 Hei nhw, dyma'r craff hon. Nid ychydig unig eu gwleidio ar fy ysgol, neswn e ti'r invidio New dependio ar y pobthog. Hei nhw. Welcome to the podcast We've got a great guy today made a really brilliant chat It's a guy called Gerlad Amir We've met each other for quite a while now and he is all things fintech He's started businesses, he's an entrepreneur He's done a lot of experience in the financial services industry I know there's a lot about fintech, entrepreneurship, what it takes to start a fintech busnes, grow it, raise cash, M&A, all of that kind of stuff, so we talk a lot about that, so I hope you enjoy it. Hey it's Lewis, welcome to the podcast, enjoy our conversations anytime, anywhere. Thanks for having me. Pleasure, how you doing? Great, a bit wet. It was a little bit wet. Hopefully it's not the end of the summer yet. Yeah, hopefully we still have a few days of shiny weather. I think so, it'll be fun. So tell us what you do. I'm a ffintech entrepreneur, I'm currently building new ventures for one of the leading private equity funds in Europe. And I'm also a non-executive director with the Mirris Group that is developing the next generation of funding of green projects through blockchain. Wow, so for example? So Mirris Group is a group of real estate entrepreneurs that have been building real estate projects in Norway. At some point they realised that they want to focus on green projects and they thought that they should be utilising blockchain as a platform to reach. They will develop the next generation of funding for real estate projects. Nice. So specifically for funding for these? Yes. Interesting. And then your private equity firm, what did you guys look to invest in? So the private equity fund I'm working with is one of the leading funds in Europe in the financial services space. Focusing, specialising in financial services and we look at new opportunities trying to tap into some of the market trends of the back of open banking, blockchain and so on. And this is Europe specifically? Yes. UK and Europe. Great. And how did you get into this? That's a good question. I would not say lack. But it's just network and opportunity. So what did you do at university? How did the journey come about? So I would start from the start. So I'm a, I guess that I'm a math geek that accidentally found himself serving in the infantry for a few years and then going to uni, starting accounting, economics and then joined Ernst & Young to the high-tech and M&A practice. Had been doing audit and M&A for a few years and really had the privilege to learn from and work with some of the brightest minds in the space. At some point I realised that as much as I love, if I can use the word love for auditing, but yes as much as I love auditing and M&A, I realised that my passion was elsewhere. So it's really to try and utilise and harness technologies to improve the financial supply chain or the financial value chain if I can put it this way. Which was fragmented, inefficient, expensive and I'm talking about the year 2003. Right, fine. So enough years ago. And the supply chain being from consumer to bank and everything in between? Well, the financial value chain, right, including so. The asset management, wealth, credit, lending, SMEs, consumers, treasury, cash management, payments, Bitcoin. Is that ran back in 2003? So the first time I've looked at Bitcoin was in 2011, 2012. Back then it was just way too volatile and anarchist in a way. So I looked at it for a while and something I decided that I think there is still enough work to be done if I can use the term traditional FinTech space. Right, fine. And then I've been doing FinTech since 2003. In 2008 I took a two years break from my FinTech journey. I've joined in Cytics as the turnaround CFO at the request of one of the VCs. We turned on the company, I worked with the management team. Complete a turnaround, we sold the company to McAfee and in 2011 I returned to my FinTech obsession I would say. Moff to London at some point I've joined the Lloyd Banking Group as the head of FinTech of the group. Well, how was that? So from start-up entrepreneurship to 50-100 big? So first of all it was a huge privilege. I would say even an immigrant joining Lloyd at such a senior position and working so closely with the decision makers across the group and having this opportunity to be involved in some of the more advanced processes, thinking, experiments in such a massive group that was a real privilege and also for someone like myself that has been trying to change this industry having this rare opportunity to understand how things work on the other side and mainly to meet so many wonderful people that generally trying to change things and change things for the best. I think within the system, right? So that was very interesting for me, eye-opening. I think that for someone like me having this opportunity to get this 60,000-feet view of the industry it was very useful and I think that also it gave me help, I think, evolve my view of where the opportunities are in the FinTech space and actually I would even say how close banks are to close some of the gaps or perceived gaps that FinTech and other big tech players think banks have. So I think that, I cannot refer specifically to Lloyd's, but I think that if we think of the big four in the UK and the big nine, I think that much closer than what the average FinTech practitioner think. Right, because you always look at big banks and think they're quite slow-moving and hard to change from the outside. Is that not true? I don't think it's true. Look, they're subject to very different set of rules and risk and governance frameworks. I think that they also have a very different perspective as to what good looks like and what customers really want. So the FinTech entrepreneur I can identify an opportunity that may be interesting for a sub-segment of customers and could potentially be successful within this specific segment. But as a big bank, you have a very different perspective, if we think of the big four that serves tens of millions of customers. Even a successful bank with a significant transformation budget would always need to prioritise. Banks serve the masses, they don't serve niches. But broadly speaking, they serve the mass. So these need FinTech digital banks of what only got a few hundred thousand users, presumably at the moment, nothing like the big banks. So I don't have the exact numbers, but I think that other than N26 and Revolut, I think that all the challenger banks are sub-1 million, have sub-1 million users. I think that Monzo maybe have 700K