LFP077 – Capital Markets Fintech with Mark Beeston founder Illuminate Financial

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Today we aim at the beating heart of FS – its IT systems. I am delighted to be joined by Mark Beeston founder of Illuminate Financial who has over two decades of hardcore FS experience trading derivatives, COO- and CEO-ing, to discuss Capital Markets Fintech.

A lot of Fintech is B2C, some is B2B but there is a whole chunk trading under the Fintech rubric which aims not to disrupt the provision of FS but rather enhance the incumbents. Disrupting existing IT vendors to FS not FS.

Illuminate Financial are Capital Markets VCs extraordinaire. Their claim is “we cross the chasm between enterprise Fintech and the Financial Institutions it should serve”. I can do no better than quote further re where this gulf comes from:

Regulation is increasing, the industry is deleveraging, and compliance is becoming ever stricter.

Financial institutions have been slow to adopt new technologies, while vendor management and procurement processes are focused on contracting multi-million dollar enterprise solutions from billion dollar corporations.

In doing so, they often overlook the innovative lower cost and highly scalable solutions offered by newer and more entrepreneurial suppliers.

Organisations know that the answers may lie in Fintech. Yet the ever-growing hype around the subject has made it more and more difficult to distil the signal from the noise.”

Topics discussed include: 

  • investing and dealing in cars
  • driving taxis
  • 560hp Audi Estates
  • the seminal importance of the 2005 derivatives crisis to Mark and setting up ICE Link and experiencing how hard it was for folks to sell him IT systems he needed
  • the changing nature and timescales of B2B FS IT sales processes in recent decades & years
  • challenges of current sales
  • the flipside is greater product stickiness once it’s in
  • the heterogeneous nature of incumbents – not painting them all with one brush
  • the over-emphasis on innovation
  • Illuminate’s great model INNOVATE – VALIDATE – ADOPT in this context
  • they have seen 1,200 companies since starting the firm – hence there is masses of innovation out there – a lack of innovation is not the problem in FS
  • Mark’s suggestions about how to structure innovation/validation in incumbents
  • “West coast corporate tourism”
  • opposite cultures of say SpaceX and incumbent FS – lessons are not transferable [not least of which the product in FS is money]
  • “there’s an unprecedented number of problems that need solving right now”
  • “in principle” vs “in practice” marketing presentation results in general (not just in FS)
  • pilot projects – “the campaign for the paid pilot”
  • “proof of concept” vs “pilot”
  • incumbents antipathy to failing let alone “failing fast”
  • the relevance of paid pilots to startups eg in fund raising
  • the arrival of the odd concept of BAU (Business as Usual) vs change projects in FS over the past decades
  • incremental problem sales vs disruptive sales
  • the topology of Enterprise/Capital Markets Fintech
  • the problem of defining “RegTech” [in Mark’s definition about 60% of their portfolio could be seen as RegTech one way or another]
  • the complete mismatch between media coverage of tech in FS and the actuality (!); solutions vs tech; supply-push vs demand-pull
  • “the mandatory change agenda is larger than it’s ever been”
  • Illuminate’s first fund (£35m) was closed Oct16, 17 LPs, 4 strategic bank partners, the model is to offer sector leverage not just money
  • three stakeholder groups – Capital Markets Fintech, Fintech Consumers, and investors – Illuminate sit in the centre of the three

And much much more 🙂

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