FinTech is impacting dramatically on how we live our lives and do business. According to research by Accenture, the UK & Ireland is the fastest growing region for FinTech investment globally, rising from $264m in 2013 to $623m in 2014, whilst a recent report by Payments UK finds the UK at the forefront of the adoption of new technologies in the sector. From crowdfunding to money transfer and mobile payments, innovative start ups are offering more choice than ever; increasing transparency, reducing costs and offering more efficient and attractive ways of doing business.
We talk to FinTech entrepreneurs, Hamish Anderson and Goncalo de Vasconcelos, two Cambridge founder/CEOs at the cutting edge of FinTech about how their businesses are disrupting the status quo and democratising the financial services sector.
Hamish Anderson is Co-Founder & CEO of Money Mover, a foreign currency exchange and global payments service for SMEs. With a background in banking at HSBC, Merrill Lynch, Dresdner Kleinwort Wasserstein and Schroders, Hamish saw a gap in the market for a transparent and cost-effective way for SMEs to make international payments. A year on from launching Money Mover’s web application, the company has recruited 130 SME customers, and helped them exchange over €39m, resulting in a saving of an estimated £500,000 in fees and charges. To date Money Mover has received over £1m of seed financing from a group of experienced international financiers and technologists.
Goncalo de Vasconcelos is Co-founder & CEO of SyndicateRoom, an equity crowdfunding platform which is disrupting the financing of innovation & broadening access to investments in exciting start-ups by allowing its members to co-invest alongside seasoned investors. With a minimum investment of £1,000 members benefit from the same share class and price per share as the lead investors. SyndicateRoom is based in Cambridge, London & Lisbon and has been in business since 2013. Growth has been rapid and last year, the company raised £1.2m growth funding on its own site in just 33 hours. At time of going to press SyndicateRoom has raised over £42,000,000 for more than 70 businesses.
What motivated you to set up your business?
Goncalo “I started SyndicateRoom to give more people fair and transparent access to the same investment opportunities the professionals invest in. Before I started SyndicateRoom I was involved with some of the incredibly exciting new businesses around Cambridge that were getting investment from business angels. This made me question why should these investment opportunities be the privilege of just the few when the very same companies are starved of growth capital? It was a no brainer straightaway – provide companies with greater access to capital and give investors access to the same exclusive opportunities the professionals invest in.”
Hamish “Before Money Mover was even a twinkle in my eye, I was a hedge fund banker with HSBC. A number of my clients were interested in providing financial services directly to end clients, thus cutting the banks out of the loop. Doing this meant that financial services could be more flexible, tailored to the specific requirements of the customer and could be arranged faster.
Lending was clearly not the only application for FinTech and it didn’t take long to spot foreign exchange as a market which was shrouded in mystery and burdened with opaque fees and charges. Recent FinTech start-ups like TransferWise and Azimo were doing a great job in personal currency exchange, but there was a gap in the market for a service focusing on SMEs, which tend to be underserved and overcharged by the banks.
Coming from a big bank I understood that banks tended to design new services which were easy for them to deliver rather than functional for users. Here was an opportunity to turn things on their heads and build a payments service that was designed from the ground up to address the needs of the SMEs which are at the heart of the UK economy.
Our business has proved that FinTech doesn’t have to be all about London. Technology is opening new doors and Cambridge offers the right talent and environment for challengers wishing to do things differently.”
How is your technology disrupting the traditional ways of doing business?
Hamish “Our technology is designed to achieve three things. Firstly, to cut costs for our customers and help them keep more of their money. Secondly, to offer the highest levels of transparency around exchange rates, fees and transaction status, and thirdly to wrap all this in a web application which provides tools, reports and functionality which are of real value to our customers. Bringing these features together is unique in an industry which struggles to deliver on a single one of them, and makes it easy to differentiate our platform from the services provided by the banks and the ‘bricks and mortar’ foreign exchange brokers.
It’s not all about cutting costs (though this what tends to grab the attention of prospective customers!) and it was always our goal to use our technology to help our customers make better decisions. We released the second version of our web application in January, and were able to incorporate many of the suggestions and enhancements provided by our customers.”
Goncalo “We make it very efficient, quick and cost effective for companies to raise much larger amounts of capital.”
What have been your major successes & challenges so far?
Hamish “We’ve overcome two major challenges so far. The first was a technical one – to design and build a web application that combines exceptional transparency and functionality within an attractive and intuitive user interface. It was important that what we built looked completely different from the other bank and financial services websites out there, so we used a team of designers and developers which had never created a financial application before. This meant they had a unique, fresh perspective which shines through in the design. As a nimble start up, we have been able to incorporate feedback and requests from our customers, such as a mini-payroll function, and downloadable payment confirmations which can be forwarded to suppliers instantly.
