LFP211 – The Thinking Behind Being A Challenger Bank for SME Lending w/Conrad Ford Chief Product&Strategy Officer Allica Bank

Incumbent banks – as Fintech has found in the past decade are rather safer from having huge slices of their business nicked than many Fintechs have imagined. However Allica Bank, established by some pretty experienced individuals have a plan. In this episode we dive into that plan along with quizzing Conrad, who was last on the show as Founder/CEO of Funding Options on what the pros and cons of being a past Founder/CEO are – a little discussed topic.

We also take a look at the SME market and its three main components – micro-businesses which are somewhat private-client like, medium sized businesses and then what are effectively small corporates.

Once again we get a great example that any word, any labeling of a category – whether it be Fintech, Africa (coming soon) or SME is not really a thing but a handle on a series of things – which of course themselves can be further zoomed-into.

Topics discussed include:

  • Crossrail/the Elizabeth line as fast and efficient from Canary Wharf to the City – at a minor cost of £19bn to build and many years behind schedule
  • once a founder always a founder?
  • the romanticisation of Found-ing versus the reality
  • Conrad’s thought process behind in the end not re-founding
  • “being a founder is just dramatically harder than you ever realise”
  • “the highs are higher but, believe me, the lows are a lot lower – nothing comes [in a salaried job] close to not knowing whether you can pay your staff tomorrow”
  • OTOH the pride of having created a great working place and a business out of nothing
  • the paradox of having to attract VC interest via “fake it until you make it”, whilst when engaged having to have a grown-up conversation about how things really are
  • comparisons between Facebook and teenagers thinking they are the only one not going to parties and founders who know their own challenges but read all about others promoted successes
  • the antidote being only ever to compare others press releases with your own press releases
  • UK SMEs
    • 5 million micro-businesses
    • 500,000 established SMEs – the “M” in SME – Allica’s focus
    • x0,000 “small corporates”
  • the dynamics of micros/medium/small corporates when it comes to the economics of commercial bank coverage
  • the huge number of complexity within the above structure
  • how the change from localism in banking has led to the lending equivalent of the funding gap
  • how internal MegBank dynamics lead to them always moving on one direction driven by economics of coverage – with the “M” type of SME being somewhat between two stools – the mass more private client type coverage and the more bespoke corporate coverage
  • role of asset-backed lending
  • where VCs have been going wrong in approaching this marketplace
  • the problem with incumbents when it comes to leveraging technology in the gap
  • why Allica chose to be a bank to address this lending gap when other business models are available
  • parameters for deciding to become a bank in order to lend to SMEs
  • price wars
  • how to avoid being crushed by the ten ton gorilla in a huge market
  • the need for multiple products as a bank
  • Allica’s upcomng SME current account
  • Allica’s shoutouts, need, raise, and desired new colleagues (about 300 staff at the moment)

And much much more!

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