![]() Marko Wenthin, CEO at Penta. Hot on the heels of being acquired by company builder Finleap, German SME banking upstart Penta has appointed a new CEO. Marko Wenthin, who previously co-founded solarisBank (the banking-as-a-service used by Penta), is now heading up the company, having replaced outgoing CEO and Penta co-founder Lav Odorović. I understand Odorović left Penta last month after it was mutually agreed with new owner Finleap that a CEO with more experience scaling should be brought in. The Penta co-founder remains a shareholder in the SME banking fintech and is thought to be eyeing up his next venture. Wenthin stepped down from solarisBank’s executive team in late 2018 citing “health reasons” and saying that he needed to focus on his recovery. It’s not known what those health issues were, although, regardless, it’s good to see that he’s well-enough to take up a new role as Penta CEO. Asked to comment on Odorović’s departure, Penta issued the following statement: “Lav is still part of the shareholders at Penta. His step back from the operational management team was a decision taken by mutual agreement. Lav was the right fit during the building phase of Penta, but by entering a new step of growth, the company faces bigger challenges and needs therefore to position itself differently”. Penta says that in his new leadership role, Wenthin, who previously spent 16 years at Deutsche Bank, will lead international expansion ― next stop Italy ― and begin to market the fintech to larger SMEs in addition to its original focus on early-stage startups and other small digital companies. “In the future, the focus will be also on traditional medium-sized companies,” says Penta. Adds Wenthin in a statement: “I am very much looking forward to my new role at Penta. On the one hand, digital banking for small and medium-sized companies is very important to me, as they are the driver of the economy and I have spent most of my career in this segment. On the other hand, I have known Penta and the team for a long time as successful partners of solarisBank. Penta is the best example of how a very focused banking provider can create real, digital added value for an entire customer segment in cooperation with a banking-as-a-service platform”. Meanwhile, TechCrunch understands that Odorović’s departure and the appointment of Wenthin isn’t the only recent personnel change within Penta’s leadership team. According to LinkedIn, Aleksandar Orlic, who held the position of CTO, departed the company last month. “We are searching for a new CTO,” said a Penta spokesperson. Alongside Wenthin, that leaves Penta’s current management team as Jessica Holzbach (Chief Customer Officer), Luka Ivicevic (Chief of Staff), Lukas Zörner (Chief Product Officer (CPO) and Matteo Concas (Chief Marketing Officer). Marko Wenthin, CEO at Penta. Hot on the heels of being acquired by company builder Finleap, German SME banking upstart Penta has appointed a new CEO. Marko Wenthin, who previously co-founded solarisBank (the banking-as-a-service used by Penta), is now heading up the company, having replaced outgoing CEO and Penta co-founder Lav Odorović. I understand Odorović left Penta last month after it was mutually agreed with new owner Finleap that a CEO with more experience scaling should be brought in. The Penta co-founder remains a shareholder in the SME banking fintech and is thought to be eyeing up his next venture. Wenthin stepped down from solarisBank’s executive team in late 2018 citing “health reasons” and saying that he needed to focus on his recovery. It’s not known what those health issues were, although, regardless, it’s good to see that he’s well-enough to take up a new role as Penta CEO. Asked to comment on Odorović’s departure, Penta issued the following statement: “Lav is still part of the shareholders at Penta. His step back from the operational management team was a decision taken by mutual agreement. Lav was the right fit during the building phase of Penta, but by entering a new step of growth, the company faces bigger challenges and needs therefore to position itself differently”. Penta says that in his new leadership role, Wenthin, who previously spent 16 years at Deutsche Bank, will lead international expansion ― next stop Italy ― and begin to market the fintech to larger SMEs in addition to its original focus on early-stage startups and other small digital companies. “In the future, the focus will be also on traditional medium-sized companies,” says Penta. Adds Wenthin in a statement: “I am very much looking forward to my new role at Penta. On the one hand, digital banking for small and medium-sized companies is very important to me, as they are the driver of the economy and I have spent most of my career in this segment. On the other hand, I have known Penta and the team for a long time as successful partners of solarisBank. Penta is the best example of how a very focused banking provider can create real, digital added value for an entire customer segment in cooperation with a banking-as-a-service platform”. Meanwhile, TechCrunch understands that Odorović’s departure and the appointment of Wenthin isn’t the only recent personnel change within Penta’s leadership team. According to LinkedIn, Aleksandar Orlic, who held the position of CTO, departed the company last month. “We are searching for a new CTO,” said a Penta spokesperson. Alongside Wenthin, that leaves Penta’s current management team as Jessica Holzbach (Chief Customer Officer), Luka Ivicevic (Chief of Staff), Lukas Zörner (Chief Product Officer (CPO) and Matteo Concas (Chief Marketing Officer). Steve O'Hear
