In the new episode of Ask Me AnyFin we met with Simon Farmilo to discuss the customer-centric approach in finance, COVID’s impact on SMEs in the UK, and the growing popularity of green FinTechs. How does the trend for sustainability shape emerging startups? Will it affect attitudes towards cryptocurrencies? Check out the interview for a fresh serving of FinTech insights!
FinTech commentator says, “Ask Me AnyFin,” and is not afraid to answer
Simon Farmilo is the Director of Strategic Partnerships at Capify UK, an alternative finance lending company providing business loans to small and medium-sized businesses in the UK. He’s an avid FinTech commentator and active contributor to the community, who regularly shares his observations on his blog.
With over 16 years’ experience in FinTech and Banking, Simon specialises in creating and scaling new FinTech models through B2B and B2C channels.
Given Simon’s keen interest in new FinTech trends and developments, it was only natural that I and Lukas Korol would Ask Him AnyFin…
Watch the conversation with Simon or read the transcript below.
Customer-centricity at the heart of FinTech
Adam Pogorzelski: Simon, thank you for accepting our invitation to join the discussion about FinTech trends and for sharing some insights on that topic. Your professional experience in financial services is very extensive. Can you tell us a bit about yourself, Capify, and your role at Capify?
Simon Farmilo: Thank you for inviting me to join you.
I’ve been part of financial services for the last 16 years. I started off as a teller in my local branch in my native New Zealand—you could probably tell by my accent—and eventually found myself in business banking. Then about 7 years ago I made the transition into the business ventures arm of the bank I was working with. Our mission there was to leverage third-party FinTech capability for the benefit of our business customers.
That really opened my eyes to the power of FinTech at the time. I remember specifically when a FinTech delegation came out from London, which included a B2B lender, and they gave this presentation about how they were using data to speed up the credit underwriting process and make same-day funding possible. I’d come from this sort of business banking background where I was issuing loans out to customers. Our average turnover time was probably one week, so this was a complete game changer. It just opened my eyes to this, and from that moment I wanted to be working in this space. It was something I wanted to be a part of going forward.
Since that time, I’ve worked in both Australia and the UK. It was some startups and scaleups, mainly in the lending space, B2C and B2B.
I joined Capify a few months ago. Capify is an alternative lender to small and medium businesses here in the UK and Australia. We’ve been going since 2008. My role here is to lead our partnerships, which is really about finding ways to work with partners and market in order to make quick and simple capital available to more SMEs.
Lukas Korol: We would like to ask a little bit more about Capify itself. You say that in lending it is quite important right now to be focused on the user, the client. The client-centric approach is quite important. We are interested if you use some kind of technology or digital solutions to help you with this, with the customer-centric approach and implementation of proper customer service.
Simon Farmilo: I like that question because I think these days FinTech is quite broadly defined and a lot of people have different opinions about it. When I was really starting out, the word FinTech meant: if you’re doing something better than a bank, more or less.
At Capify, we’ve been going since 2008, and essentially we had been a FinTech because otherwise we wouldn’t exist. Our unique selling point is doing simple, easy finance, better than a bank can do. Over the last 10 years we’ve introduced more FinTech-like technology for our customers to stay competitive and improve the experience. That includes open banking, which a lot of FinTech lenders are doing, which is awesome for customers. I think it just speeds up things so much, makes it so much easier, rather than sending out your year-to-date accounts and the last 3 years of whatever. So we use open banking, API integrations, various data points, company house credit bureaus, and things like that.
We actually use something called a hybrid approach. That means that although we have a digital end-to-end process right from an application—we use DocuSign at the end—we find that small business owners do like to talk to someone during the process. And that’s exactly why we have a locally based call center in Manchester where through the application process customers can call someone, get hold of an expert in 15 seconds basically, during business hours, which we find works really well.
B2C, it’s very expensive to run that, and mostly in B2C, you get these self-driven app processes, which work. But I think in B2B, the hybrid approach really makes a difference. I think as a result of that, we have great Trustpilot scores, most of our customers come back for a second loan, so… So why not, really.
Coming out of the pandemic, businesses are ready to grow
Adam Pogorzelski: During the pandemic it seems, in my opinion, like technology is even more important now. How has Covid affected Capify and your clients? Have you been able to observe any positive outcomes to this challenging situation? Are businesses borrowing to stay afloat or rather to grow? How does it work?
