Interview with the FinTech TWIN$ - A Road Trip to Discover the FinTech World

Driven by their passion for FinTech, Chloe Gueguen and Marine Gueguen (Head of Private & Institutional Investors at Lendix Spain and ESSEC MSc in Management alumna 2014), also known as the FINTECH TWIN$, embarked on a 7-month adventure around the world in October 2015 for a cross-country investigation into FinTech Disruption. We hear from them about their experience thus far, and the key insights they have gathered from their various trips.

The FinTech TWIN$ with CrowdCredit (Source: FinTech TWIN$)

Q: What inspired you to embark on this FinTech Road Trip, and why did you choose to focus on the Asia-Pacific region?

A: FinTech became a buzzword among financial services experts in the UK and the US a few years ago, with the success stories of Zopa, TransferWise, Funding Circle etc. Yet, until recently, little focus had been put on the Asia-Pacific region - a paradox, considering that APAC is the engine of our global economy! This paradox pushed us to go ‘on the ground’ to explore areas where data was missing and meet the entrepreneurs, investors, accelerator/incubator programs, banks and regulators that would create the FinTech world of tomorrow. Through this ‘FinTech Road Trip’ across 6 countries in the Asia-Pacific region (India, Myanmar, Hong Kong, Japan, Singapore and Australia), we have had the chance to meet with many FinTech entrepreneurs, leading banks such as Société Générale (our main sponsor), Goldman Sachs, Bank of Tokyo-Mitsubishi UFJ or BBVA who are themselves willing to disrupt, and also consulting firms such as McKinsey & Company, Accenture, KPMG, Deloitte. These ‘FinTech ambassadors’ have generously shared their contacts and their vision on how FinTech will impact the Banking Industry with us - something we now want to share with other innovative minds among our student community. 

Q: Could you share some key learnings from your Road Trip?

A: The FINTECH TWIN$ journey was an amazing life experience, full of both personal and professional learnings. We were lucky to connect with and learn from the best FinTech experts worldwide. We also learned a lot by observing our environment and being immersed in and interacting with people in these countries, finding out more about their own language, culture, history and specific behaviors. Finally, Chloé and I were lucky to get to know each other better, and deepen our twin-relationship through the trip. Apart from this deep human immersion, we both further developed various ‘hard’ and ‘soft’ skills. We nurtured our knowledge in banking and FinTech, how to raise money (First with a crowdfunding campaign and then with our sponsorship with Société Générale),  how to legally create a company, and how to be both a good analyst (FinTech reports and business model analysis) and a good marketer (Creating a website and FinTech videos). The soft skills we have developed are even more valuable. We learned how to mix professionalism with fun, wearing 2 hats:  being a FinTech consultant and a backpacker from one day to another! We learned how to work in a team, find complementarities and respect each other even in stressful moments. We learned how to build a network. Above all, we learned that you never stop learning when you are surrounded by inspiring people willing to disrupt and reinvent the world every day. 

Q: After exploring the area of FinTech in the Asia-Pacific region, what do you think are the main differences in the emergence of FinTech across various countries?

A: In order to analyse the main differences and compare various FinTech ecosystems, we developed a ’TWINS’ framework, which I explain below:

Talents: Is the country home to tech and finance experts as well as entrepreneurs?

We observed that Asia is more ‘TechFin’ vs Europe which is more ‘FinTech’

Tech giants and telcos such as Alibaba, Tencent, Rakuten etc. are employing many people in Asia. India in particular is set to produce the world’s largest number of engineers, and trains data analysts who are employed by the major global banks.

Wealth:How do FinTech start-ups get financed to gain traction and expand globally?

We saw more corporate funding in Asia vs VC funding in Europe
Corporate investment accounts for 40% in Asia vs only 10% in Europe (Source: ‘The Pulse of FinTech’, KPMG International and CB Insights). Alibaba, Tencent, and Rakuten are big Asian conglomerates that directly compete with each other to acquire pioneering technologies and develop the best in-house FinTech solutions. Big banks are also seeing FinTech start-ups as potential enablers in Asia. Banks also compete with each other to acquire the best ones. Corporate funding and family offices are thus playing a great role for many FinTech entrepreneurs in the Asia-Pacific region, who see an exit more in a merger or acquisition within these big corporations than in IPOs in the financial markets.

Asian and US mega deals are contrasting with smaller deals in Europe
In Q1’16, the FinTech sector received a total of $4.9B in funding (218 deals): $2.6B went to Asia (36 deals), $1.8B went to North America (128 deals), $0.3B went to Europe (47 deals). The two largest FinTech deals occurred in China (Lu.com and JD Finance both raised more than $1B) representing almost 50% of all global investment. Mega-deals also occurred in the US (Betterment, Aria Systems and Blockstream). (Source: The Pulse of FinTech, Q1 2016 Review)

There is less focus on payments and increased focus on InsuranceTech and robo-advisory services in Europe and the US whereas Asia is still leveraging payment and alternative lending solutions.

Inadequacy: What inadequacy in the traditional markets and which problems are FinTech start-ups trying to solve?

In Europe, FinTech is all about optimizing the Bank of the 21st Century. In Asia, it’s about reinventing banking to include the unbanked and moving towards cashless societies.

Network: How is a FinTech community emerging in these countries?