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![]() Ken Villum Klausen, CEO at Copenhagen-based banking app Lunar Way has raised a €26 million round led by SEED Capital, while obtaining a European banking license from the Danish Financial Supervisory Authority. Founded in 2015, the banking app, which focuses exclusively on the Nordics, raised €13 million and expanded to Norway back in February. With the additional funding and the new banking license at hand, Lunar Way plans to accelerate the development of its Nordic bank, develop new products, and grow in the Danish, Swedish, and Norwegian markets. The app already offers several features such as budgeting, spending notifications, transfers, bill payment, and card freezing. The new banking license will open up even more possibilities, for instance loans, insurance, and multi-currency cards. “The funding and banking license is the preliminary culmination of years of hard work and dedication from the entire Lunar Way team,” said Lunar Way founder and CEO Ken Villum Klausen. “We have grown from a small startup to a fintech with close to 100 employees from Denmark, Sweden and Norway with users in all of Scandinavia – a market notoriously hard to penetrate. All the while challenging the status quo of banking in the Nordics and meeting the regulatory demands of becoming a bank. We’re the very first of our kind in the Nordics to get a banking license. We’ve done all this in four years. That in itself is an accomplishment. But our journey is only just starting now.” The Nordic market consists of only 27 million people but is the home of the most stable economies in the world, with some of the wealthiest and tech-savvy populations on the planet. Though the market is known for being hard to crack for new banking entrants due to the Nordic clearing systems, as well as demanding regulations for safety and payment infrastructures that vary greatly from country to country, Lunar Way has chosen to focus its efforts solely on the Nordics since day one. “Unlike other fintechs that have chosen to expand vertically, Lunar Way’s approach is to go deep in the Nordics, building not just a supplement for users to have when travelling or as an add-on to their other banking solutions, but as a 100% digital, innovative and true alternative to traditional banks,” said Villum Klausen. “We mean it when we say that the goal is to change the status quo of banking and to be the #1 banking app of the Nordics.” Where 90% of the population is digitally native and already has a mobile banking solution, the first challenge in the Nordics is to offer a product that is innovative and easy to manage. The next challenge is to launch a bank, unlike anything the users know. “The future belongs to those who offer the best user experience, and it’s our ambition to be the leading financial marketplace in the Nordics,” added Villum Klausen. “We already offer the users control of their entire personal finances, spending overview, savings, interactive budgets and up to 4% interest. The plan going forward is to collaborate with those who offer the best financial solutions out there and tie the whole thing together in the Lunar Way app. “From here the user can access, view and handle all their personal finance needs. We’ve already taken the first steps in Denmark and offers insurance, loans, multi-currency cards and so on with several different partners. Soon we’ll provide investments with Saxo Bank. The bank license will help us create similar marketplaces for our Swedish and Norwegian users faster. It will also enable us to build our own financial products.” Mary Loritz ![]() Shachar Bialick, CEO at Curve, the London-based “over-the-top banking platform,” has raised $55 million in new funding. The startup lets you consolidate all of your bank cards into a single Curve card and app to make it easier to manage your spending and access other benefits. Curve’s Series B round is led by Gauss Ventures, the London-HQ’d fintech investor, alongside Creditease, IDC Ventures and previous backer Outward VC (formerly Investec’s INVC fund). A number of other early investors, including Santander InnoVentures, Breega, Seedcamp and Speedinvest also followed on. The new round of funding values Curve at $250 million (or one-quarter unicorn, so to speak), and will be used by the company to continue adding more features to its platform and for further European expansion. (It also plans to launch in the U.S. in 2020). To date, the company claims 500,000 users and says it is on track to reach 1 million by