Simon Farmilo: It’s a really interesting question. Obviously, last year was very impactful for us, and this year. We really felt for SMEs during this pandemic. Businesses like ourselves got hit pretty hard. But I think the government here in the UK did the right thing by introducing Covid relief loans, CBILS, etc. Many businesses took those schemes, which allowed them to keep them afloat.
I think right now we’re starting to see businesses have exhausted their relief options.
They’ve probably taken as much as they can from the government, and what they’re looking to do now is actually go out and find capital to grow their business out of the pandemic. We’re excited to support businesses as they bounce back.
I think in terms of positives, this pandemic has really forced businesses to think differently, including pushing out more into the e-commerce channels to survive. I truly believe UK businesses especially have shown themselves to be very resilient. I think we’ve seen confidence beginning to grow again. And I think they are taking the front foot. So rather than withdrawing, being concerned, being conservative, I think they’re really deciding: this is it, once we come out of the pandemic, I want to borrow money to grow and support my growth through it. So that’s exciting to say, and I think it’s a true testament to the small business owners.
The importance and value of mentorship in FinTech
Lukas Korol: Let’s leave Capify aside for a moment. As we know, you are also a mentor in the FinTech Alliance Mentoring Hub. Why are you involved in such an activity?
Simon Farmilo: I guess I see it simply as people helping other people, which is great. And kudos to FinTech Alliance for setting it up. It’s basically a platform and a hub where you come together. There’s a list of mentors and a list of mentees to interact with, and then they have this chat feature, which is great. You can organise calls and things like that.
I talked to someone the other day, and he was probably actually just as experienced as me, maybe more, in FinTech. But he and his wife were moving back from LA to London, and he really just needed to understand the UK FinTech scene and what to look out for. I actually came over only about 3 years ago, so I could certainly relate to what he was going through in some space. It’s a great conversation, and I think that’s what it’s about.
FinTech can be quite a lonely place, especially in small startups or remote working. I wish I had something like this hub earlier in my career. I think as a society we don’t do mentorships enough, and, certainly, in FinTech we should be doing it more.
Adam Pogorzelski: Besides your decision-making role at Capify and the mentoring at the FinTech Alliance, you are also a FinTech commentator who has his own blog. Let’s take a more general look at the FinTech sector now. What areas of the FinTech industry do you find most interesting, as a blog writer?
Simon Farmilo: Yeah, I do enjoy writing. Whether or not people like to read it, it’s a different story, but, naturally, things that I understand the most around B2B lending and the technology around that I find the easiest to write about.
However, I do like to explore the variety of what FinTech is and some of these trends we’re seeing. I find my most popular posts are to do with Bitcoin and blockchain. I think it’s such a hot topic at the moment, and there’s just so much you can write about with that. I think people like to speculate and try to understand what’s going on, so I find it quite enjoyable as well.
Green startups are on the rise, but how does the sustainability trend affect cryptocurrencies?
Lukas Korol: I read your blog post about sustainability or this type of startups that are trying to somehow address the need for sustainability in the FinTech space. Which was quite interesting, because it’s not so obvious that you could think about sustainability in our climate awareness in the context of financial solutions. So I would like to know your opinion about how much there will be happening in this narrow space of sustainability-focused startups?
Simon Farmilo: Certainly, green FinTech is trending right now. A lot of corporates are jumping onto green sustainability very quickly. You’re seeing a lot of these pledges for zero carbon emissions by 2030 etc. and a lot of those corporates are jumping onto it.
You are starting to see some of these FinTechs that are really helping people to understand what their spending is doing—with certain supplies and products that they’re buying—how that, at the end of the day, affects the CO2 levels in general, and what sort of contribution it is making.
So there’s this use of data, and things like that are helping consumers to make those decisions, for sure, which is really interesting and great. Because up to now it still feels like sometimes it can be quite hard to engage with how to help to make the planet better as a consumer, rather than just liking the Instagram post about whales or something like that. Sometimes that’s what we feel the most we can do.
What I really do like at the moment—and I wrote about it in my recent blog—are some of these green community initiatives that are happening. There are some exciting FinTechs that are supporting this rising ecosystem.