The second challenge was funding. While we’re revenue generative and our business is growing quickly, we’re investing more into the business than we’re earning. This has meant that we’ve needed funding from external investors while we concentrate on building a robust and scalable infrastructure. We started seeking seed financing at the end of February 2015 and got our pitch in front of a number of experienced technology investors who saw the potential of what we are creating. We closed our round in mid-June last year and have spent the last six months deploying that capital into our web application, business development and operational infrastructure.”
Goncalo “Our major success is growing at a rate many times higher than our initial business plan had assumed. And I can guarantee you that those initial assumptions were very much on the optimistic side already! We are now raising the same amount our initial business plan set for the whole year … every month!”
“There have been plenty of challenges along the way and there will be further challenges ahead too. Rather bizarrely one of our largest challenges at the moment seems to be find a bigger office in Cambridge!”
FinTech is a huge growth sector, attracting massive investment globally. Which areas do you think have the highest potential for growth?
Goncalo “FinTech itself comprises many very different sectors, from back-office software for banks to online platforms for consumers like SyndicateRoom. Blockchain is one of the sectors that is tipped to be the next big thing but is yet to be proven. Online investment like crowdfunding is also one of the hottest sectors with yearly growth being simply astonishing.”
Hamish “The payments space has huge potential for growth, particularly technology with an enterprise focus. While personal remittance companies such as Transferwise, Azimo and WorldRemit have attracted a great deal of media and investor attention, the global remittance market, at around $500bn, is only 5% of the size of the international SME payments market. There’s a lot we can do already to improve the process, transparency and utility in this market, but the real opportunity will come in the future as the financial architecture – the payments backbone – which is currently owned by the banks and the institutional sector, is unbundled and becomes open for innovation. The UK Financial Conduct Authority is very supportive of innovation and is blazing the trail in this area.”
The upsurge of innovative FinTech companies is threatening the established players. How do you think they will react in the longer term?
Goncalo “Established players in financial services are typically very slow at reacting but have very deep pockets, so I think they will be around for a long while. Banks and other institutions are starting to move into this space by deploying capital along the crowd via platforms. The innovation that the financial services are seeing will present some of the incumbents with a great opportunity to jump ahead of other incumbents by forging strategic alliances with FinTech players as early as possible.”
Hamish “FinTech exists to make financial services more convenient, attractive and cost-effective. Inevitably this puts us into competition with the banks, which are still the dominant financial services providers in the UK and the world. In my experience, banks are slow to recognise that competition can come from anywhere other than the big banks. They don’t really take non-bank financial institutions seriously. Recently, however, the banks have begun to take notice of the FinTech sector, and are responding in a couple of ways. Some banks (e.g. Barclays and Santander) have set up FinTech investment funds or incubators to nurture start ups which they feel could be of value to their own businesses in the future. It’s interesting to note firstly that the resources allocated to these funds have been tiny in comparison with their overall technology budgets. Secondly, when you look at the start ups that the funds are investing in, they’re clearly focused on ‘gizmos and gadgets’ rather than standalone, disruptive businesses.
In the longer term, we’ll see banks buy fully fledged FinTech businesses which are competing with them, either to ‘bury’ them, or to graft them on to their existing offerings. Whether the FinTech business will still hold its appeal for customers once it has sold out to a bank remains to be seen.”
What does the future hold for your business?
Goncalo “A very bright future, but my natural entrepreneurial optimism may have some influence here. I think we are very well positioned to carry on growing as fast, if not faster. We are in the right market, at the right time with the right team and the right advisers and mentors. Now it’s up to us to make it happen.”
Hamish “In tech-land, everything has to move fast and grow big. We have extremely ambitious plans for Money Mover, and our focus is very much on building our client base and volumes. Technology makes this a very scalable business and all elements are growing month-on-month, mostly through word of mouth and via our growing network of partners such as law firms, accountants and industry groups. The challenge for the time being is recruiting the best people. We’ve just recruited an experienced CCO and a Marketing Manager so as far we see it, the sky’s the limit.”
Bailey Fisher Executive Search is an independent executive search firm specialising in building boards and leadership teams for high growth and disruptive companies in technology and life sciences. The company operates internationally from offices in Cambridge and London www.baileyfisher.com
This article first appeared in Cambridge Business Magazine, April 2016 issue.