the end of the year. Curve is currently available in 31 countries across Europe, with around 30% of its customer base coming from outside the U.K. “We [have] identified a few countries where the organic pull is fantastic, and we are about to double down on them,” Curve founder and CEO Shachar Bialick tells me. Like a plethora of fintech startups, Curve is building a platform that essentially turns your mobile phone into a financial control centre that re-bundles disparate financial products or functionality to offer a single app to help you manage “all things money.” However, rather than building a new current account ― as is the case with the challenger banks such as Monzo, Starling and Revolut ― Curve’s “attack vector” is a card and app that lets you connect all of your other debit and credit cards (sans Amex) so you only ever have to carry a single card. Once you’ve added your cards to Curve, you use the app to switch which underlying debit or credit cards you wish the Curve Mastercard to spend from, and can track and see a single and consolidated view of your spending regardless of which card was charged (and therefore which of your bank accounts the money was pulled from). In other words, Curve isn’t asking to replace your existing bank accounts but is pitched as a cloud-based platform that runs “over-the-top” of existing banking and payments infrastructure. Historically, the over-the-top terminology has been used to describe the way video streaming services such as Netflix run “over-the-top” of existing broadband infrastructure. “For Curve to succeed in its mission of bringing banking to the cloud, we need [to continue] to build the product; tiny experiences that together create a whole new offering,” Bialick continues. “Our money is everywhere and the job of connecting it all together to one seamless experience requires many resources, and especially many talented people. The latest Series B will enable Curve to re-bundle more of your money: experiences such as Curve Send (peer-to-peer payments), and Curve Credit (post transaction installments for any payment, anywhere).” Alongside Curve’s all-your-cards-in-one functionality, the Curve app lets you lock your Curve card at a touch of a button, provides instant spend notifications, “zero FX fees” when spending abroad or in a foreign currency and the ability to switch payment sources retroactively. The latter is dubbed “Go Back in Time” and means if you make a purchase via Curve that gets charged to a card other than the one you intended, you have two weeks to change your mind. More recently, Curve has re-vamped its cashback feature in a bid to draw in more customers for the premium versions of the Curve card. With the new Curve Cash programme, customers get 1% instant cash back on top of any existing rewards cards that they have plugged into the app, potentially earning customers double rewards on purchases. You simply pick from the list of retailers supported for cashback ― you are allowed to choose between three and six retailers, depending on which Curve plan you are on ― and then get 1% cashback for any purchases made at those stores. Bialick claims that Curve’s over-the-top model is also producing higher engagement than many challenger banks, with customers spending on average £1,500 per month through the Curve platform. (As an imperfect reference point, challenger bank Monzo says that around 30% of its users top up their account by £1,000 or more per month). I’m also told that 15% of Curve’s users have added a challenger bank card to their Curve account, which also makes for an intriguing and even more nuanced comparison. And whilst Curve is arguably trying to define a new market category ― at least here in the West ― and therefore isn’t the easiest of products to explain, Bialick says that existing Curve customers are the startup’s biggest advocates. “There isn’t just one thing that pulls customers to Curve, there are as many pulls as [there are] the number of ‘money jobs’ one has. All your cards in one, fee-free spending abroad, ‘Go Back In Time,’ to name a few, all attract and retain our customer base. Indeed, awareness and brand building is key, especially amongst all the noise, but that’s where our customers are proving invaluable, telling their friends about Curve, which drives most of our adoption with 2,000 plus new accounts per day.” To win in this new category of banking, Bialick says the company needs to steadfastly stick to its mission to reduce the number of steps it takes to carry out everyday money-related tasks. “The winners will be the companies… [that] create the most seamless experience, removing as much friction between the customer and their money.” Steve O'Hear Paragraph. ここをクリックして編集する. ![]() Barcelona-based Combine is a mobile financial assistant that lets you aggregate all your bank accounts from multiple countries simultaneously and use the app as a personal finance manager. It’s the perfect solution for expats around the world to stay in control of their finances, allowing users to view a balance from all their bank accounts in one currency, with unified transaction history and insights from statistics. Founded by Denis Moskalets and Irakli Agladze in 2016, the Combine team is a true example of a digital startup, with an international team of remote workers. The startup, which was part of the Startupbootcamp IoT & Data Tech programme in Barcelona, has raised over €200k from angel funding since their inception. Mark Asquith ![]() Barnaby Hussey, CEO at CLEO, the London-based “digital assistant” that wants to replace your banking apps, has quietly taken venture debt from U.S.