Jack Ma has never been on Dragons' Den, the TV show where entrepreneurs beg for start-up money, but Asia’s next generation of financial technology start-ups appear to have taken the plunge.
At the FinTech Innovation Lab in Cyberport in Hong Kong on Thursday, eight start-ups pitched ideas and products to an audience of 100 venture capitalists and bankers. It was much like Dragons' Den but bigger and with more coffee breaks.
While global investment in financial technology ventures more than tripled to $2.97 billion in 2013 from $928 million in 2008, according to a report by Accenture, much of that investment has taken place in London and New York.
The pace of investment in such innovation in Asia is important as the region juggles with increased regulation and burgeoning mobile banking technology. This is magnifying the challenges (and opportunities) that financial institutions now face in terms of processing data, ensuring security and delivering products digitally.
Security and finance proved to be the major theme of the day and the participants pulled out all the stops to win the hearts and minds of those watching, all of whom were targeted not just as potential investors but also as customers of the various technologies under discussion.
The atmosphere was buoyant and often a little cheeky.
“Two billion dollars! That’s the amount of money that the 10 banks participating in this FinTech programme paid in publicly disclosed fines in the past few years due to breaches in their anti-money laundering and know-your-customer compliance programmes,” Andrea Weist, one of the participants, said.
Weist, co-founder of India/US software products company Jocata Financial Advisory & Technology Services, was touting solutions for anti-money laundering and know-your-customer compliance. “So I don’t say this to embarrass any of the banks but instead to point out that compliance matters.”
The FinTech investor day was a culmination of a 12-week program that saw the final eight hone their pitches under the mentorship of 10 banks: Bank of America Merrill Lynch, Bank of China (Hong Kong), Barclays, China Construction Bank (Asia), Credit Suisse, DBS, HSBC, JP Morgan, Morgan Stanley, Ping An and UBS.
“[HSBC’s] involvement brings us into contact with a diverse, innovative group of companies that we can support, mentor and learn from,” Raymond Cheng, chief operating officer at HSBC Asia-Pacific, told FinanceAsia. “I believe programmes like FinTech are essential for a healthy, thriving and developing financial services market and HSBC is committed to supporting the FinTech Innovation program as it expands into Asia."
Jack Poon, founder of AtCipher.com, a Hong Kong-based company that addresses the security concerns held by many financial institutions regarding cost-saving cloud solutions, opened his pitch by noting that there were more than 80 million data security events -- code for breaches and the like -- last year.
He said that Eric Schmidt, executive chairman of Google, advises that in order to protect data privacy people should encrypt everything, but that this isn’t done because it’s simply not that easy to encrypt and share on the internet.
“We believe we have a game changing technology; however, our customers need solutions,” said Poon. “We listen and we act. We have hired ex-bankers and IT staff to use our technology to address security issues.”
That said, the pitch was otherwise short on detail.
Sushil Salujua, a senior managing director at Accenture and sponsor of the program, said financial technology was something that catches the essence of finance and capital market services. “It is driven by consumer needs. The technology is available now and the need is now,” he told the audience.
Advanced Merchant Payments (AMP), which enables banks and other business service providers to deploy “alternative lending” technologies for the benefit of small business customers, said that during the course of the event it had secured US$5 million from SBT Venture Capital.
“The funds will be used to scale and further internationalise the business, build out the underlying technology, and reach new partners for AMP’s innovative loan origination and automated portfolio management platform,” said Tom DeLuca, chief executive of AMP, which has operations in Hong Kong, Singapore, the Philippines and the UK.
Also pitching was FinSuite, a Melbourne-based company that is just over four years old and already boasts NAB, Macquarie, ANZ and Westpac as clients, helping them to cut the cost and time required to analyse financials on loan applications. Founded by former bankers, and originally self-funded, FinSuite was on the prowl for cash. “Look what we’ve done so far with a few people; think what we could do with more people,” said Bart Jesman, the company's chief executive.
New York, London, Hong Kong
The FinTech Innovation Lab Asia-Pacific is modeled on a program co-founded by Accenture and the Partnership Fund for New York City in 2010. The New York Lab’s 24 participating companies have raised almost $80 million in venture financing after taking part. One participant was acquired for $175 million.
In 2012, Accenture and 12 banks in London launched the FinTech Innovation Lab London. The majority of participants went on to sign deals with banks and collectively have raised $10 million in new financing since participating.
In July, Accenture then called for applicants in Asia-Pacific, receiving about 100 applications from 20 countries.
“We recognised that Asia-Pacific should be leading the way in innovation,” said Beat Monnerat, senior managing director and head of financial services for Asia-Pacific for Accenture. “We have start-ups here, we have diverse banking needs across the region and we should be developing the solutions here, not importing them from abroad.”
After all, Alibaba was a start-up 15 years ago. And look what happened.