and all the rest have sub-half million. It's a nice number in terms of proof of concept. It's not a very exciting number in terms of imposing any threat on the big four, at least in the UK. And how do you see the FinTech sector? Has it been evolving over the last five or so years? That's an interesting question. So I think that it started with the hype, as always, because suddenly this old, boring industry that was dominated by incumbent banks suddenly had this shiny toy, this new capability, where you can submit an application in minutes and get an answer within minutes. And if you approve, you get a loan within minutes or hours rather than weeks. So I think that was interesting. I think that following the hype there was a painful acknowledgement. And I think that if we look at the last report of the World Economic Forum, and they put it nicely, they described FinTech as not changing the competitive landscape, but changing the basis of competition, which is a nice way to put it. So FinTechs just raised the bar. They just show what is possible. At least conceptually, between what FinTechs can demonstrate on a POC or just a proof of concept level to the ability to actually deploy some of those capabilities at scale for the masses. There are some gaps that I think that as an industry we still struggle with. So if we look at this FinTech banks partnership and which one that we work best, so I cannot think of a very good example, BBVA maybe, ING maybe, but even them are still in the journey. But most banks are still struggling with finding the right model to work with FinTech and harness their innovation and the new capabilities they bring to the table at scale and deploying it and rolling out at scale. So you see that the big banks are working out ways of how to work with these FinTechs rather than seeing them as competition? FinTechs were never a competition, to be honest. Never. Every time, even when I was doing FinTech in the early days, every time I read an article about the track that FinTech imposed to banks, I looked at it and said, look, that's just a nice article that one of the VC's or angel investors or founders managed to push through this specific medium. But FinTech was never a threat. How can FinTech be a threat in what sense? So if you are a big bank and you think that this small company has an interesting technology that can turn into a threat, you simply buy the company. It's as simple as that. Why would it be a threat? So there are other threats, I think. If we think of Amazon, PayPal, blockchain in the long run, open banking. So there are other threats. So tell me about blockchain. How do you see that being a threat over the long term? So blockchain, as a distributed ledger, turns broadly speaking, right? Because there are different use cases and different segments and verticals. But conceptually, blockchain turns intermediaries redundant. So blockchain removes the need for intermediaries, which means that to a large extent it turns the financial services industry obsolete. And if we think of blockchain as the enabler to unlock the true potential of P2P, then the question is what will be the future role of banks. Again, it will take probably 10 to 15 years, but at some point it will happen. At some point there will be a... Depends on who, but yes. In the banking world, no. It's not the far future. Long term, but yes. In a sense, around the corner. And the big banks are trying to work out ways to use blockchain? Of course they are. All of them. And how are they getting on? I don't think I'm in a position to represent the state of the industry, but from what I know, from what I hear from my peers, what I hear in conferences, I think that most banks have a pretty good understanding of the opportunity and threats. So most of them have been experimenting with blockchain and more broadly with DLTs, Distribute and Ledge Technologies. And looking at the use cases around payments, mortgages, identity, cross-border payments, I think that cross-border trading. And I think that most of them have a pretty good idea of what they should do to... Or have been trying to join or have already joined one of the consortiums. If we look at IBM and some of the other... And R3 and some of the other activities that we see in the space. So I think that banks will understand that it's really inevitable. I'm not sure that they have a clear strategy around what would be the long term strategic answer to P2P and a decentralized banking world. But I think that in the short term, at least for the specific use cases that were already identified, most of them have a pretty good idea of what they want to do. And where would digital currencies fit into this? Sorry, again? Where would digital currencies fit into this? So the blockchain, Ethereum? I'm not sure. That's a tough question. I'm not sure. There is a clear appetite by investors and by institutional investors. I think that they do expect banks to provide custodian services. So that's clear. Do you think it's inevitable that we'll be using these types of things? Yes. And I think that banks should play an important role in offering banking services in the new crypto world. Many are owned custodian services and insurance and cyber security and so on. So I'll hold on to my theory in which crashed a few months ago. Yes, please do. Interesting. Do you look much, I need to cover most of Europe, but are you seeing some of these things take off quite quickly in places like Africa, where a lot of people have a lot of mobile phones and mobile banking? Because we're very mature in the UK and in Europe. Do you see some of these fintechs and innovative ways of banking taking off faster in Africa? Yes, absolutely. So if we think of the DALA, the DALA Foundation and WALA, they've launched essentially a decentralized banking proposition. It's a mobile wallet coupled with payments and a designated currency that was launched less than a year ago and already more than 100k customers. Maybe I'm wrong, maybe much more than that. This is in Africa. So they've been growing exponentially. Amazing. Yes, it is amazing and that's just one nice example, the others. And I think that, again, if I, ignoring blockchain and open banking for a second, I think that the opportunities in the fintech world are existing in the developing world and not in the western world. I don't see many strategic opportunities in the western world. Interesting. But I think that the emerging markets, Africa, Latin America to a certain extent, Asia, so it's really a blue ocean. There are so many interesting opportunities to explore. And if we