-based TriplePoint Capital, according to a regulatory filing. The amount remains undisclosed, though I understand from sources that the figure is somewhere in the region of mid-“single-digit” millions and will bridge the gap before a larger Series B round later this year. Cleo declined to comment on the fundraising. However, sources tell me the need to raise debt financing is partly related to Cleo Plus, the startup’s stealthy premium offering that is currently being tested and set to launch more widely soon. The new product offers Cleo users a range of perks, including rewards and an optional £100 cash advance as an alternative to using your bank’s overdraft facility. The credit facility is, for the time bring at least, being financed from the startup’s own balance sheet, hence the need for additional capital. The new funding also relates to Cleo’s U.S. launch, which began tentatively around a year ago. This has been more successful than was expected, seeing Cleo add 650,000 active U.S. users to date. The U.S. currently makes up more than 90% of new users now, too. Overall, the fintech claims 1.3 million users have signed up to the Cleo chatbot and app, with 350,000 active in the U.K. Accessible via Facebook Messenger and the company’s iOS app, Cleo is an AI-powered chatbot that gives you insights into your spending across multiple accounts and credit cards, broken down by transaction, category or merchant. In addition, Cleo lets you take a number of actions based on the financial data it has gleaned. This includes choosing to put money aside for a rainy day or specific goal, sending money to your Facebook Messenger contacts, donating to charity and setting spending alerts and more. Meanwhile, alongside TriplePoint, Cleo is backed by some of the biggest VC names in the London tech scene ― including Balderton Capital, Entrepreneur First, Moonfruit co-founders Wendy Tan White and Joe White, Skype founder Niklas Zennström, Wonga founder Errol Damelin, TransferWise founder Taavet Hinrikus and LocalGlobe. Steve O'Hear ![]() Max Bernardy is CTO and co-fouder of TITAN, the platform uses an algorithm to analyze 13-F disclosures from the leading hedge funds and formulates an equally-weighted portfolio of the top twenty companies held by those major funds. As for the hedging part of the portfolio, depending on an investor’s risk tolerance they can allocate up to 20 percent of their funds to shorting the S&P 500. Unlike Robinhood’s unsuccessful Checking and Saving accounts, Titan’s portfolio is SIPC insured up to $500,000. Hedge funds are usually reserved for accredited and institutional investors with large sums of money ($500,000 minimum). Titan’s minimum investment is just $1,000 and only charges a 1 percent annual fee. Titan’s new approach to mobile-investing made it one of the hottest members of YC’s Spring 2018 batch. According to TechCrunch, it had about $10 million in assets under management four months ago when it graduated from the startup accelerator. I’m interested to see how Titan will fare in 2019 if the economy shifts into a recession. According to its fact sheet, Titan’s portfolio has a long-term focus so it’s investments stay largely the same from quarter-to-quarter. Robo-advisers like Wealthfront, Betterment and Acorns are in for a rough ride when the economy turns in the next few years. The algorithms that power these platforms and the entrepreneurs who started them have yet to experience a recession. That’s a danger for most of today’s young entrepreneurs and venture capitalists. Titan has the opportunity to grab up millennials looking for a safer place to put their money in 2019 thanks to its hedge-fund like investment philosophy. Everyone who invests with Titan is buying into the same portfolio of stocks. Titan also sends investors deep dives on specific companies and quarterly reports. As TechCrunch’s John Constine pointed out, Robinhood helped democratize access to stock trading, and Titan is doing that for a more advanced financial vehicle. Daniel Strauss ![]() Financial technology startups will enter the next decade with a little more street cred than the last time around. Nearly 60 upstarts focusing on financial services -- from Stripe Inc. to Chime Inc. to Plaid Inc. -- have garnered valuations of more than $1 billion in recent years, according to CB Insights. Personal loans -- a category popularized by fintechs like GreenSky Inc. or Affirm Inc. -- are now the fastest growing form of debt in the U.S., Experian data says. And Robinhood sparked a movement toward