One of those is a startup called Raise Green and what they do is they help actual people in local communities invest into local community initiatives. Most of those are solar-powered spaces where energy is being generated. It allows locals to take some ownership in those projects as well, which is really exciting, so this is a brand new thing that Raise Green is bringing to science. People that are running these projects and people in the local community who can walk their dog past it, down the road. So it’s very tangible.
Raise Green is getting quite smart with the analytics as well, so you can actually say, “Right, if I invest this much, this is how much solar power I’m generating as a part of my investment.” We’ll start to see things like that, so I’m personally quite excited about the community initiatives that are happening and what FinTech is empowering people to do.
Lukas Korol: To connect those two topics—sustainability and Bitcoin, cryptocurrencies—I would like to ask you for an opinion about the criticism about energy cost and energy power that is needed to maintain all of those Bitcoin facilities where miners are trying to mine new Bitcoins. It’s said that the whole consumption of energy, only in the Bitcoin space, is comparable to the energy consumption of a country like Ukraine or Denmark, or Argentina. So it raises quite an interesting question about the sustainability of such a cryptocurrency as Bitcoin. Do you have an opinion on this? What do you think about this aspect of Bitcoin?
Simon Farmilo: Looking back at the Bitcoin blockchain, you’ve got these 5000 anonymous nodes around the world, these computers that are all contributing to the ledger, and they make sure everything gets tracked and things like that. I’m writing a post at the moment around some of those vulnerabilities. One stat that came out is if you were to try and hack blockchain, you’d need to control 51% of those nodes that are out there. That’s because to have 51% or more ownership of those nodes means you can go and change the ledger, and basically whatever you put in there is the objective truth. Because if you have less than that, if you try and change something, the majority is going to override you.
I was reading one article recently, as a part of my research, and they worked out that to have enough computing power to try and force an attack on Bitcoin’s blockchain, you’d have to rent enough computer space and power that would cost about 250 000 USD an hour of computing power, just to try launch this attack. That gives you some indication of how expensive it is.
The awareness that’s coming around the sustainability of energy is good, and we need to have those discussions.
But Bitcoin is so popular these days, it’s hard to see one of these new coins that perhaps are more eco-friendly overtaking it. So, we’ll have to see. It’s going to be very interesting.
Lukas Korol: Especially that the recent weeks are quite harsh for Bitcoin investors, because it’s going down right now. It’s a flea market. So it’s quite interesting how popular this cryptocurrency became recently.
Simon Farmilo: With Coinbase’s IPO recently, I think that’s a real game-changer. It’s certainly validating cryptocurrency, so, yes, it’s going to be very interesting.
The future is bright for Capify and its partners
Adam Pogorzelski: At the end of our discussion I would like to go back just for a second to Capify, and I would like to ask you about your plans, about the future, your roadmap. If you can share, what are your plans for the upcoming year or further future?
Simon Farmilo: In my specific role it’s really about helping partners, whether it is B2B service, a large payment platform, a marketplace out there, an e-commerce platform.
And that’s through embedded finance, which is something here at Capify we’ve taken on a bit of funding recently, we’re really interested in that space. We’re very much committed to working with partners that are looking to introduce FinTech as a service, embedded finance into their customer experience. I think that trend is growing very, very quickly.
For banks, banking as a service is really picking up as well. For the likes of us, FinTech as a service, we come along and we offer our solutions through the white label experience or through a non-financial brand, even. I think it’s really exciting.
Here at Capify, we’re really interested in working with companies that are already capturing data—that could be sales data or whatever else—and how we can plug that into our underwriting. It helps customers come to a decision very quickly.
You could be on an e-commerce platform as an SME selling online, and all of a sudden you get this notification saying you’ve been pre-approved. That basically means, based on your sales data that you’re already generating, we’ve been able to understand that there’s actually an opportunity for a loan for yourself.
Some of these discussions that I’m having out there are really exciting, and it’s just about working with partners and unique ways that help to put them ahead of the competition. So watch this space, it’ll be great.
Adam Pogorzelski: Fingers crossed for your plans. That was our last question, so thanks again, Simon, for your time, and for the discussion and great insights. I hope we will have a chance to meet again soon and discuss not only current, but also upcoming trends in the FinTech space.
Simon Farmilo: Thank you, it’s been great.
Ask Me AnyFin is a series of interviews where we reach out to founders, innovators, and disruptors to get to the bottom of the complex issues surrounding the FinTech world.
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