FinTech Interview Series: Matt Hicks of Codat

Tell us about yourself.
My entire career has centred around solving problems for small businesses. I started my career in FinTech working at a P2P lender and then an equity crowdfunder (Marketinvoice and Crowdcube, respectively) and have now transitioned into an API vendor servicing both FinTechs and incumbents (banks) with data integrations that help them to provide their small business customers with great experiences. I am a computer science graduate but decided that I was better at speaking to people than computers so now I am technical sales leader who obsesses about sales processes and route to market strategy. 

Tell us about Codat
Codat is a Clerkenwell-based software vendor specialising in SME financial data exchange. Our products aggregate and standardise SME accounting, banking and payments data from widely used platforms. In an increasingly fast paced business world Codat is attempting to help its customers to close the small business information gap. Let me explain... If you look up a small company that fall beneath the audit threshold at Companies House to assess its financial performance you’ll most likely be left thinking that there is a lot left to the imagination. Almost certainly, it will be an abbreviated balance sheet and not much else. That means more than 95% of UK companies will be likely to file incomplete accounts at CH. In addition, new companies in the UK are not required to file their first set of accounts for 21 months from their incorporation date and private companies aren’t required to file accounts until 9 months after the end of their accounting reference period. You can see therefore that CH records for most small private companies are at best out-of-date and incomplete, and at worst border on useless when it comes to gauging their current financial position. Credit agencies consume this companies house data and give an arbitrary score and sell this as a credit risk solution to their customer but most business owners and FS providers know that collecting management accounts is vitally important to get a true and most importantly up-to-date picture. Codat leverages API-led connectivity to help close this information gap and enable small businesses to contribute their data to a financial services providers and visa versa. As an API-first business, which is fairly unusual in the UK currently, we are developer facing but solve real-world problems for both small business end-users and their financial services providers alike.

You are focussed on the UK right now - do you think that your model will transfer internationally?
We have customers in Hong Kong, USA, Ireland, France, Germany and the UK. We see the UK and USA as our main markets moving forwards. We sell outside the UK many via channel partners and larger software vendors.

You’ve been fortunate to work with a lot of the UK leading FinTechs - what are some of your favourites
My favourite FinTech in the UK is Monzo. I am an alpha user, early shareholder and super referrer so I am probably biased but their product is a joy to use and I think their customer service and community engagement is the best I have ever seen across all industries. 

How have you used technology to create value?

Codat is using Microsoft's latest cloud-based services architecture to deliver an aggregated financial data solutions to its customers. We decided to be API first because we didn't want to try and displace existing off the shelf software solutions used by our customer and be the victim of the budget cycles but rather slot in as a data layer within their existing technology stacks either directly or indirectly. That means our solution is not well suited to a business that is not technology enabled. We are positioning ourselves to be attractive to infrastructure vendors and solution providers looking to differentiate themselves with cutting-edge new features at a fraction of the cost of developing those features in-house. We add value by driving efficiency for both end-users (SMEs) and financial services providers. Rather than transmitting data via Excel and PDF over email protocol and manually reconciling records at either end we provide means of transmitting this data directly from the source to the destination so that people can focus on the insights the data provides rather than making sure the data is in the right place.

How has the sector changed since you started?

I think we are seeing a lot more B2B enablers rather than B2C disruptors now. VCs seem to be cooling down on FinTech now after a huge couple of years from a funding perspective. The B2C disruptors tend to be favoured by the VCs and the press but the London FinTech scene has some amazing B2B FinTechs and RegTechs that are facilitating huge leaps forward for their customers but they do not have the same appeal or returns profile for the VCs (i.e. never going to be unicorns) and are far too boring to be interesting for Tech Crunch readers - and that's OK!

Is FinTech actually different? We've always been consumers and developers of technology in financial services.
I think it is different yes. I find the need to label everything something-tech frustrating but I think that FinTech is an important paradigm shift in how companies of all sizes use technology to better serve customers and the FinTech sector has broadly been very positive from that perspective. At Codat we try and avoid being too FinTech because as an API vendor we want to appeal to the widest possible audience of financial services providers and I think sometimes being too FinTech can be off-putting.

How do you see AI and Machine Learning impacting processes?

I am by no means an expert on AI and ML and definitely feel like the number of times I hear and read about it means it's overhyped. As a data business, we should be well positioned as a facilitator for the latest AI and ML processes because without large volumes of data it's hard to leverage these technologies effectively. Our customers often ask us if we are applying any AI or ML to our data and the answer is no. We are not trying to build a data asset, we are trying to help our customer build real-time data assets on their customers to help drive better business decisions and therefore we leave the AI and ML stuff to them or other vendors.

Can regulation keep up?

We have found the introduction of PSD2 and GDPR incredibly useful. Most people would rather watch paint dry than talk about regulation but they always want to know that you tick the boxes as a counterparty. We have tried to build consent frameworks around the new regulation to turn GDPR and PSD2 compliance into a feature of our product. It has resonated well so far. I think regulation is always going to be playing catch up sadly and sure the regulators are being kept busy by the crypto cowboys currently!

Is the London-based FinTech machine losing steam?

I don't think so. I think we have probably seen the top in terms of volume of VC funding into FinTech companies in London and we will likely see the consolidation curve kicking in across many sub-sectors (P2P, crowdfunding, robo-advice) which is likely to result in casualties but that's normal and will provide new opportunities too.

What are your favourite FinTech innovations?

I think Robinhood is a fantastic service and I look forward to it coming to the UK or FreeTrade releasing their product. I use low-cost ETFs and other pretty boring passive investment instruments because I don't want to pay the broker fees on the smaller amounts I am investing in individual stocks. 

My favourite FinTech business in the USA is a company based out of Kansas called C2FO - they are a B2B vendor that facilitates dynamic discounting and have taken a totally fresh and innovative approach to an old problem and grown very quickly as a result.