free stock trading that has shaken the business models of the likes of Charles Schwab Corp. and E*Trade Financial Corp. Still, analysts and experts say there’s more to come. Sweeping mergers and acquisitions have transformed some of the industry’s largest incumbents in payments, who are gearing up for a bigger fight for market share with newcomers. And regulators are looking to have more say over how technology companies venture into financial services. Here’s our annual list of the most important trends, challenges and companies to watch in the New Year. Exit StrategiesMergers and acquisitions have historically been small and rare in the fintech space, but that changed in a big way in 2019. Fiserv Inc., Fidelity National Information Services Inc. and Global Payments Inc. did a series of deals that transformed payment processing in the U.S. More recently, PayPal Holdings Inc. made its largest acquisition ever and Charles Schwab announced it would buy TD Ameritrade Holding Corp. for about $26 billion. That frenzied pace of deal-making might continue through (at least some of) 2020.
Julie Verhage and Jennifer Surane Roisin Levine, Head of Banks at Flux, discusses the importance of collaboration between fintechs and incumbents in 2020Legacy financial institutions and fintechs are often pitted against one another, with the former represented as being slow and resistant to change, while newer upstarts are classified as disruptive, but struggling to find profitability or become mainstream.
Like almost all stereotypes, there are some truths in these assertions. But the scale offered by incumbent banks that can provide distribution to tens of millions of customers means that, for fintechs looking to reach mass market quickly these collaborations, when approached with the right outlook, collaboration between the two is undeniably a match made in heaven. Everyone benefitsIncumbent banks know that in order to stay ahead of the curve - and provide the best service to customers - they need to select the right vendors and partners. It is impossible for them to innovate on every front, and partnering with fintechs can provide a quick way of adding a new customer centric feature or service without building it from scratch. This collaboration benefits everyone - fintechs are able to vastly increase their audience, banks can accelerate their own digital transformation, and (hopefully) customers get access to a new feature that’s both secure and useful. It is fascinating to now also see the incumbent banks emulate their fintech rivals by launching their own standalone digital banks, with features clearly influenced by the successful mobile-first challengers. Imitation is the sincerest form of flattery, and ultimately the end users, consumers or SMEs, will benefit from the increased competition and relentless race to optimise our banking experiences. Incumbents turn challengersOver the last year RBS and HSBC have both created their own challenger banks in Bo, Mettle and Kinetic. These new banks may soon introduce their own marketplaces or simply become easy integration platforms for third party services delivered by other fintechs. Building these as greenfield projects creates an opportunity for incumbents to be more agile, deliver and test partnerships quickly and deploy new features at pace. Often the challenge for large banks is the sheer scale of their operations - multiple stakeholders, legacy systems and rigorous procurement processes can make partnerships difficult to implement, whilst newer banks have the benefits of being API driven and ready made for collaboration. You only have to read some of Monzo’s early blogs outlining their vision of API enabled, intelligent interactions between bank accounts and other services to see how they looked at banking differently. Open Banking in the UK helped accelerate this concept and made this incredible foresight a reality for others. Meaningful engagementFintech and bank partnerships have been encouraged and celebrated over the last few years. But Fintechs have a duty to make these collaborations more frequent and appealing by listening to the incumbent banks that they wish to partner with to understand their medium and long term objectives. It is easy for fintechs to often assume a bank should know why a partnership or technical innovation could be beneficial, but meaningful engagement requires an easy to understand product or service, with a very clear demonstrable benefit to customers. Fintechs that pitch broad and over complicated proposals create drawn out conversations with banks and projects that ultimately never find their key sponsor. When the right product, feature or service is available and articulated correctly the appetite for collaboration is clear. Incumbent banks have spent millions of pounds overhauling legacy systems, building vast digital teams, and giving freedom to their venture arms to identify fintechs worthy of strategic investments and long term partnership initiatives. For this reason, banks and fintech collaborations are set to continue through 2020, but the real measure of success won’t be the PR announcements that excite just industry press and fintech advocates. It will be the partnerships that put true financial control and opportunities into the hands of millions of normal banking customers via seamless user experiences. By MATT HIGH . Dec 29, 2019, 10:22AM FINTECH MAGAZINE Digital Payments: 20 years ago PayPal and WorldPay kicked off the first wave of fintech making it easier for consumers and merchants to do business together on the internet. In the last decade digital payments has raced ahead thanks to RFID and mobile apps and there is much to play for in this growing market expected to be worth $2 trillion by 2025.
