Alex Scandurra is CEO of Stone & Chalk, one of the major fintech hubs in Australia. Stone & Chalk is an industry-led initiative that reflects a collaborative effort between fintech entrepreneurs, VCs, corporates and government, to incubate and nurture startups. Alex was previously head of Barclay’s fintech accelerator programme in London.
I caught up with Alex at Sibos 2015 in Singapore, and asked him about innovation in financial services and technology in Australia, as well as his experiences in London.
I’m exploring collaboration at this year’s Sibos: how banks can work together with fintech startups; how fintech firms and banks benefit from such a partnership, and how firms such as Stone & Chalk can bring together these entities in an effort to quicken innovation. What’s your view on collaboration?
Banks, and in general large organizations, have several key assets they can offer startups, be they geographic footprint, customer base, distribution channels or other expertise. At the same time, most large organizations around the world struggle with what startups do: being able to move at lightning speed, having that relentless customer focus, bringing in entrepreneurial talent. When you look at what the two can bring together, there’s a huge scale-up opportunity for startups to work with large organizations, to be able to reach that point much faster, and for the large organizations to have access to things that perhaps would cost a lot more, or are impossible to do internally. Together, they can get to market much quicker, better and cheaper.
What kind of fintech startups do you work with mostly at Stone & Chalk?
It’s nice and broad. We have two key dimensions of differentiation: maturity or life stage, and the proposition area. In terms of life stage, we have several startups that are already at 15+ employees, quite large and some cash flow positive, through those that are about 6-10 employees: recently launched and trying to get traction and grow the proposition, all the way to those that are about 2-3 employees: prelaunch, at concept stage, developing betas and looking to pilot and prototype.
The other dimension is breadth and proposition area. We have startups that are working on mobile payments, insurance, wearables, connected cars, P2P lending, equity crowdfunding, and so on. There are several in the distributed ledger space, blockchain and bitcoin, as well as big data and predictive analytics. We have firms doing loyalty, cloud insurance, and one that’s already building and exporting high-end ultra-latency switches for stock exchanges. Stone & Chalk is a really, really diverse environment.
A lot of the conversation here at Sibos has been about the unbanked markets. I feel Singapore and Australia are well poised to have a high level of innovation in this space. Do you see any of those kinds of startups coming up?
There hasn’t been a huge amount, because Australia is quite a developed market and their focus is more around whole new propositions as opposed to looking at the unbanked. But what I do see is a huge potential for more developed countries in terms of their banking infrastructure, particularly in digital mobile, to look to offer whole new services to emerging countries with a large unbanked population.
In banking, rather than seeing an evolution with scaling out branches, these countries will probably go straight to mobile and digital banking, which I think is also sensible from a commercial standpoint because the profitability in some of those markets isn’t the same. So, you need to approach it in a very asset-like way.
How can startups and banks work together to make sure data is used effectively, while adding value to customers?
I think there is a huge opportunity. It all comes down to insights with customers, the capability, and customer-centricity in design in terms of what’s actually going to improve the lives of people and how they use that data. In doing so, they will get a lot more buy-in, trust and support from the consumers as opposed to monetizing their databases to other parties. I think there’s a huge opportunity where we’re talking about predictive analytics, hyper-personalization and the whole market of what data and intelligence can enable. I think that’s very clear in the market. I think it also helps take the relationship of the banks beyond banking institutions. There’s a lot of opportunity for the sector to start going into industry adjacencies, exploring how to remove friction from a customer’s life.
Every conversation at Sibos seems to begin and end with blockchain. What’s your opinion about its potential? Do you think there’s a realistic opportunity to change the way banks work?
It’s an interesting one because the whole model of banking is centered around it taking on the role of intermediary, like a hub-and-spoke model. It’s a centralized process, whereas the ledger is the exact opposite. In theory, it kind of makes sense that its wide-scale adoption would come down to overwhelming commercial benefits.
The adoption of blockchain would almost have to start in parallel with the existing frameworks, because how do you go from being an intermediary to just now being a participant among many players? I think that’s probably why there’s so much activity and energy around this because I think half of it is intrigue and the other half is panic. Yet, it certainly has real potential to change the financial services industry.
What do you think the future will be like? Will there be more disintermediation and disruption of the various elements of the value chain, or will we see a stage of aggregation, bringing the disintermediated elements back together?
I love the image from CB Insights that talks about unbundling of each of the banking elements. There’s a stack of new fintech businesses attacking each of these elements. That’s where disaggregation started from. I can see us now compartmentalizing our financial lives and going to different organizations to get a home loan, to borrow money from a P2P lender, and then to get wealth management or retirement planning advice. So, I think the concept of a universal relationship with a bank is really a 20th century thing.
I speak to a lot of banks who talk about trust, security, regulations, protection, and so on, but I don’t think they realize how big a percentage of their customer base is pre-generation X. It will almost be like a tsunami when the millennials get more than 50% of the world’s buying power. They will be the ones who will decide the future of the industry.
What has been your experience partnering with the banks? Are you seeing a high degree of collaboration in the space?
The successful banks of the future will be those who are able to power many of the emerging fintech businesses and startups that fragment the ownership of the customer. I don’t think banks will go away in my lifetime, but the role they play will be significantly different.