We noticed more collaboration with FinTech in Asia vs competition in Europe and the US
While US and European FinTech start-ups have been pointed out as ‘disruptors’ directly competing with the banks, in Asia, given the circumstances, FinTech start-ups tend to collaborate with traditional institutions: Asia is indeed very fragmented so it’s hard to scale regionally or even globally without partnering with an established institution with existing networks. In APAC, there are over 25 countries, each with its own language, currency, infrastructure and regulations. Collaboration has been a vital driving force for growth thanks to emerging FinTech hubs in Singapore, Sydney, Hong Kong, and Seoul where not only FinTech start-ups, banks, regulators but also e-commerce, Telco or insurance giants can come together to exchange views and ideas. For example, the Singapore FinTech Festival which will be held in November this year will bring together different players in the FinTech community such as start-ups, investors, financial institutions, local ecosystem partners and government agencies for collaborative exchanges.

$upervision: How is FinTech regulated by the Governments?

Regulations are fragmented in Asia vs unified in Europe and the US
In APAC, each country is adopting its own set of regulations. By contrast, Europe tries to adopt more unified regulations: eg. PSD2 in the payment field. More details can be found in the subsequent questions.

FinTech TWIN$ at a French FinTech event (Source: FinTech TWIN$)

Q: How is FinTech influencing the landscape of the financial services industry, and how can traditional financial players embrace the rise of FinTech companies?

A: FinTech is influencing the financial services industry in the same way Uber disrupted the taxi industry and Airbnb disrupted the hospitality industry. It means that banks not only have to compete with FinTech players, but also and most importantly, they have to put digital at the heart of the bank's strategy. A multitude of technologies have the potential to transform banking: the Internet of Things, Cloud Computing, Big Data, Artificial Intelligence, APIs (Automated Programing Interfaces), Biometrics, Social Media, bitcoin/cryptocurrencies.

Q: How can banks disrupt and reinvent themselves and turn digital into a positive asset in our new digital area? 

A: So far, banks have been adopting 3 main strategies:

• - Building their own proprietary technology
• - Acquiring a relevant FinTech company to gain access to its technology
• - Partnering with a FinTech company to achieve synergies

To do so, banks have been reorganizing themselves in 4 ways:

• Opting for an internal innovation department
• Opening innovation labs and launching FinTech hackathons
• Participating in incubator/accelerator programs
• Having their own dedicated FinTech VC-fund

Q: How do you think the FinTech market will be affected by Brexit?

A: Regarding Brexit, we wrote a full article about its possible short and long term impacts on FinTech; you can find it on our Linkedin profiles:

www.linkedin.com/in/marinegueguen | https://uk.linkedin.com/in/cgueguen/en

Q: At a recent FinTech Roundtable held at ESSEC, Mr. Sopnendu Mohanty, Chief of FinTech at the Monetary Authority of Singapore, highlighted the importance  of “RegTech” in the realm of FinTech. In your opinion, what is the impact of regulators and regulations in the development of FinTech? 

A: The proactive approach taken by the MAS is really interesting, and shows how a regulator can propel a FinTech ecosystem. In the last 10 months, the MAS has set up a FinTech Office, committed S$225 million to support FinTech developments (Source: Monetary Authority of Singapore).

Yet, while Europe is trying to adopt a uniform response to FinTech (PSD2, Open-Data), governments in the Asia-Pacific region are adopting different attitudes. Singapore and Hong Kong have been supportive towards FinTech without clearly regulating FinTech. Singapore has adopted a risk-based approach and will regulate only if there is a material risk, but can allow grey-zone areas to a certain extent and let FinTech start-ups innovate within a sandbox to test their business model without the burden of regulation. China is now adopting the opposite approach: following the Guiding Opinions in July 2015, the regulator has already taken action to regulate P2P platforms in China. Most APAC countries are encouraging competition within the banking sector: South Korea is simplifying retail banking licenses for tech firms, Australia has recently granted a full banking license to tech-provider Tyro.

In such an evolving, complex and fragmented regulatory landscape, agile regulatory technologies (RegTech) might help firms and also governments to better manage their compliance risks.

Q: How did your experience at ESSEC prepare you for this journey, and what advice would you give to current and future students at ESSEC?

A: - Create your own network: ESSEC gives you a great opportunity to meet people. Attend the events that welcome inspiring CEOs and key stakeholders. Be daring – speak with them directly  at the end of events or conferences; you will differentiate from many other shyer students! When doing so, be yourself, ask questions about the speaker, find a common topic of interest and talk about everything except about the thing you really want to obtain (a professional connection): sport, culture, personal experience, debate… At the end, the speaker should think: I like the personality of this student! 

- Be 'schizophrenic' - Cultivate a multitude of skills! It is perfectly fine to do a French ‘classe preparatoire’ then get involved in student associations, do an apprenticeship at L’Oréal then an exchange program at Shanghai then a double degree specialized in Finance & Economics in Australia and in the meantime start a business around a topic of your interest such as FinTech. WHY? 1) because you managed to enter the school, and should make the most of the  amazing opportunities 2) because life is about exciting experiences and you will finally find a logical link between those experiences! 

- Set priorities and time constraints. Your association is your top priority for the 2nd semester? That’s fine. Go further and take up a sizeable responsibility in the committee (President, Treasurer). You want to launch a project like FINTECH TWIN$? Do it! Yes, you can study, run a business and party -  you just need to find a way to better manage your time, which was the hardest task for me!

Click here to have a look at the latest video produced by the FINTECH TWIN$ on Asian Specificities.