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Africa is one of the lynchpins of Fintech’s origins – key origins being Zopa’s invention of P2P borrowing/lending in 2005 and mPesa’s mobile money+ in 2007. In this episode we take a look at more recent innovation in Nigeria, Africa’s largest country with a population of over 200 million. Piggyvest who launched in 2016 and whose only round to date was a $1.8m seed now have an amazing 4 million customers saving and investing via their app. In 2021 alone, the platform paid out over $582 million to its users

In this jolly episode (we could do with an injection of Nigerian positivity and humour in Europe right now) Odun, co-founder and COO,  guides us through an introduction to Nigeria, her entrepreneurial career and the background to Piggyvest, the seminal role of a wooden box (!) as well as the future.

Africa in a world beset by American “wokism” is all too often seen at an insanely low resolution as if it were a place rather than a continent of a billion people and some 50+countries. We will cover Fintech in Africa per se in an upcoming episode but first we start with no generalisations just an great tale of entrepreneurship and a prime example of how the digital revolution in FS is worldwide, needing just the right amount of tinder and entrepreneurial spark to enable better deals for not just  the over-served global zilllionaires but for every smaller sums of money – in Piggyvest’s case one can save and invest from as little as 20 US cents.

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Chargebacks – the ability to retrieve your money from your bank spent when spent via a card in case of dissatisfaction after a purchase and an inability to resolve the situation with the seller – are one of those rare items that affects everyone from consumer through to merchant and including naturally the financial system in between. As we shall here they are super-complicated in reality.

Monica Eaton first came across the challenge of chargebacks way back in 2008 when she had an online retail business but was naive about them and learned the hard way. However she resolved to understand the situation better and conducted extensive research into why she had been suffering from so many chargebacks which led to a website labeling over 100 reasons for them that retailers might be able to avoid, The Force was definitely with her as within a very short space of time major media outlets and retailers wanted to know more and interview/consult with her. Fast forward to today and the company she founded to take this further – Chargebacks911 – now has some 400 staff in four offices around the world and have successfully protected over 10 billion online transactions recovering an astonishing $1bn+ for their clients.

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Many founders establish businesses and only later realise they are hard to fund. Others aim to create “fundable businesses” yet lack the passion for a long journey. Somewhere along the spectrum is a happy medium which must be balanced along the growth curve as phases change and different types of funders come and go. In this episode serial entrepreneur Dileep Thazhmon, fresh from raising a $180m C round navigates us through this territory and describes how the balance is always changing.

Jeeves (tryjeeves.com) help businesses organise all employee expenses under one unified platform which includes flexible funding in multiple currencies. As their slogan says “built by entrepreneurs for entrepreneurs”.

They have over 3,000 clients in over 20 countries which is a phenomenal achievement given that the business only opened to its first customer in 2021 :-!

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The Fintech wave spreads ever wider – and in the case of retail financial markets as Nicky puts it if you can buy a book at midnight why can’t you buy a share? It’s a good example of how the digital paradigm has changed customer expectations and oldskool ideas about limited “market hours” – there of course for the convenience of the suppliers not the customer – carry little weight.

Equally becoming a marketplace is no trivial task, which is why we have seen so few Fintechs attempt it. Spectrum Markets is a wholly owned yet separate subsidiary of the IG Group and so this episode offers us an opportunity to discuss a dual topic – not just retail markets but how incumbents should structure being able to host revolution as well as evolution.

So in this show Nicky guides us through several years of attempting both to revolutionise financial markets whilst attempting to do this with both the strengths and the challenges of a major incumbent.

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Financial services – whether mainstream or alternative – depend entirely on Trust – trust that the pieces of paper and coins in your pocket will be taken in exchange for goods (no longer 100% true), trust that a piece of plastic in your wallet will “tap and pay”, trust that you do “own” those securities a website says you do etc etc. However Trust is at a real premium right now and indeed ever since 2008. Who can you trust with your wealth? The State? Central Banks? Banks? The dollar? Sterling? The Euro? Stockmarkets? Your pensions? Crypto? “Stablecoins”?

In this episode Omid, a decade-long veteran of the crypto world who as well as lecturing on said same at the Columbia Business School is the author of “The Story of the Blockchain: A Beginner’s Guide” which gets an impressive 4.5* from 82 reviews on Amazon. He is also the author of his upcoming “Re-Architecting Trust: The Curse of History and the Crypto Cure for Money, Markets, and Platforms”.

So we dive into the nature of Trust per se – how that has worked, or not, how it is underwritten in the FS system, how it works in crypto and how the existing system and crypto might coalesce/crash together with CBDCs.

Unless you have precious metals in your hand the shocking truth is that all of your wealth is dependent on “the system” and trust in that so this is a core topic.

