API adoption

Data management and security

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Source: McKinsey Quarterly, August 2017

• Complexity of new data architectures – ownership,

management, quality

• Who’s managing the data risks?
• GDPR – value chain responsibility, subject access

requests

• Data security of linked entities
• Consent management - explicit use, value chain
• Due diligence
• Brand contamination risk

Summary (1)

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• 1. Digitisation and government intervention is creating rapid change and new

business models, driven by APIs. These API-enabled business models can set new expectations that will drive market activity. Asset finance cannot be immune

• 2. An increasing range of data-powered financial management tools are becoming

available, to assist customers in selecting a financial product and making choices between different providers, with implications for asset finance companies

• 3. In the near term, API-driven digital solutions may have more impact when

empowering a sales force or supporting in-life and repeat-purchase activity, rather than aiming for new new business. Frequent asset finance users may be more likely to contract on-line.

• 4. Benefits can be delivered very rapidly, in the right business environment. This

will be difficult for many incumbent players.

Summary (2)

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• 5. Speed - for example on proposal management, underwriting and onboarding -

will be a key processing and service battleground. B2C and instant/near instant will be the new normal.

• 6. There are significant commercial opportunities for asset finance companies in

the API Economy but also significant threats. There is a significant risk from a “do nothing” approach, from substitution and from data management / security.

• 7. There will remain the requirement for a personal sales approach for asset

finance sales but the business model will come under increased pressure.

• 8. You may need a CTO and a digital strategy, if you don’t already have them!

Thank you

peter.hunt@growcap.co.uk

www.growcap.co.uk

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