Great potential for financial inclusion services in emerging markets, backoffice startups
Potential for disruption, but more productive to work together towards larger goal
SINCE touching down in Singapore just a week ago, Markus Gnirck has spent most of his time talking to venture capitalists (VCs) and angel investors.
“The impression I’ve gotten is that there is high interest in fintech (financial services technology) startups, but few are currently deemed ‘investable’ by the investor community.
“There is a lot of optimism about us as a vehicle for bringing in high quality startups from abroad to Singapore to invest in, as well as helping local startups further develop their proposition to market,” the cofounder and global chief operations officer of Startupbootcamp FinTech tells Digital News Asia (DNA).
Startupbootcamp was founded in 2010 in Copenhagen, Denmark [corrected], with the core idea of supporting the world’s best entrepreneurs as they grow their startups. It comprises a global network of industry-focused startup accelerators, with fintech being one of its verticals.
Gnirck says that while investments in fintech startups are more commonplace in the United States and Europe, in Asia it remains a nascent space with many interested investors wanting to learn more about what a fintech proposition truly entails.
“Many investors wanted to learn what is ‘fintech;' there’s a lot of buzz about this space and it is seen as an exciting area – but what does it mean really?
“There aren’t many VCs out there who really understand this space yet, so we hope by coming to our demo and pitch days, they get a better understanding of what fintech is really all about,” he says.
According to Gnirck, the most common understanding of fintech is that it is predominantly centred on payments or crypto-currencies.
“But it’s more than that – it’s everything from crypto-currencies and backoffice solutions to financial inclusion, asset management, insurance, lending, security and authentication. It’s about efficiency gains, and encompasses a wide range,” he says.
Essentially what makes a fintech startup is the fact that the technology component is the bigger piece in the startup’s product or service that is being offered to the financial sphere.
“It’s also about the front and middle office, helping consumers engage with banks and financial institutions and conduct transactions.
“Even big data, as long as it’s scalable to other industries – that’s where we can come in and provide that value. You typically see someone exiting from a bank, has been coding and developing their solution for a couple of years with two or three customers on board and the question is, 'What’s next?' ” he adds.
The main types of fintech startups coming from Asia that Gnirck has encountered to date are focused on payments and crypto-currencies.
“Consumer-facing payments is very hot in this region, and I’ve seen a few products which are clones of existing models but localised along with a few apps that track the behaviour of stock markets, helping filter out the noise to zero in on insight,” he says.
If there is one thing Gnirck would like to see more of in Asia’s burgeoning fintech space is more startups tackling problems in backoffice operations and financial inclusion.
Financial inclusion or inclusive financing is the delivery of financial services at affordable costs to disadvantaged or low-income segments of society.
“This area has amazing potential connected to payments and the possible use of crypto-currencies, especially in emerging markets like Malaysia, the Philippines, Thailand and Myanmar.
“I’d also like to see more backoffice solutions, especially from entrepreneurs who have past experience in this space – be it in banks or other financial institutions – as they would know the pain points intimately and would want to solve them. And we hope that we can provide the platform for them to take that jump,” he says.
According to a 2014 Accenture and The Partnership for New York City report, global investment in fintech companies has grown four times faster than venture investing overall, more than tripling over the last five years to nearly US$3 billion in 2014.
New York's fintech sector alone received US$472.1 million of venture and private equity investment in the first three quarters of 2014 – more than what was invested in all of 2013. In London, another major financial technology hub, financing has been growing at twice the rate of Silicon Valley since 2008.
Booting up for growth
Startupbootcamp FinTech comprises two core components, the first being a series of Pitch Days it runs worldwide, with 12 hosted in Asia in cities such as Tokyo, Sydney, Shanghai, Beijing, Hong Kong and Mumbai.
Pitch Days are open to all to apply for, with only 10 of the most promising teams given the opportunity to pitch and get feedback from the organisation’s pool of industry experts.
Within South-East Asia, Singapore’s Pitch Day is slated to take place on Jan 15, with Jakarta next on Jan 22 and Kuala Lumpur on March 3.
These events also serve as a catchment pool for potential entrants to the accelerator programme, which forms the second core component of Startupbootcamp’s offerings.
The accelerator programme is three months in duration, with the first batch for Singapore slated to kick off in May. Applications close on March 15.
Successful teams will receive S$24,500 (US$19,595) in cash per team, partner services worth more than S$800,000 (US$639,846) and 3+1 months of free office space in the Startupbootcamp FinTech hub in Block 79.
In addition, teams will also be able to tap into the organisation’s touted network of more than 200 mentors, and exposure to potential investors.
The glue in the puzzle
Asked about the inherent difficulties of new players gaining traction in highly regulated industries such as finance, especially when competing with bigger and more established brands, Gnirck (pic) claims that it hasn’t been an issue for the organisation.
Startupbootcamp FinTech enjoys regular access to C-level executives thanks to the partners it takes on in each market it conducts its programmes in, stemming from the understanding that more so in the business-to-business (B2B) space, there is nothing better than the “get them in the same room and meet” approach, he argues.
“We have seven partners in London and our last Demo Day, which saw about 450 investors in attendance, also resulted in about 21 projects signed with our startups and partner companies.
“These projects range from service integrations to more involved deployments. In addition, our partners have actively invested in many of the startups coming through our programme,” he adds.
In Singapore, Startupbootcamp FinTech counts DBS, MasterCard, Route 66 Ventures, SBT Venture Capital and Infocomm Investments as pioneer partners and investors.
With the Monetary Authority of Singapore also on board as a partner, it intends to add more entities to its roster moving forward.
“We push our startups to work hard and play hard, but we also do the same with our partners; that’s why the level of access to partner companies is quick, with an established feedback loop so teams can adjust their value propositions accordingly,” says Gnirck.
It is common for many startups to aspire to disrupt their chosen industries, and the finance industry is no exception, with the emergence of cryto-currencies and its potential role alongside the reaction of traditional stakeholders and regulators already a polarising topic.
Asked for his opinion on the issue, Gnirck says he believes that it is should not be a ‘them versus us’ paradigm, with Startupbootcamp FinTech committed to the notion that all players must work together as a community toward a larger goal or vision.
“That’s what we teach our partners and startups – there is no point to a startup walking up to a bank and telling it, ‘I want to disrupt you;’ or for banks to just ignore startups.
“We try to educate both sides, to reduce the language barriers in terms of teaching startups how to sell to banks and teaching banks how to talk to startups,” he says.
When it comes to regulators, Gnirck admits that in all honesty, there are not that many disruptive startups in fintech out there at the moment and he “rarely uses the D-word” to describe the ones he has come across.
“There are only a few out there that would really push the regulators in terms of what they are doing with their product or service,” he says.
The peer-to-peer space is one potentially contentious area, but Gnirck tells entrepreneurs to just “go for it” and don’t think about regulations.
“Do it and then talk to regulators, and include them in the conversation early on to make it work. If not, it wouldn’t be entrepreneurial to just only think about the restriction of regulations and not about the bigger picture,” he argues.
It is this role as mediator, connector and enabler that Gnirck and the Startupbootcamp team hopes to further establish in the region in the months to come.
“We essentially want to be the glue that ties all the various stakeholders together, from startups to partners to regulators,” he says.
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