Another £40m will be pumped into the fintech sector following the award of four £10m grants from the Banking Competition Remedies’ Capability and Innovation Fund to lending and payments services for UK small businesses.
Each of the four recipients of the awards set out objectives for what they are going to do with the cash over the next few years in commitment documents to the remedies funding panel, briefly summarised here:
- Modulr is a “payments as a service” API platform that is promising to create payments control for accountants and recruit 700 practice partners over the next five years.
- Online lender iwoca received £10m to launch an “OpenLending” platform by the end of this year to open up its mechanisms to business bank account providers, accountants, other fintech outfits and bookkeeping platforms such as Xero.
- The challenger bank Atom, meanwhile, will use its grant to create “smart lending” solutions for its customers along with a data-driven financial toolkit for SMEs.
- One of the areas highlighted for attention in the Pool C criteria was international payments, which are catered for by the fourth award-winner, Currencycloud, which aims to roll out a global transaction banking platform tailored for small businesses.
Digging into the detail, both iwoca and Modulr indicate that accountants are likely to play a role in expanding their market footprint. Modulr’s plan to build an Accounts Payments Control Centre (APCC) is the most eye-catching commitment for members of the profession.
Modulr Accounts Payments Control Centre
The target users for this new online service will be accountants who manage payments on their clients’ behalf – currently a complex labyrinth of banking and payment service bureaucracy. Modulr has already been working in this area, for example collaborating with Sage to manage accounts payable and payroll payments from within Sage Business Cloud Accounting and Sage Payroll.
Modulr will build on its existing Accountant’s Dashboard to expand the functionality and reach of the new look APCC to let accountants manage multi-step approvals, user access and workflows through their accounting and payroll systems.
Modulr’s service is based around a business payment services programming interface (API) that lets affiliated organisations plug into its platform. By opening up this API, the company is promising to bring innovations such as open banking payment initiation, fraud prevention and “request to pay” collection processes to a total of 860,000 small businesses by the middle of 2024.
Modulr chief executive officer Myles Stephenson said the award was “a great opportunity to bring an entirely new digital solution to market; the benefits of unlocking automation and straight-through payment processing will radically change the way SMEs and accountants do business”.
OpenLending expands for iwoca
The online finance marketplace Funding Options was one of the winners of the Pool D awards announced in June, but it provides a platform to compare products from a host of lenders – it doesn’t actually lend the money itself.
With lending listed as one of the main activities targeted by this funding round, iwoca and Atom were the only lenders to get a piece of the action. The iwoca OpenLending concept is a functioning technology “stack” that is currently working in tandem with Xero. The CIF funding will enable the company to open up the code so that other partners can customise iwoca credit solutions for their small business customers.
Mark Di-Toro, iwoca head of PR for the UK explained: “We were the first business lender to offer an API so third parties can seamlessly offer credit on their own platforms. We’re now building on our track record to launch OpenLending. With OpenLending, we will introduce customisation to our API, allowing partners to adapt features to suit their customers’ needs. To accelerate the reach of OpenLending, we are partnering with Xero and together we will co-develop customised credit solutions to reach 450,000+ small business who rely on Xero.”
Another commitment involves iwocaPay, an automated invoice finance service that will enable companies to offer flexible payment terms to customers while getting paid immediately. The flexible factoring options can include single invoices and extend up to 90 days after receipt. The company committed to launching iwocaPay by the middle of next year and to finance 40,000 transactions by the end of 2023.
Atom’s pitch to the BCR funding panel revolved around its application of “smart” machine-learning technology to enhance customer service. Drawing on lending, savings and other data sources Atom said it will deliver the following lending ervices over the next two years:
- On-demand working capital facility
- Unsecured term lending that responds dynamically to forecast cashflow and financial health
- Access to lending secured over business assets; and
- Invoice discounting.
Over the past year the Banking Competition Remedies’ Capability and Innovation Fund has dispensed £425m to 15 fintech companies. Most of the fund recipients are matching the official grants with further investment to achieve their ambitions, but the challenge ahead is considerable for all the CIF award winners.
Despite having lent more than £1b to UK small businesses, for example, iwoca noted, “The SME finance market remains anaemic, with the funding gap growing to more than £10bn.”
About John Stokdyk
AccountingWEB’s Head of Insight has been with the site since 1999 and likes to spend his time studying accountants’ technology habits. When not nerding out, you can find him exploring obscure indie music and searching for the perfect organic sourdough loaf from his base in Brighton, UK.