How APIs, Analytics, and Algorithms are Transforming Finance: Q and A with Sean Anderson, Chief Product Officer & Founder, Bento for Business
Sean Anderson and three other fin tech executives will be speaking at the next Uncharted Minds: How APIs, Analytics, and Algorithms are Transforming Finance, Wednesday, February 24, 2015 from 6:00 PM to 9:00 PM (PDT) San Francisco, Click here or use the code ‘insider’ for 50% off tickets to the event
1. Fin tech is an elusive term, how would you define the space?
Fin tech for me is any business that’s trying to apply new technology to address inefficiencies and gaps in our current financial system — whether that’s banking, personal finance, investing, insurance, etc. It’s a pretty broad umbrella term, and I think it can apply to both efforts by small startups and even certain activities within established businesses. At Bento for Business, we’re creating easier, more convenient solutions for small businesses — this isn’t a single type of technology application — but a comprehensive approach to rethinking how small businesses leverage technology to save time and money.
2. There is a lot of talk around big data and analytics but is it just hype? Is the access to data, through APIs really changing how finance works?
Lots of people are trying to use analytics to create new data models that make systems “smarter”. The idea is that a small improvement in, say risk modeling for loans, makes lenders more efficient and allows them to make more money at scale. A five basis point improvement in fraud losses on a loan portfolio is significant, but it’s hard to judge if your new analytical model is delivering that improvement over the status quo when you’ve only lent $500,000.
As far as APIs — they make payments infrastructure accessible to startups and other players who need them. Previously, some of these things required a banking charter and a cadre of lawyers and compliance folks. It’s truly remarkable to see how this has changed the landscape for fintech startups to date, and I believe we’re still early — there’s a lot more that can be done.
3. What area of financial innovation are you the most excited about? What are you least excited about?
Naturally, I’m most excited about small businesses — your consumer bank account looks and feels different than it did in 2006, but small business banking and financial services have a lot of room for innovation and improvement. That’s why we started Bento for Business.
On the flipside, I worked on my first near field communication (NFC) payments solution in 2002, so I’m a bit jaded about the transformative power of NFC. It will make a difference, but it’s hard to be too enthusiastic about it.
4. What’s the biggest challenge entrepreneurs and small businesses will face in 2016? What advice do you have for them to navigate it?
I think there’s a lot of uncertainty around larger macroeconomic trends and elections that will color attitudes of investors and customers in 2016. When such things happen, it’s a good time to make sure that you’re a company is focused on the core value that you offer, especially when that’s new and unique. You can’t afford to be distracted.
5. Is the change that the finance industry is experience transformative? Are fin tech startups disrupting incumbents?
I think fin tech disruption is often overstated in the short-term but underestimated in the long term, once the hype settles. Incumbents are being forced to change their business in response to startups, although that means a fair amount of the disruption will be acquired, copied and co-opted. Startups need to be focused on specific goals, so I don’t necessarily see 10 startups displacing the top 10 banks — most startups aren’t trying to build the end-to-end banking stack, and will need to partner with incumbents to get things done.
6. What advice do you have for prospective employees who want to join a company like yours?
Fin tech startups have the same challenges and opportunities as any startup, as well as some unique domain-specific challenges such as compliance and regulatory issues. It’s tremendously complex, and not all of it makes technical sense. If it seems like a complex puzzle that you’re interested in solving, you’ll do fine.