Changing the SME banking landscape

Deloitte has invested in Fractal Labs, an award-winning API-powered start-up, to help banks revolutionise business banking

Deloitte are proud to have invested in Fractal Labs, an award-winning start-up helping financial innovators better serve their small business clients through their AI-powered API platform.

It’s no secret that small businesses face many challenges  when it comes to banking and financing. Small-to-medium-sized enterprise (SME) banking has been a segment that the banking industry has, at times, found challenging to serve due to its variety, complexity and unique requirements. As such, it’s reported that the worldwide SME funding gap has hit $4 trillion.

With the rise of FinTech, new operators have entered the industry and begun to disrupt the SME banking market. Often empowered by less regulatory scrutiny than what the big banks face, a number of start-ups have successfully taken large slices of the market with highly personalised and flexible digitally-based SME banking offerings.

At Deloitte, we have been intricately involved in, and supportive of, the growth of FinTech in the UK. But we also know the vital role that the major banks play within the British economy by supporting SMEs. So, what if we could make it easier for the banks to service their SME customers?

Enter Fractal Labs – a start-up Deloitte works with that empowers financial innovators to enhance the data required to make financial risk decisions, and use intelligent targeting to remove the friction from customer engagement.

An introduction to Fractal Labs

Through a platform for financial services (FS) providers, focused on the SME segment, Fractal Labs is fundamentally changing the small businesses banking experience by reinventing SME financial services one API at a time. In a demonstration of their pioneering spirit, on the day that PSD2 went live,they were the first start-up to get authorisation by Open Banking.

By combining data and automation, Fractal Labs unlock an entirely new value exchange between SMEs and their banks by aggregating and enhancing the data required to make financial risk decisions, while using intelligent targeting to dramatically improve customer engagement.

Their platform empowers Fractal Labs’ partners to better service SMEs, while creating new revenue opportunities; ultimately providing SMEs with better access to the financial services needed to grow and thrive.

Fractal Labs has expanded its roster of influential clients to all corners of the globe, including the UK, Republic of Ireland, Finland, The Netherlands and Australia, with plans to expand to South America. They have also been selected for the UK-Australia FinTech Bridge.

Fractal Labs provide intelligence to enable an entirely new customer value exchange through an API-suite which includes three products:

  • Data Aggregation
    • Bank, accounting, budget, payments, credit scores, public registries data
  • Data Intelligence
    • Cash flow forecasting, transaction auto-categorisation, insights - bills, invoices, customers and suppliers.
  • Targeting Engine
    • Cross-sell products, Relationship Manager insights, product potential

This enables new customer propositions such as lending, cash management, payments and insurance.

In doing so, Fractal Labs connects the underlying loan assets in the real economy to the capital markets by digitising loans after origination. In doing so, they can help money managers create an optimal portfolio based on risk at an individual loan level.  To do this, Fractal Labs has an expert team of behavioural scientists, data scientists and engineers.

Why is Deloitte investing in Fractal Labs?

At Deloitte, we work with some of the world’s biggest banks and best FinTech firms. We also invest in promising FinTech start-ups addressing part of the financial services value chain.

We have been working with Fractal Labs for some time to help our clients across the world transform their SME banking offerings. We’ve also integrated Fractal Labs’ AI intelligence API into our Propel by Deloitte accounting software. Amid this, and the rise of Open Banking, the logical next step was to provide further support with an investment.

Reflecting Deloitte’s desire to back the people behind FinTech start-ups rather than the technology they develop, Louise Brett, Deloitte’s FinTech leader states:

You don’t invest in technology, you invest in teams. We worked with Fractal CEO Nicholas Heller and his leadership team for 12 months and we believed in them and saw the potential.

Deloitte’s investment will help Fractal Labs:

  • accelerate their growth,
  • build their team to deliver their offering to the international market, 
  • react swiftly to the growing market-pull for solutions solving the challenges SMEs face, and
  • increase liquidity within the underserved SME segment.

As residents of Deloitte’s FinTech lab in central London, the investment will also allow see Deloitte draw on its network, expertise and experience as a corporate venture capital (CVC) firm by providing support, mentoring and client introductions.

SMEs are crucial to economies both for wealth creation and for the people they employ. Productivity growth is essential for promoting long-term economic growth and higher living standards. It is therefore vital that SMEs are given the best chance of succeeding with the best banking services they can access.

Fractal Labs CEO Nicholas Heller states: “It is a rarity to work so closely with such an established business, and still be given the freedom to build the products we truly believe will revolutionise the banking experience for small businesses, who are at the core of everything we do at Fractal Labs. Our ambition is to be a truly global business, and this new investment from Deloitte confirms that we are on the right track to achieve what will be an incredible feat with a partner who has a lot of confidence in both our team and mission”.

Louise Brett, head of FinTech at Deloitte, said: “This is our first FinTech portfolio investment and we are continuing to help our financial services clients accelerate their innovation through collaboration and partnership. Fractal Labs is an exciting young company that is leveraging the UK’s leadership in Open Banking and we look forward to supporting it in its global ambition to serve the SME sector in partnership with Deloitte and the industry.”

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