TechFin: A threat to FinTech?

September 30, 2021. BANGKOK, Thailand.

We now take a closer look beyond their basic differences, focusing on why TechFin is not a threat to FinTech – but might even be a potential for partnership.

FinTech startups have been disrupting the financial industry in recent years, but times change quickly – and now the same companies have begun looking over their shoulder in fear of a new set of potential rivals.

In our previous article, we talked about how TechFin is the latest challenge in the financial industry, and why it shouldn’t be confused with FinTech – despite the confusingly similar names. We now take a closer look beyond their basic differences, focusing on why TechFin is not a threat to FinTech – but might even be a potential for partnership.

Different customer bases

FinTech largely targets the same customers as other financial institutions, drawing in new customers with more streamlined options for financial services.

In contrast, TechFin is not directly trying to replace existing bank processes for customers. Most TechFin companies have a large user base already, and do not try to lure potential customers away from the financial services market.

Although TechFin companies provide financial services on their front-end,they will usually let a licensed financial institution process the actual transactions. This way, TechFin businesses can avoid the regulatory hurdles and other requirements imposed upon financial institutions, while still providing their users with world-class services on their platforms.

Ultimately, a TechFin company’s target audience is its existing users. A technology business in TechFin seamlessly slots financial services alongside the other features that its users can access, thereby providing more reasons for customers to stay on one platform and complementing the overall user experience.

Benchmarks for success

The differences between FinTech startups and TechFin platforms go beyond service type and customer base. The two groups of companies also have very different business models.

The goals of TechFin companies revolve around engagement levels and data. By providing financial services on their platform, TechFin companies can keep users on their platform for longer periods of time. Increased time spent on the platform means more user engagement, more opportunities for paid advertisements, and more user data gathered for monetization.

As with most technology businesses, TechFin companies collect user data to analyze consumer behavior and spending habits. This same data can be used to create better customized services, or sold for a profit to other companies. In some cases, data monetization can be more lucrative for TechFin companies than the returns from the financial services themselves.

For FinTech companies, on the other hand, user engagement alone does not guarantee profit – or even survival. FinTech platforms aim to attract customers who will open accounts and use their financial services. Even if a FinTech platform adds new high-tech features that encourage their customers to use their platform for longer periods of time, if customers do not make any financial transactions, the Fintech platform will have failed to increase the value of assets under its management. …?

In this respect, FinTech has much more in common with other banks and financial institutions than with TechFin. Although FinTech companies use cutting-edge technologies and digital infrastructure, the overarching measure of their success is about increasing their assets under management, just like traditional banks.

Innovation through partnership

TechFin is more than a threat for FinTech to understand and compete with. In fact, TechFin companies can be great potential collaborators for FinTech businesses.

A FinTech startup can boost customer success by pairing with TechFin companies to create a platform that is attractive and user-friendly. By offering in-depth data analysis and detailed consumer insights, a TechFin partner can help a FinTech startup make financial transactions as easy and enjoyable as the TechFin partner’s features.

Meanwhile, a TechFin company might prefer to pair with a financial institution that is more aligned with their technology-centric approach. When choosing a partner in the financial industry to provide payment services to their users, a TechFin company can work more efficiently with a FinTech startup that is technologically fluent. For a TechFin company, a FinTech partner’s main advantage is its ability to swiftly adapt payment models that suit the needs of users in the TechFin sector.

A FinTech partner can also help a TechFin platform offer financial services that are innovative and exciting for its users. FinTech startups are constantly seeking new ways of doing financial transactions in order to challenge the ‘old-fashioned’ services of the industry, such as blockchain utilization and cryptocurrency trading.

Ultimately, businesses from both sectors can help each other attract and retain consumers – while continuing to innovate the financial industry.

It’s all about perspective

Although similarly named, TechFin is not here to uproot FinTech’s spot in the financial sector. As a group of technology companies, the TechFin sector has different customers, operations, and goals than Fintech.

Not only is it possible for TechFin to peacefully coexist with FinTech, but both can benefit enormously by working together to push their respective services towards a more digitized customer friendly future. By building new partnerships between the two sectors, both TechFin and FinTech can help each other attract and retain consumers – while acting as twin catalysts for change in the financial industry.

Source Link: https://www.bangkokbankinnohub.com/techfin-a-threat-to-fintech/

Barclays: “The Accelerator was a game-changer for us”

September 16, 2022. LONDON, UK.

After seven years, the Barclays Accelerator, powered by Techstars, has reached a $4bn market cap valuation. We look back on the programme that has supported nearly 200 fintech startups and led to successes including unicorn status, an IPO launch and a “game-changing experience”.

When Barclays linked up with startup accelerator specialist Techstars in 2014 to launch a fintech accelerator, it was, according to Sonal Lakhani, because the team wanted to build on the bank’s culture of innovation, “learning even more about fintech – and working with startups in a constructive way”.

Lakhani, who is Global Head of Programmes and Strategic Initiatives at Barclays Innovation Office, remembers the formation of the 13-week accelerator programme as being “like a mini-MBA, shrinking down the process of going from an idea to actually founding a business and then getting it funded”.

