11:FS CEO David M. Brear — the banking battlefield, fintech for SMEs & financial ecosystems globally

In today’s episode, Kailee Costello hosts David Brear, the CEO and co-founder of 11:FS and one of the hosts of the Fintech Insider podcast.

In today’s episode, David shares his insights on 3 topics:

1. How digital technologies and fintechs have unleashed innovation in commercial banking. We talk about the unmet needs of SMEs and why David expects to see a transition to more service-based models in the future.
2. The banking battlefield. The competitive landscape is shifting from being about the “number of customers you can acquire” to a landscape where digital is increasingly important. We discussed strategies that incumbent banks can take to stay competitive.
3. How fintech and financial ecosystems differ across different global markets. We spoke about the impact of generational and cultural differences, and why David expects different winners in different regions.

Key takeaways from our discussion:

How digital technologies and fintechs have unleashed innovation in commercial banking

• SMEs are potentially the largest underserved category in financial services globally because the complexities of running a business and the distraction of financial services to running that business are really significant. The market that has been struggling to get to grips with fundamentally serving the real problem; the SME market is often treated like it is an offshoot of retail banking, resulting in SMEs spending time running their financial services that they’d prefer to spend growing and building their business.
• A key underserved “job to be done” is getting access to financial systems (e.g., bank account setup, access for the Financial Director). Tide in the UK have done an amazing job of tackling this, capturing ~6–7% of the market with their ~3–4 minute account opening process
• When we think about banks embracing digital innovation the first step is the organization recognizing that they are a financial services provider, not a financial product provider. By going beyond thinking “I’m a lender and I do credit cards and I’ve got current accounts”, they can focus on actually orchestrating financial services to help businesses be more successful
• It’s not what you do, it’s the way that you do it that is critical in these markets. If you look at players like Tide or Monzo or Revolut, it’s not that they’ve implemented an amazing innovative strategy that hasn’t been done before, it’s that they’re brilliant at going from a good idea to putting it in the hands of customers quickly. That’s part operational capability, technology, and infrastructure, but part of it is also just that culturally they’re set up to do small things quickly, test and learn with their customers, and evolve.
• David foresees a transition to service-based models in commercial banking. He expects a return to traditional values with big incumbent organizations re-establishing themselves by serving customers digitally. There will be a spread between monoline service providers that do a very narrow field very effectively (e.g., KYC) and players with a broader product offering, but ultimately, the organizations that establish themselves with credibility and the end-consumer’s trust to orchestrate solving problems will be the most successful in this market.

The ‘banking battlefield’

• At the core of the ‘banking battlefield’ is the ability of incumbent organizations to embrace true innovation and change before the disruptors reach a scale that disrupts established players. Historically, the only axis that mattered was the number of customers that you could acquire; the advent of digital has added another axis.
• True digitalization involves more than just having an app or website; it requires a comprehensive shift in operating models, unit economics, and technology delivery.
• The next generation of financial services will focus on real-time, intelligent, and contextual solutions to address diverse customer needs, with a blend of speed, low unit costs, and customer-centricity driving success.
• Each company’s strategy will be very different based on where they sit on that ‘banking battlefield’ (whether they’re a big incumbent bank, a small bank, a big tech player, or a non-bank like Shopify). Different players start from different positions. Incumbent banks find it challenging to undertake transformative changes due to organizational size, cultural shifts, and technological revolutions, but some banks are overcoming this by building their own disruptor (e.g., Chase in the UK and Standard Chartered in Hong Kong with Mox)
• Companies like Apple and Google will play a key role in financial services going forward. These companies have established trust, but what they really bring is their ability to solve problems and create desirability around the things they do. Incumbent banks are not particularly good at doing that, however, fintechs are. For example, Monzo recently released a capability for investments that had ~150K people queueing for the product launch

How fintech and financial ecosystems differ across different global markets

• Technology is reasonably consistent across regions; the key influencing factor is regulatory changes that trigger competition and openness to technology adoption. Regulation shifts are creating the right environment for fintechs to flourish and put pressure on existing incumbent players to step their game up.
• The position that incumbent banks are in with regard to legacy technology is really consistent across regions, however, the way you address it is very geographically specific. The underlying financial instruments (e.g., savings accounts, credit cards) are very similar and the context of rising interest rates and cost of living is relatively consistent across the world. However, geographical and generational differences create people using those things in different ways. For example, people in Hong Kong pride themselves on being financially savvy (being ‘moxie’ is why Mox is called Mox) whereas in other cultures people are quite private about their personal finances.
• The level of overhead that comes with adhering to regulation is really significant, however, David doesn’t think that regulation is the barrier to entry that it used to be; regulators are starting to make it more attractive to go to different markets and there is more global commonality when it comes to how regulators are regulating as well. There are also plenty of investors out there looking to fund the next big thing to take over a territory.

Check out the Episode on the platform of your choice here: Spotify | Apple Podcasts | Soundcloud

About David M. Brear and 11:FS

David Brear is the CEO and co-founder of 11:FS and one of the hosts of the Fintech Insider podcast. 11:FS is a challenger consultancy that helps clients create innovative strategies, build new propositions, and launch new ventures in the UK, US, Europe, and Asia.

Check out the 11:FS Fintech Insider podcast

About the Author

Kailee Costello is an MBA Candidate at The Wharton School, where she leads the Wharton FinTech Podcast team. She’s most passionate about how FinTech is breaking down barriers to make financial products and services more accessible — particularly in the personal finance space. Don’t hesitate to reach out with questions, comments, feedback, and opportunities at kaileec@wharton.upenn.edu.

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