Lending Market Watch Mindset

Welcome to Banks’ new competitors

Founded in 2006 by a single repeat entrepreneur. IPOed the next year. Raised a total of USD 232 M, including a last round in 2013 of USD 150M that puts it firmly in the dollar billion valuation club (aka the unicorn club) …… If you have not figured out which company it is, I will just add 3 words:

– All Blacks

– Sailing

– The Lord of the Rings

If you still have no figured out which company it is or why I am starting to speak about Xero on a financial services / banking blog, then you are pretty much in the same position as most Banks.



The same can be said of Amazon. Founded in 1995 by a former Wall Street Hedge Funder, starting as on online bookstore and now the biggest ecommerce seller and platform online.

How Big is Amazon


What do these two companies have in common? They have both started to distribute financial services products via their platform, whether it being working capital loans on stocks or data on small and medium business financial performance.

One way to look at Banking is that it is a data arbitrage business, whether by exclusivity on data itself or control over the aggregated value of data. That data to simplify enormously is used to arbitrage interest rates between deposit and credit. As software is hacking the world, the ownership of financial data is moving from the existing financial players to the new global platforms. 

Interestingly, businesses are more and more leveraging several of these platforms at the same time. For example, online retailers may use both Amazon and Ebay to distribute their products or local competitors. Several online accounting platforms are competing for medium and small businesses, with the aggregated accounting data across companies distributed across them.

Therefore  lot of the early competitive pressure we are seeing is whether each of these platforms have a critical size (and the business appetite) to be an exclusive channel for financial services? Or whether innovative cross platforms financial services providers, such as Kabbage or Fundbox will prove that most of the value lies in cross platform companies? One thing is sure, the market for non-bank financial data, whether productized internally or distributed via APIs, will boom on the next years. 


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