Alex Manson, Head of SC Ventures

The global banking industry is at an inflection point. The emergence of new-age financial technologies is prompting banks to rethink their strategies, in order to stay relevant and quell any potential threat to their very existence.

Standard Chartered, with a presence in 60 countries, has been driving innovation in the banking space, co-creating solutions to improve client experience and establishing new partnerships and solutions to change how it approaches and think about banking.

Recently, the bank set up SC Ventures, a business unit to promote innovation, invest in disruptive fintech, and explore new business models. The VC arm’s new Fintech Bridge programme aims to tap the best solutions from fintech ecosystem, combining with bank’s innovation.

In this e-mail interview, Alex Manson, Head of SC Ventures, talks about the core objectives of the initiative, how technology is going to change the global banking industry, and more.

Below are the edited excerpts:

Can you walk me though the SC Ventures Fintech Bridge initiative? How is it different from existing fintech programmes in the world? 

SC Ventures Fintech Bridge is the first portal to bring together internal and external partners in innovation, blurring the boundaries of the conventional corporation. Standard Chartered business units can post challenges on the portal, which can be seen by both internal ‘intrapreneurs’ and outside fintech partners. The latter spans all community builders within this ecosystem, from startups and investors to accelerators looking for opportunities to collaborate with the bank.

Also Read: Blockchain will force banks to change their feudal mindset

Fintechs can apply to a challenge or simply make themselves known and potentially get matched with a particular challenge, use case or just the right people within the bank. We like to think of it as an “open borders” innovation programme.

Is it a global programme? How do you select startups for this? Can you explain the process?

It is more than just a global programme — the startups we work with call it a ‘connected network’, where startups bring their capabilities to solve a bank problem, and the bank brings its network of expertise, clients and locations. Successful Proof of Concepts (POC) are potentially deployed across all relevant parts of our business and network of over 60 countries.

We do not select fintech partners like a jury selection process. Rather, people find their ‘match’ in the context of challenges or specific objectives — assisted with a matching engine to pair the right fintech capabilities with their respective use cases.

What are the key objectives of Fintech Bridge? How is it going to benefit the bank and also the fintech industry?

This initiative that we have launched goes beyond benefitting Standard Chartered — we are looking to develop the respective ecosystems we operate within, including both our internal team members and external extended partners.

There are three objectives for the SC Ventures Fintech Bridge:

  1. We CONNECT an external community of community builders with our internal community of innovators.
  2. We SHARE our challenges based on the belief banks can build better, more relevant solutions more quickly with fintech partners.
  3. We CHALLENGE ourselves by blurring the boundaries of the conventional corporation. One of our commitments is to make collaborations simpler and faster, as we know time is precious for not just the startups but also our colleagues in the bank.

We want to achieve all these on one platform.

In a recent interview you said said that “banking has a great future, but we have to re-invent it, we have to re-wire the DNA”. How can banks re-wire DNA? Can you elaborate?

‘One intrapreneur at a time and one partnership at a time’ is the short answer.

In just a few months, almost 20,000 colleagues signed up to the intrapreneur platform and submitted over 1,500 ideas. These are the bankers of the future, whose mindset is to make things happen for clients in partnership with others in and outside the bank. This is about the DNA element in banking.

Doing this also requires us to ‘unlearn’ a number of habits, which are common in most large organisations: wait to be told (or tell people what to do), solve for efficiency, solve for risk mitigation by slowing down information down to the top and making few well-considered decisions. When reinventing an industry, creativity triumphs over efficiency and acceptance of failure trumps risk aversion, hence mindsets in all corners and at all levels of the organisation need to evolve.

Last but not least, rewiring the DNA in banking is about supporting communities: communities of customers, merchants or families — all of who have aspirations and needs which banking can facilitate with them and for them. Between banking and society, this is about reinventing the mode of engagement.

You also feel that the biggest risk that banks are facing is one of irrelevance — not capital, liquidity, or market risk. Isn’t contradictory to your earlier statement (that banks have great future)? Do you think banks can address this challenge using cutting-edge tech?

It’s just two sides of the same coin! On one hand, banks have a great future because they have an opportunity to reinvent themselves using technology, but more importantly revamping their business models to support their communities. The future is bright because I know that some banks will do exactly that.

