Weekly Briefing No. 23 | A Banking Battle Royale is Set to Begin

Demsey and Firpo | George Bellows (1882-1925)

Demsey and Firpo | George Bellows (1882-1925)

This week we discuss the rise of challenger banks in Britain and feature Selerity’s CEO, Ryan Terpstra, in an exclusive interview. We also highlight Amazon’s fintech yearnings, the rise of the “Tiger Cubs,” WeWork’s new offering in the belly of Wall Street and Even Financial.

 

IN DEPTH


A banking battle royale is set to begin.  The waiting is over: UK challenger bank, Atom, has launched its iOS app to pre-registered clients. This eagerly anticipated mini-launch is not just about the UK, where financial services account for an astounding 11% of the nation’s tax receipts. It has global fintech implications because challenger banks — Atom, Mondo, Starling, Tandem and Secco — want to reimagine banking services and recontextualize the role of banks in a consumer’s life. Chris Gledhill of Secco, for example, proclaims the goal of “customer disengagement” wherein the bank will operate as an underlying service embedded within other apps and social platforms. UK incumbents, such as Lloyds, Barclays and RBS, are certainly making themselves more digital, but they aren’t looking to redefine their roles. And that’s the battle we see ahead — the “Bust the Bank” crew pitted against “Incrementalists,” who want to go digital sequentially and carefully. Watching how this battle unfolds will be instructive for banks everywhere. 

For more, check out McKinsey’s new report on building a digital banking business.

Not your father’s fintech conference. There’s no shortage of fintech conferences taking place these days.  However, many of them have begun to feel redundant with the same speakers and topics resurfaced again and again. That’s why CB Insights’ Future of Fintech conference should be on your calendar. The event is June 8th to June 10th in New York and will feature many of today’s most important and provocative fintech executives. Confirmed speakers include Mike Cagney of SoFi, Joe Lonsdale of Palantir, Fred Wilson of Union Square Ventures and many others. Some of the burning questions on the agenda: Will tech heavyweights and other unusual suspects bulldoze their way into financial services? Is tech disruption of Insurance the next big thing? Where are fintech VCs looking to put fresh capital? Does the world really need more roboadvisors and marketplace lenders? If these issues are on your mind, sign-up for the conference today as attendance is limited to 300 guests.  Sponsored by CB Insights.

A case study in tenacity: Selerity CEO Ryan Terpstra. “Thanks to social media tools, corporations, governments, individuals and politicians have all become publishers. We have the ability to sift through the content and find the important pieces that are relevant to a customer in real-time.” That’s the value proposition offered by Ryan Terpstra’s seven-year-old fintech company, Selerity. Originally positioned to serve high frequency trading funds, Selerity has since pivoted to focus on financial professionals of all stripes within buyside and sellside institutions. Last year, things finally came together when the company signed a high-profile partnership agreement with Symphony alongside heavyweights Dow Jones and McGraw Hill. Now, with fresh capital courtesy of Citigroup and other prominent backers, the wind is at Selerity’s back. The FR’s Gregg Schoenberg sat down with Terpstra to discuss Selerity’s long and winding journey, and to get his thoughts on entrepreneurship, the fintech market, Twitter and why messaging is the next operating system.

See the full interview here.

IN BRIEF
 
Amazon is hungry and fintech looks tasty. “After a number of years where fintech has been a little bit ahead of itself in terms of valuations, things have come back to earth,” according to Patrick Gauthier, vice president of Amazon Payments. Permit us to translate Gauthier’s Amazonian into English: “We know that Amazon Payments is behind PayPal and others, but we’re Amazon. We have over 300 million customers and a market cap that is nearly six times greater than PayPal’s. Plus, we aren’t afraid to make investments that are negative to near-term earnings if they position us to win in the long term. So for all you attractive payments companies looking to sell, stop by our HQ in Seattle before you go anywhere else.”
 
WeWork chooses Wall Street. WeWork, the fabulous co-working decacorn (valued at $16 billion), has rolled out an extension: WeLive, a micro-apartment offering. Per tenant pricing at WeLive starts at $1,375 and features month-to-month housing options replete with hipsters-in-hats and cool environs, but free of credit checks. WeWork could have selected a maiden location just about anywhere it wanted, but the Uber-hot brand (pun intended) selected 110 Wall Street, right in the belly of New York’s financial district. That choice makes WeLive a fintech story in our book, and speaks to the company’s likely view that as Wall Street employment levels continue to shrink, fintech entrepreneurship will continue to rise.
 
What happened to the best buggy whip maker vs. the worst? Answer: they both got crushed quickly when the masses switched to cars. That’s somewhat how we felt about this FT article (subscription) describing Deibold’s decision to buy German ATM rival, Wincor Nixdorf, and to infuse their ATMs with “smart” technology. Adding scale and snazzy tech is generally a great thing to do, but doubling down in cash-based ATMs seems risky to us.
 
Need to get smart on InsuranceTech? If so, read this article from TechCrunch that provides a helpful overview of the current state of affairs. Our favorite quote: “There are 46 insurance companies in the Fortune 500, with an average age of 95 years. Cumulative market cap is more than $1T,’ said Spencer Lazar of General Catalyst Partners. However, according to a Morgan Stanley/BCG consumer survey, half of policyholders have one or less interactions per year with their insurers.”

Trust in Reno? It’s going to take some time for authorities to sort out the mess associated with the so-called Panama Papers. But it looks like Panama’s pain may be Nevada’s gain. In fact, Nevada (aka The Delaware of the West) and other western states seem poised to keep growing as welcoming places for institutions such as Rothschild Wealth Management & Trust. If that’s the case, data security start-ups will likely be spending more time in Reno and Sioux Falls.

Are hedgies the new fintech VCs? This New York Times article would have you believe that the famed “Tiger Cubs” are taking over the fintech start-up landscape. VCs, meanwhile, warn of fintech tourist investing. Who wins? For now, it’s the start-ups who are able to drive better terms as a greater number of (increasingly diverse) capital providers look to find their way to the cap table.

Company of note: OpenBazaar. 
 
The first decentralized and encrypted online marketplace is finally open for business. Unlike Amazon or Alibaba, OpenBazaar is not governed by any one authority. The platform runs on a bitcoin-distributed blockchain that relies on users to serve as arbiters of disputes that arise. Critics, though, have suggested that it will be a haven for drug and other illicit trading activities.
 
Comings and goings.
 
Even Financial, a New York based platform that provides alternative lending choices to prospective borrowers, announced that it has hired Raed Khawaja, formerly a vice president with Bankrate.
 
Quote of the week.

“To be interested in the changing seasons is a happier state of mind than to be hopelessly in love with spring.” 
~ George Santayana