Technology has transformed the financial services sector over the past two decades. Now common parlance, fintech is a core component of the UK’s digital economy; there are an estimated 1,600 fintech firms nationwide – a number that is projected to double by 2030 – while the sector contributes an estimated £11bn and over 76,000 jobs to the UK economy.
Channel has witnessed and been a part of the fintech revolution. The London-headquartered company provides financing solutions for businesses alongside asset management services to investors. Founded in 2007, Channel has recognised the need to keep pace with the technologies reshaping its industry. But how?
Kristian Wilson is chief technology officer (CTO) at Channel. In this Q&A, Kristian shines a light on what is involved in the digital transformation of an established finance company, including how to balance risk, the importance of partnerships and the challenge of building and nurturing a fintech team.
What has Channel’s digital transformation journey looked like so far, and what inspired it to invest so heavily in building its fintech credentials?
Kristian Wilson: Digital technologies have been reshaping industry after industry, yet the asset management sector has historically lagged behind. This awareness has been a constant driver of change at Channel – it has translated into a commitment to disrupt the status quo in the financial services ecosystem and accelerate the pace of innovation.
Digital transformation rapidly became a strategic imperative for the business. The leadership team had a very clear vision about what they wanted to achieve, both so we could provide a better service to our investors, but also in disrupting the world of trade finance and SME lending.
This was the starting point of our tech-led journey, which required us to pivot fast and embrace agility, migrating away from legacy systems. Having strengthened our tech division, we significantly invested in developing proprietary systems using APIs, open banking and cloud-based technologies to facilitate a fast and efficient data-led lending experience.
Is SME lending lagging behind consumer lending where digital transformation is concerned, and how can this be addressed?
KW: SMEs have been largely neglected by the lending industry. Despite playing a key role in the economy, they continue to be under-serviced by financial services, with lack of access to finance proving a critical barrier for many.
I’d say their business banking experiences are lagging ten years behind what we see in the consumer space. And at the end of the day, businesses are made of people and people expect a consumer-grade experience when it comes to accessing financial products, such as loans. But this is severely lacking.
Outdated, inefficient and cumbersome decision models represent a huge stumbling block for SMEs seeking finance. Much of this comes down to the fact that the SME sector is harder to play in; consumers are pretty well understood, which facilitates risk assessments, but on the SME side, there are more variables involved – lenders are faced with a much bigger data set. This inevitably makes decision-making more challenging.
That being said, there is also the opportunity to really understand their needs and help them unlock growth by making better lending decisions than anyone else in the market. At Channel, we are passionate about correcting this – that is why we recently launched our Fintech Lending Fund, which provides capital to other fintech and digital SME lenders.
As a CTO and tech team, how do you focus on developing the right technology for your business?
KW: I think the hardest bit is communication.
Firstly, it’s about making sure that people are including technology in the conversation, because that’s where it adds the most value. For innovation strategies to succeed, they need to be a company-wide endeavour. Technology can’t be sat in an ivory tower – it’s important to maintain two-way communication in order to understand the business pains and find the right solutions.
The biggest risk in technology is building the wrong thing. Software is a people problem, so it’s about keeping that conversation going and gathering frequent and honest feedback to ensure that what you are building is what people really want and need, without exposing yourself to too much risk. There is a lot of testing, re-testing and validating involved. You have to strike the right balance between opening people’s eyes to the art of the possible, but also manage their expectations.
As an asset management and trade finance specialist, where mitigating risk is everything, how can you develop a fintech culture of not fearing failure?
KW: Part of the fintech mentality is committing to be a learning organisation, which means sometimes you have to value the learning that you take over the delivery.
Technology is so fast-moving that you have to be comfortable with that pace of change and the uncertainty that comes with it. My approach to innovation is ‘if it’s failing, kill it fast’. This is something that I’ve brought to the table and has been embraced by the team.
It stems from having a healthy attitude towards risk and the flexibility to pivot when what you are working on is no longer aligned to what you need to achieve. Learning to accept failure as part of the innovation journey is also important.
At Channel, we have settled into a symbiotic relationship between technology and the wider business, where we challenge one another to make strategic bets in the right places but at the same time we are leaning on our track record of experience to rein in the associated risks.
How important are partnerships between fintech firms in allowing the sector as a whole to flourish?
KW: Fintech lending platforms play a critical role in providing much-needed capital to SMEs and the sector should be aiming at achieving greater synergy through innovation. There is a lot of room for collaboration in the fintech space and as a business, we are very aware of the benefits of combining strengths in partnership models in order to deliver better results across the financial ecosystem.
This is where technology can play such a critical role in driving optimisation through collaboration and leveraging synergies between different players in the sector to redraw the boundaries of B2B finance.