Celebrating seven years of the Barclays Accelerator: in numbers

• $4bn market cap valuation from alumni companies.

• 10 companies are chosen for each 13-week programme.

• 19 programmes have taken place in London, New York, Tel Aviv and Cape Town.

• 191 fintech startups have graduated from the Barclays Accelerator, powered by Techstars.

• 146 Accelerator companies are still trading.

After seven years and 19 programmes, split between London, New York, Tel Aviv and Cape Town, 191 companies have graduated from the initiative, officially known as the Barclays Accelerator, powered by Techstars. Between them, alumni companies have amassed a market cap valuation – the estimated value if all their shares were available on the open market – of over $4bn and contributed heavily to the changing face of financial services.

Over the years, she says, the model has changed to allow Barclays to work in partnership with the fintechs and support the companies coming up with new ideas, new business models and new technology. “We tried to create an environment that fosters the growth of companies when they come out of the programme. In doing this, we can also ensure that our own products and services stay relevant to our consumer base, as well as supporting job creation.”

"We tried to create an environment that fosters the growth of companies when they come out of the programme."

Sonal Lakhani

Global Head of Programmes and Strategic Initiatives at Barclays Innovation Office

Sonal Lakhani is Global Head of Programmes and Strategic Initiatives at Barclays Innovation Office.

Finding unicorns

A star graduate of the 2015 New York Accelerator is Chainalysis, which recently became the network’s first unicorn company, exceeding a billion-dollar valuation. Describing his firm as “a data platform for blockchains, looking at and trying to understand all the data in crypto and finding risks and opportunities”, co-founder Michael Gronager says that Chainalysis has recently undergone three $100m funding rounds, growing in valuation from $1bn to $2.2bn to $4.2bn.

This exponential growth is not uncommon in fintech, and even without Chainalysis, the Accelerator portfolio – most of which entered Barclays’ buildings as pre-seed companies – has a market cap of more than $2bn, doubling since 2019.

Joff Hamilton-Dick is the co-founder of SparkChange, a provider of specialist carbon investment products and data, which was part of the 2019 London Accelerator. He remembers the experience as being “a game changer for us”.

"Having really good mentors as part of the programme has been crucial over the years. That network will always be in our DNA as a company."

Michael Gronager

CEO, Chainalysis

Chainalysis, co-founded by Michael Gronager, is the Accelerator network’s first unicorn company.

The speed of interactions with mentors and potential investors was a key asset, he says. “In week two of the programme, they had something called ‘mentor madness’ and lined up 90 meetings with senior business leaders and entrepreneurs. They'll come and sit at your desk – the rate at which you can forage around and make second-degree connections was simply unprecedented for us.

“There was one person in particular who has irrevocably changed the shape of our business: everything from the people we've hired to our investors, to the advisers we brought on board, to client traction we're getting – just from one person in ‘mentor madness’ in this well-oiled, well-organised accelerator.”

Barclays stayed involved with SparkChange, leading a $4.5m seed investment round, and supporting a company that Lakhani says “is a great example of where finance can play an important role in the sustainability agenda”.

Unique connections

The graduate class of 2015 has recently celebrated its first IPO, with the listing of cryptocurrency exchange and brokerage Safello in a heavily oversubscribed float on the Nasdaq First North Growth Market in Stockholm. CEO Frank Schuil remembers the Barclays Accelerator, powered by Techstars, as “a very energetic experience”. He says: “You're all in the same boat with great entrepreneurs who are trying to build amazing companies with amazing mentors.

“There were some unique connections that you get from being in such an intense environment for three months, and we had a very successful batch of companies. Another cool thing was the access to the Barclays network – it was a great opportunity to launch a proof of concept with a really big partner.”

"Another cool thing was the access to the Barclays network – it was a great opportunity to launch a proof of concept with a really big partner."

Frank Schuil

CEO, Safello

Frank Schuil is CEO of Safello – which recently launched its IPO.

SparkChange’s Hamilton-Dick also remembers the proximity to Barclays as being “a key way to learn about the market and how big banks are thinking about our product, and also what are the wrong rabbit holes to explore”.

Gronager looks back on the accelerator as a vital time in Chainalysis’ growth to unicorn status. “It was great to build friendships with other founders in the process,” he says, “and see how they’ve managed to grow their companies over time. Working with Barclays was also key for us to develop our sales strategy into financial institutions.”

Lakhani says that the pandemic has offered “an opportunity to pause and think about our strategy and what we’re trying to achieve” as the fintech ecosystem matures.

“We have listened to feedback from our fintech community, both within and outside Barclays,” she explains. “We want to be able to continue to support the early-stage creation of startups, but we also want to produce a new programme that's focusing on scaleups and how to best support those scaling companies.”

In the meantime, lessons learned in the mini-MBA, coupled with constant access to the alumni network, mentors and investors, continue to pay dividends even for multi-billion-dollar companies such as Chainalysis.

“Having really good mentors as part of the programme has been crucial over the years in being able to reach out for questions and guidance,” says Gronager. “That network will always be in our DNA as a company.”

Source Link: https://home.barclays/news/2021/09/The-Accelerator-was-a-game-changer-for-us/

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