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Back to the (Fintech) Future

Another Career Switch

I have spent three years of my life as a venture capital investor, talking with over a thousand fintech startup teams, looking for outstanding teams, excellent ideas, and good enough execution – in this order. My previous experience as entrepreneur, software executive, and internal innovation promoter has helped – many times too well, as I (maybe too) quickly rejected many potential investments. It was a very intense time, and the best part of it was talking, in only a few years, with hundreds of extremely bright people – something not likely to happen in a regular corporate job. But, as every corporate venture capital team, old and new, knows, your CVC life span is always at the mercy of the latest strategy and/or executive change. And so it happened, a new team is now managing the investment portfolio, and our team has moved on.

I really loved being part of the fintech community – the level of energy, the complexity of the problem, the “obvious” state of an industry “ready for a shakeup” – all contributed to a feeling of being in the right place, at the right time. And I was able to bring to any team the perspective of someone who’s success for years was determined by making risky investments in an emerging field, together with the aggregate experience of assessing hundreds of startups. And instead of the mostly ceremonial (and occasionally strategic) board seat, I enjoyed the thought of getting back in the driver seat and help a company succeed through outstanding execution. From being involved, I switched back to being committed.

Here Comes Moven

I knew the Moven team from the very early days, and I was one of the first to believe in them. So when Moven was looking for a Chief Operating Officer at the time I was contemplating my next adventure, it was an easy choice for both parties. The company was, in the second half of 2015, in the right spot – a new investment round, traction, and needing more executives to start splitting the workload of the management team. Moven is one of the pioneers of the “neobank” field, and well positioned to succeed in changing banking – mobile, experience/context based, agile in execution, and thriving to find the right path between disrupting banking and partnering with banks. There are many other startups, mostly in Europe, who have been inspired by Moven – the best form of flattery is imitation — and they are at various stages of development. Moven has the strategy, the business plan, and the team to succeed and become a successful story on how banking can start being disrupted.

Fintech Disrupting Banking

There are many arguments being made – from earlier “breaking banks” actions documented by the Moven founders, to current calls for collaboration between fintech startups and existing financial services institutions. Of course it’s (very) hard to massively disrupt a massive industry. Retailers, advertising, music – none were disrupted overnight. And fintech has all the characteristics of an overnight success that will take 15 years of hard work: an industry uniquely positioned for digital transformation, a business model that has not changed in hundreds of years, millions of people employed, more billions invested each year, and thousands of startups worldwide.

There used to be several objections documented in the industry of why fintech will not succeed – from “you need people who know banking” (and many startups today employ former bankers), to “regulators will kill startups” (and they try hard, but eventually regulations will have the be aligned with 21st century technology progress) and “banks already have an established trust relationship with their customers” (see monthly reports of banks worldwide being fined huge amounts for breaching said trust). All these points seem to have faded, as new successful startups move along their traction path with good, experienced teams, navigating skillfully the treacherous regulatory waters, and proving with real customers that trust is being redefined by technology and an informed audience.

Today, I see two other most prevalent arguments against fintechs, and Moven is right in the middle of both battles. First, most bank IT teams will start by saying “we can do it ourselves”. Whatever “it” is. As someone who has done “it” successfully many times, and also failed a couple of major projects during my career, my answer to this argument is “sure, go ahead”. Any large organization has a (historically proven) 50/50 chance of success on major digital transformation projects. Some large banks have failed several times in a row with each failed project eating away another year and another $50 million. But hey, it’s a great learning experience for the team, I am sure next time it will be different. For a company like Moven, who partners with banks to deploy a white label version of its mobile banking experience software, the challenge is finding those bank partners that understand that the right fintech startup partner is the best way to accelerate digital transformation, and spend a fraction of the in-house development cost. In the end, it is about the shortest path to success, and an understating of the open innovation concept “not all the smart people in banking work for my bank”.

Moven is probably mostly known for being one of the first neobanks in the US, with a direct-to-consumer model that offers a “downloadable bank account”, i.e. the potential customer downloads a mobile app, provides KYC data in the app, and gets a bank account, together with a debit card, and an associated contactless payment sticker. The app also offers money management/real time budgeting and real time notifications. It a nutshell, customers get what the Moven team believes a modern banking experience should be. And, in true startup fashion, more features are being added regularly, for example a re-thinking of what a “savings account” should be is scheduled for the summer of 2016.

All nice, but the question we get constantly at Moven is “how many customers do you have” coupled with “you are too small to be trusted” (see above on trust) and “bank X launched a new mobile feature and got 100k users in three months”. Good points, and here are the answers. First, of course that Moven cannot build a new brand overnight, and get “lots” of customers to open a bank account, and transfer their banking business. However, Moven’s customer base grew 10 times in the past year, and the growth is accelerating. As I said at an industry conference recently, yes we are a mosquito. Today.

Second, of course if an established bank deploys and promotes a new feature it will have a percentage of its customers try it. The real story that no one talks about is the actual conversion rate (30%? 70%? Or 2.3%?) and the retention numbers. For a startup, the time is never right for pursuing vanity metrics – a company like Moven succeeds or dies based on actual customer adoption of new capabilities. And as real adoption metrics improve, and customer acquisition costs drop, all under the overall agility umbrella that allows constant rapid experimentation and improvements that only a startup can afford, the future may look brighter than it seems today.