The risk, however, is to not get on with it and again, some banks may fall into the trap of ignoring client relevance and instead exclusively focus on their more conventional risks. Not that these are not important, but that would be missing the point of the bigger existential risk of irrelevance. Basically, it’s our call!

Is blockchain an essential technology that could bring in transparency? What are your views on integrating blockchain tech with bank’s existing system?

Yes. Blockchain is essential in the sense that it is “foundational” — a ledger is not a product or an app per se; it constitutes a foundation for a lot of things that can be done with it. And yes, one if its characteristics is transparency as the distributed ledger is for all to see.

Banks’ systems architecture will evolve to become modular and connected via APIs, making any new technology integration a lot more feasible and quicker than with conventional core banking systems.

Many experts feel that new-age tech like blockchain will make banks redundant and irrelevant. What is your opinion? Do you think banks will stay here forever?

It is clear that any industry not paying attention to new technology could quickly become irrelevant. But first, banks are paying attention. Second, relevance is always less about the technology itself than the value a business delivers to its communities. Remember the focus of our purpose, the ‘DNA’. Technology must deliver a better experience, offer more accessibility to financial services, and better connect and increase community viability.

Also Read: How is fintech shaping financial services? Here are some thoughts from an industry veteran

My prediction is that banks will evolve in their technology, capabilities and business models. The industry has every opportunity to not only stay but become even more relevant — it will just have to rewire itself.

Do you think the current technologies in the market will still be relevant in future for banks?

Some will and some will not, but all will be evolving in any event. The way banks use technology will also evolve, from a ‘do it yourself’ to a much more open architecture model — because there would otherwise be no way to keep up with the pace of such evolution.

What will be a bank’s functions and shape, say, 50 years from now?

Fifty years is a long time for a ‘crystal ball question’, but one certainty is: its functions and shape will not be the same!

Long before that deadline, we can see that the conventional client segmentation may no longer be relevant (persons become businesses, businesses expect the convenience of consumer platforms for example): the distinction between front and back-office, the distinction between products and channels — the very existence of conventional channels.

My not-so-long-term prediction is that what we call banking today will become ubiquitous, meaning it will be everywhere, embedded in our lives, irrespective of whether we are a corporation or an individual. It will be instantaneous and, just like we do not need to ask ourselves about the technology involved in sending an e-mail or hearing a voice over the phone, it will become very natural and seamless.

What are the current trends in the fintech industry? Where is it heading for? Is it getting enough attention from the corporate, VC and startup communities?

The fintech market is not a homogenous one: from bank attackers looking to disrupt incumbents and software vendors looking for partnerships, to core Artificial Intelligence specialists. This is a wide range of players that can no longer be characterised in the same industry bucket.

The overall trend is partnerships, as all players are finding out that it is near impossible to do it all by themselves. At times, the distinction between partner, vendor, client and competitor will get blurred: we could end up doing all four with the same organisation!

Can you share more details about SC Ventures? Is it a separate fund? What is its corpus? What is the investment philosophy?

SC Ventures is a separate unit of the bank which includes our eXellerator innovation lab (within the bank), the Innovation Investment Find (a separate fund), and individual ventures that are separate and distinct from the bank.We invest in partners we work with.

The philosophy is one of partnership and alignment of incentives: as we help our fintech partners grow to scale, they can help us transform the bank at scale. We are essentially messaging to the founders and the rest of the market that we are in this together.

What is the average ticket size? How may deals have you already done? Any new deals in the pipeline?

We invest in a sweet spot which we would define as neither too early for enterprise readiness, nor too late for partnership and co-creation. This would typically correspond to late Series B or C, but there are exceptions.

We keep our options open to investing in promising companies that we have done POCs with.

How is the fintech industry in the West different from that of Asia? Is Asian fintech is catching up with the West?

There are both differences and similarities, but I would say that in any event, Asia is and will be giving the West a run for its money. First, the scale of Asia, especially China, but also India and Indonesia, implies loads of data, which has become recently available and can now be processed at scale.

Second, the urgency of needs in some of the Asian markets drives an effervescence of innovation, which has been slower in the West where incentives to change were initially less acute.

Third, Asian populations tend to be young and digitally savvy, facilitating early adoption of digital business models.

Image Credit: SC Ventures