Market leaders include Ant Financial, Stripe and Square. Klarna has transformed consumer retail purchasing through services for merchants in the “payments as a service” market. Mastercard and Visa dominate the global card market for payments, a point not lost on Apple who has partnered with Mastercard and Goldman Sachs to launch Apple Card. Payments is a lucrative market Facebook will attack through Libra. M-Pesa is the poster child for mobile payments and deposits in Africa, has 17 million customers in Kenya and has expanded to South Africa, India and Eastern Europe. The Nordics have Swish (Nordea) and VIPPS (DnB) that allow peer to peer money transfers between consumers and to businesses, popular apps with high consumer adoption rates, delivered by incumbents. Money Transfer: An early fintech play in the $600 billion remittances market that has revolutionized the cost of sending money abroad for workers from counties such as the Philippines, Mexico and India. Fees have dropped from high rates of up to 17 percent of the value of transaction, to zero. No huge tech innovation here but great business model innovation. Apps are built on legacy infrastructure using customer bank accounts for KYC / AML and benefit from the legacy infrastructure, the fintech takes its margin on the foreign exchange spread. Big players include XE, OFX and TransferWise. The Facebook team will have noticed this market when planning for Libra. Alternative Lending: P2P Lending is an early fintech play that has focused the globally fragmented lending market. Estimated at over $200 billion P2P lending grew substantially following the financial crisis when big banks were not lending. P2P lenders often deploy more sophisticated data driven credit models than traditional banks and have much lower operating costs with no branches. Big players include Lending Club, Funding Circle and SoFi. OakNorth, one of Europe’s highest valued fintechs, is taking on the P2P segment with an alternative lending model and a third party data driven tech offering. The opportunities for retail and SME lending have not been lost on traditional players with new entrants such as Goldman Sachs Marcus offering loans and Amazon re-focusing on its next wave of business lending solutions. Bitcoin, Cryptocurrency, Digital Assets, the Blockchain and Distributed Ledger Technologies: This mouthful of a megatrend cluster wins my prize for the fintech megatrend of the decade. Bitcoin was launched on the blockchain in 2009 following Satoshi Nakamoto's 2008 whitepaper and the rest is history - blockchain sent a thousand projects sailing across all sectors although it took some time getting noticed. A decade in and we are only just getting started. Forecasts that this sector will cross the $25 billion mark by 2025 seem grossly inadequate to me. Libra has awoken central banks, policy makers and regulators with the likelihood that a dominant global industry led stablecoin may emerge. The FSB, BIS, and IOSCO are all focused on analysing the market impact of stablecoins and central banks are reviewing their plans for digital fiat currencies. Libra may have fumbled in the early days with its own narrative, but its impact has been sensational. Following the ICO crash and pullback of the bitcoin price in 2018 the sector has regrouped with an enterprise focus: new digital assets and derivatives, and a focus on exchange, custody and settlement infrastructure. Market leaders include R3 with its Corda platform and Six the Swiss stock exchange, who will partner to platform digital assets; a JP Morgan Coin for client payments; and Fidelity Digital Assets platform for institutional clients. After Xi Jinping's comments expect the Chinese government to push the development of blockchain technology, ahead of the application of cryptocurrencies which are banned in China. Traditional cryptocurrency exchanges such as Binance, Coinbase, and Huobi are now trying to better understand the implications of their requirement to adhere to the FATF travel rule, requiring them to do KYC checks on customers. Blockchain is also leading the sustainable finance world in areas such as impact coins, refugee crisis, migrant workers, and financial inclusion. Blockchain for green and blue bonds is positioned to take off, due to the efficiency of issuing and cost of administration. This follows blockchain bonds launched by the World Bank and the Commonwealth Bank