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Over time the Fintech wave reaches ever more complex topics. FX per se was one of the earlier low-hanging fruits to be digitised – a simple, near immediate transaction that everyone understands as they do it all the time when going on holidays. However its taken much longer – a decade or perhaps two – for Fintech to touch the more challenging topic of hedging. Hedging is far more challenging as it is one that even FX professionals find challenging to decide upon/recommend. I think this angle is best summed up by the adage “one mans adage is another mans position” – history is replete with examples where so-called hedges turned into actual positions in all sorts of markets.

It is into this challenging area that serial entrepreneur Seth Phillips is taking Bound “a digital FX broker built for the 21st century” who are looking at ways to make FX hedging available in much lower ticket sizes than MegaBanks find it profitable to deal.

As we discuss in this show it is not just the classic case of an SME who have expenses in one currency and revenues in another – with both being uncertain – that is affected by this. Many startups might have for example dollar funding of capital but operate say in the UK in sterling. FX is very volatile these days and swings of 10% or so can easily flip a company from profit into loss. But traditionally many SMEs faced with the complexity of hedging and inaccessibility of hedging products end up taking this unwanted and hedgable risk. In a world where there are plenty of business risks that they are voluntarily running adding an additional unwanted risk is not ideal.

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“P2P”, invented by Zopa in 2005, was one of the main unique business models that was at the core of the early success of Fintech businesses in disintermediating banks and offering better/cheaper/faster experiences to both lenders and borrowers. Over the past nearly two decades  P2Ps have had many fates – variously succeeding, going bust, committing fraud, listing, being sold and transforming into banks . 

In this episode we dive into the lessons learned from this history with Jaidev Zopa’s CEO who oversaw the transformation of Zopa from a pure P2P model to one mixed with banking and then more recently dropping P2P altogether.

What lessons can be drawn from the whole experiment? What worked well and what did not? What was it in the end. what set of circumstances, that led the firm that originated the whole idea to abandon it?

In this conversation Jaidev and I discuss the two-decade arc from both our perspectives from P2P not existing, through P2P existed but we didn’t know of it, through to hearing about it and initial reactions with a deeper dive into Jaidev’s years starting in 2014 first as COO and then as the CEO who drove the recent changes in business model.

We end with reflections on not just in what ways is the current Zopa different but also in what ways is it the same? One may change an engine in a car without affecting the car’s appearance, appeal and indeed destinations it drives to.

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Scandinavia (Sweden/Norway/Denmark) and the Nordics as a whole (Scandinavia +Finland +Iceland) have massively outperformed most parts of the world in Tech and Fintech when considered compared to the relatively small sizes of the populations. Why is this and where is it all going?

In this episode Erik who was part of creating the world’s first online mortgage bank in the late 90s, has been a CTO of many leading regional banks and is now founder and CEO of Naktergal discusses not just where the region is placed now in Fintech but the deeper origins of tech success before wrapping up with the outlook for Fintech in the region.

Naktergal offer a range of digital lending platforms for banks and Fintechs as well as modular add-on solutions for the inevitable weak-points in different existing legacy/big-brand tech solutions in banks.

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The fact that today we are talking to Aman, the co-founder of specialist Fintech Corporate Finance boutique Royal Park Partners which has done over 30 transactions is a great sign of the maturation of the Fintech market. In this episode we discuss the origins of Fintech Corporate Finance in Europe – not that long ago it didn’t exist as A Thing and how it is similar to MegaBank CorpFin and how it differs.

I was fascinated to see that whilst Fintech is one of the hottest, newest, trendiest sectors in the world the boutique CorpFin model is way more similar to oldskool, pre-Big Bang CorpFin models – in particular in it’s principal focus on integrity and long term client relationships rather than product pushing. In other words the oldskool model was more advisory and the modern MegaBank model more transactional.

In this context we also discuss how the Corporate Finance market itself has changed over the decades as well as the vital question of when a Fintech should move away from the DIY model to fund raising et al and move on from using the lawyers or accountants to support such processes and when they should use a professional CorpFin house whether of a MegaBank or a boutique.

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Investment risk has changed radically from what regulators and the media propound. A prime example is that with negative real interest rates and at the end of a secular 40 yr bond bull market the idea of bonds being “low risk investments” is nuts yet widely followed in asset allocation. Furthermore as we touched on in LFP197 on the dollar, hyperinflation and much more and LFP199 on Gold the trend to invest in real assets is growing. As we haven’t yet covered VC from a “how to invest in it” we also dive into this important topic – especially during a tech bull market when most of the value creation happens before the IPO.

So throw out your textbooks and so-called modern portfolio theory (from the 1950s a long long time ago) and start thinking afresh.

Alan is a great guest to discuss this topic with having been a CRO as well as a banker and consultant and now head of Digital Horizon, a VC and Venture Builder firm.

We discuss investing in the 2020s with a particular focus on understanding what investment risk is now, what key new investment risk exists that was never really a thing in recent decades but is now and wrap up with the practicalities of retail investment in Venture Capital. Key points discussed being: Continue reading →