think of the western world, so again, if we think of open banking, PST2 and blockchain, so these are strategic enablers, transformation enablers for the next ways of fintechs. Interesting. Is your fund looking at Africa now? No, not yet, that's the best answer, I think. Not yet, good. So who's funding these startups, these fintechs in developing countries? So in the western world, or in Europe and the US, we continue a transition from angel investors to VCs, and now we see more and more CVCs, so the venture arms investment time of banks that invest more and more in fintechs. And I think that also the mix changed from early stage companies to more mature companies. So I think that in general we could see an increase in investment in fintech, but I wouldn't be surprised if we take a harder look at the numbers, we realize that actually there was a decrease in the investment in early stage fintechs that are focused on building for positions for the western world, or in the western world. Interesting, for what reason? Because I think that investors are much more aware of the challenges around building a company in the financial services space. So the heavily regulated space and customer acquisition costs are higher than expected, and I think that most fintech entrepreneurs underestimated the loyalty of the average consumer or SME to their income and banks or to their banking providers. And it's challenging to secure funding and it's challenging to secure debt. And again, there are some exceptions obviously in the payment space. We still see interesting opportunities in fast-wearing companies. The cross-world of payments, forex, remittances, so there are some tactical opportunities. I think that the next unicorns would probably evolve out of the open banking and blockchain. Is the revolution done really well? I think so, yes. Great, I think we've valid a billion. But I think that one of the reasons they've been doing so well is because they have an exception of CEO. I think that the way he runs the company and the way he executes is something that we could all learn from. Interesting, that's an interesting question because looking at if firms have the right talent and what type of talent is going to be relevant for the future is a quite interesting question. Do you see that changing? The types of people that are going to be attracted to financial services, their backgrounds, there seems to be quite a big warfare like data scientists, these types of people in banks now. So there is, you know, talent and access to talent is always a challenge. And as you grow the company and as you face new challenges, you always need more people, more good people to help you in the journey. And you increasingly focusing on recruiting good people that will help you build and run the company. I don't think that there is a specific challenge in attracting talents to financial services. So talents look for the right place to express themselves and be effective and experience success. And I think that that applies for financial services as much as it applies to any other industry. But you have seen recently that really top talent is being pursued by the tech firms, the Amazons, the Googles, etc. And there now seems to be a little bit of a fight back from financial services firms. So for example, scrapping dress codes, being more relaxed, flexible working. So there does seem to be this kind of war for the talent from the tech firms and the banks, which I find been quite interesting. Yes, and not surprising because I think that once banks realise, if we think of Goldman Sachs, JB Morgan and the new technologies that are building, if we think of Markus and we think of some of the work they are doing in the blockchain space and AI, obviously. Which we haven't spoken about. So you need to have the right people to build those new technologies and new platforms and new enablers. And some of those people currently work for GAFA. So if you pay more and offer a more attractive working environment where they can express themselves, they will join. And to very interesting complex problems as well. Yes, definitely. In financial services. Very interesting. Absolutely. And now banks are getting cooler. People want to work there. Yes. Because ultimately the number one place to work is in a really cool firm with big complex problems to solve. Like a Tesla or Google. And now as banks start to get a little bit more over to that side, I think they'll find it. I agree. We talked a bit about AI before we started recording. Mostly around Google listening to all of our conversations. Where is that fitting in here? What's the place for AI in financial services now? Everywhere. And anywhere. I don't think there will be any segment or any area in the financial services space that won't have AI or will be using AI in this way or another. So if we think of the use cases of AI, so we could think of RPA and how we can automate processes. But some RPAs? Robotic processing automation. So automate processes and reduce the number of people and the cost of labour that is involved in the manual processes. So replace humans with machines. And by that improving the cost to information. So improving the profitability. So we can think of RPA as a very good way to decrease costs and to better manage risks. And also I think that we don't see it yet. But we will see more and more banks and financial institutions using AI to build hyper-personalised propositions. So to use the data they have and to use AI to optimise across and upsell opportunities they have. As we see with Amazon, as we see with Facebook, with Google. So they will do the same. And they can do the same because they have the data. And if you use the data and you shift your mindset from a transactional mode to a relational mode. Where you actually look at the customer and better understand the customer and build proper customer profiles. So banks can do very interesting things. And they will already be doing building. And hopefully they can also help us more. So with personal finance, people saving better. That's a given. 100%. So that's the only way for banks to stay relevant. And to turn into the trusted financial advisor or financial assistant. For both for consumers and SMEs. So our trusted financial advisor is going to be an AI robot. Yes, definitely. Definitely. And I think that if we think of this decentralised banking world that will be enabled by blockchain. So I think that would be one of the opportunities for banks in 10 to 15 years. Interesting. Thank you very much for joining me. And good luck with all of your investments.