of Australia. Whilst the debate between decentralized public networks and private permissioned networks evolves, most commercial players are seeking interoperability between blockchain and distributed ledger protocols and would like their digital assets and smart contracts to “work” across the Blockchain, Ethereum, Hyperledger, Corda, EOS, etc. Decentralized Finance (DeFi) has emerged as the ultimate tool for the disintermediation of financial services in a world where many of the intermediaries are jurisdictional based entities with statutory mandates – high friction territory. Love or hate bitcoin and the blockchain, Satoshi has helped to change the world by combining two technologies that have been with us for over 40 years: distributed data storage and cryptography, into new innovative applications and use cases whilst taking on the fractional reserve banking system with a new digital currency not controlled by a central authority. While the first generation of this technology is energy inefficient and slow relative to the traditional transactional payment system, it is highly innovative, has many practical use cases and newer generations are improving performance. It is NOBEL prize thinking, not like he’d ever win, whoever he or she is. Challenger Banks: More challenger banks have popped up in the past few years than you can shake a stick at. A greater flexibility in the licensing options for new banks along with a new generation of banking infrastructure partners has reduced both statutory and working capital requirements to get their plays to market. Most of the plays focus on delivering outstanding brand driven customer services on mobile and internet technologies. These include savings and current accounts, payments, cards and loans, and many are moving into share trading and investments, connecting up the “wealth account” to the “current account”. Market leaders include Chime, Revolut and Monzo, and while most are a long way from making a profit they are attracting new customers, an outcome not to be discounted in an often fickle and inert consumer marketplace. Demographic changes are on the side of challenger banks, baby boomers in the West are heading to the rock and roll retirement home, and half of the planet is under the age of 30. In an era of zero to negative interest rates, arguably the traditional banking model is broken, so it is unlikely we will see challengers focused on delivering better savings rates, though customer charges should be lower than traditional banks with no physical branches and legacy tech. In any event, the customer experience and getting the job done in real time and cost effectively is the value add. Challenger banks are transforming banking in the same way low cost airlines transformed the service proposition of national air carriers. Low cost airlines did not put national carriers out of business, but significantly expanded the air travel market with customers that did not (as) regularly use airlines. Let’s see if challenger banks can deliver this market expansion, demographics are on their side. Low Cost Stock Trading and Investments: Whilst Robo Advisors have not lived up to the expectations of gaining a large share of the investment market, they have delivered technological solutions for investing in stocks and funds that is now being deployed across the market from challenger banks to larger wealth managers. Robo Advisors in the U.S. include Betterment, Wealthfront and Robinhood, the latter leading on commission free investing. In Europe Scaleable Capital is a Blackrock backed quant and tech team partnering with big banks to distribute investments. Nutmeg, the U.K.’s Robo poster child attracted investment from Goldman Sachs in their 2019 funding round leading to rumors of an investment account offering to accompany Marcus. Wealth managers have responded and firms like Vangard and Schwab, with its recent acquisition of TD Ameritrade, have delivered new robo tech tools to their investors. With the rise of passive investments and the race to the bottom on fees, technology is the best lifeline strategy for wealth managers. Offering free share trading in history’s longest secular bull market is a winner. Offering a technology proposition for customers to self-help their way to a risk adjusted passive investment plan has been largely positive, though surveys indicate many people would still appreciate (human) advice when it comes to investments. Innovative Financial Services Regulators: Following the financial crisis, the Financial Conduct Authority (FCA) in the UK was given a competition mandate. After the failure of two of the four universal banks in the UK serving 80 percent of the market, the government wanted to promote greater competition in financial services. This heralded a new era of regulatory innovation, led by Chris Woolard, the FCAs strategy and competition director, started with the (fintech) Innovation Hub and the Regulatory Sandbox. Global financial services regulators were quick to copy this playbook, with MAS in Singapore and ADGM in Abu Dhabi delivering a range of regulatory tools and innovations. The Global Financial Innovation Network (GFIN), formally launched in January 2019, is a consortium of 50 regulators collaborating on fintech innovation and now includes the U.S. SEC and CFTC. Its aims to produce a global sandbox to allow industry to focus on cross border multi-jurisdictional innovations and is eagerly awaited by industry. Regulating financial services markets is like driving while looking in the rear view mirror. Tools and engagement models that support industry and regulators working together to better identify technological and financial risks to consumers, counterparties and the financial system in the early stages should be lauded. U.S. policy makers may wish they had taken this approach in earlier years with tech firms like Amazon and Facebook. Financial Services Infrastructure: The growth of APIs to obtain client data in the financial services sector has been explosive. Open Banking in the U.K. and PSD2 in Europe offer the industry an interoperable data protocol for client data sharing that most customers have no idea of and probably don’t care about but will change their engagement with providers, hopefully for the better. Data growth is also driving the big data / machine learning / AI trends that are emerging. Clearbank, the first clearing bank to have launched in the U.K. for over 200 years is one of my favorites for real fintech innovation. It offers digital clearing between counterparties and is taking on the four big U.K. clearing banks. Founded by Nick Ogden who calls himself “the plumber” and is also the founder of WorldPay, he has gone on to found RTGS.global to take on real time gross settlement market for central banks. Chinese Fintech: The rise of Chinese fintech over the past decade has been nothing short of breathtaking – we in the West can learn a lot. Ant Financial, the finance subsidiary of Alibaba, leads the way and is the highest valued fintech on the planet at a whopping $150 billion and Tencent is not far behind. While the geo-political relationship between the West and China has stalled due to trade and technology security issues, pay attention to Chinese fintechs growing their payments, banking and investment businesses in China and Asian markets. The Chinese government’s commitment to blockchain over cryptocurrency is significant, there is a big push to use this technology to underpin further development of the Belt and Road Initiative. The US government has been noticeably quiet on blockchain and European governments are just starting to think about policy. Following the noise that Libra has made this year, The People’s Bank of China is rumored to have accelerated its plans for a central bank digital currency. With little of the legacy of the Western financial services infrastructure and a demography of digital adopters, watch this space closely. Industry Wide Investment, Collaboration and Innovation: Investment in fintech has increased over 13 times in the past 10 years from $8 billion in 2010 to over $110 billion in 2019 driven by venture investing and crowdfunding. The U.S. and China typically account for more than 80 percent of the total investment with the U.K in a very distant third place with $1.5 billion. I call this the bookend investment scenario where everything in between the U.S. and China bookends is sub-scale with respect to (fintech) capital investment and likely sub-scale with respect to talent in numbers. Whether it is corporate venture capital, Y Combinator models and labs, or joint ventures and partnerships, innovation seems to be contagious in financial institutions. Barclays Accelerator is notable for its partnership with Techstars, which was run by the outstanding Chris Adelsbach, and Goldman Sachs and Citi dominate institutional fintech investment. The trend has extended to governments and regulators and I have lost count of the regulatory sandboxes around the world. The OECD has set up the Blockchain Policy Forum, BIS is launching three innovation hubs for central banks starting in Singapore, and fintech industry membership and advocacy organizations have popped up all over the planet. I must confess to proudly taking part in this historic and unprecedented epoch of digital innovation in financial services. Following my role as the CEO of Innovate Finance - the UK fintech hub, I went on to found Global Digital Finance with Simon Taylor (11FS), a not-for-profit dedicated to professional standards and codes of conduct for the crypto and digital assets sector. Having spent a career in financial services, not-for-profit advocacy has become a priority for me. Following the financial crisis and the birth of my daughter, I have been consumed with the future and ensuring we leave the system in better shape for our children. I maintain my day job as an advisor and investment manager as a partner in a boutique firm and can reliably confirm I am long on digital in the global financial services sector, for the benefit of everyone. Follow me on Twitter or LinkedIn. |
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