Fintech

What lessons have fintech CEOs learned as they mastered the art of leadership?

Published

7 months ago

15 June, 2024

What lessons have fintech CEOs learned while mastering the art of leadership?

Writer’s Note: This story is part one of the “Journey to Leadership” series highlighting six fintech CEOs and their individual journeys. The intent of this story is not to establish a universal blueprint for becoming a superior CEO. After all, a) there is no one-size-fits-all formula and b) every leader’s path is subjective and distinctive. Instead, my goal is to uncover the lessons learned from prominent industry leaders, both seasoned and young, and how their experiences have shaped their understanding of their skills and roles.

While introductory sessions are common for other roles within a company, how can you learn the ins and outs of being a fintech CEO? Young CEOs are eager to seek advice and learn from experienced leaders. Meanwhile, those experienced recognize the importance of balancing outside advice with their own experiences on this evolving journey. They understand that only they can manage their roles, shape their leadership style and lead their companies.

Know when to take advice and when to stop

“One of the most valuable lessons I learned as CEO of Mercury is that you should constantly seek the advice of others,” said Immad Akhund, CEO and co-founder of Mercurya business and consumer banking startup.

However, Akhund stresses the importance of being discerning when it comes to seeking advice from the right person at the right time. It can be valuable to seek guidance from leaders who have already been down a similar path but are one step ahead.

“As a CEO, you don’t have anyone you can learn from very easily. It is your responsibility to get advice from the right people proactively. If you don’t, you’re not learning,” Akhund said. “When you talk to people who are further along, you tap into things you don’t know and it helps you prepare for the future of your business and see around corners.”

Leverage previous experiences to achieve favorable results

Akhund has been Mercury’s CEO for almost seven years, having previously held another CEO role for eight and a half years. While some current CEOs have previous CEO experience, others are relatively new to leadership roles. Everett Cook, who headed the business banking platform Rho as CEO for the past six years, he transitioned from the role of hedge fund analyst. This background gave him an atypical perspective on building a company. Drawing on his experience in markets and investing, he combines these skills to make decisions for his company in his current capacity.

“Markets are fundamentally a business of ideas — everyone has the same set of stocks to invest in, so the only differentiator is the quality of your ideas and how well you size and manage your bets,” Cook said. “The biggest difference is that in markets, executing an idea is trivial, whereas in building a company, execution is the hard part. But ideas still count and we still need to make good bets to win in the long term.”

What defines a good bet? Cook believes it all comes down to understanding the dynamics of supply and demand. He emphasizes the importance of CEOs being aware of their position within market cycles and managing accordingly.

Cook also learns from the markets the importance of accepting mistakes and maintaining emotional discipline. “You don’t have to be right all the time, but the expected value of your bets must be positive over time,” he noted. “I think it’s similar for us: You want to carefully size and scale your investments based on the likelihood of success and your risk tolerance. Quickly identifying winners and losers, reducing losses and doubling down on successful initiatives are crucial. And never get excited about an exchange.

The importance of skills development in driving progress

Being receptive to acquiring and honing new skills over time can add another layer of experience.

Stephany Kirkpatrick, founder and CEO of Oruman API integration for instant payments, highlights the importance of skill development as an essential part of your career path before taking on the role of CEO.

Before founding Orum, he worked at a financial planning startup. “Working for an entrepreneur was truly inspiring. Being part of an early-stage company was an eye-opening experience,” said Kirkpatrick.

From that early-career experience, she learned the value of growth: staying curious and seizing opportunities that foster learning and skill development. If an opportunity presents itself, step forward; if there is a chance to sit at the table, listen, absorb the discussions and then share your insights.

Kirkpatrick believes that a crucial aspect of being a CEO and founder is becoming comfortable with risk and decision making. Seeing the emergence of real-time payment networks, he recognized their potential, but realized he was entering uncharted territory by building a technology company focused on faster payments. The transition from consumer to business sales presented challenges, and institutions were wary of fraud risks when adopting instant payment systems.

“What I’ve learned is that you shouldn’t ignore risk or try to hide from it. By tackling it head-on and understanding how to deal with it, you can transform it from a liability into an asset.”

Getting to the heart of the challenges

Some leaders have come to understand along the way that leading a business involves identifying and understanding the root causes of challenges, as solutions and product development may not always be the only answers.

Michael Rangel, CEO of the SME Banking Platform New for eight and a half years, he learned the importance of prioritizing the problem over the solution. He points out that solving big problems becomes even more critical as the product team expands. As new members are added, they often lack a deep understanding of the company’s goals, leading them to focus first on building rather than understanding the underlying issues.

“I’ve seen that people can focus more on building products that they believe are solutions, but they don’t stay close enough to the customer and the problems they face,” he noted.

Cliché but true: it all starts with understanding the vision and mission

CEOs with decades of experience and multiple initiatives under their belts suggest that honing their leadership skills involved starting from the entry level to fully understand the role.

Four-time founder Max Levchin, CEO and co-founder of the BNPL provider To assertand co-founder of PayPal, emphasizes the importance of having a concisely defined mission and a set of core values unique to the company.

“Many decisions become simple when you have in black and white what you stand for, why you are here and what you would or would not do, regardless of the cost,” he said. “This clarity is critical because when your organization grows to thousands of employees, you won’t always be in the room to make those decisions. Establishing a specific value system for your company will make difficult decisions much easier.”

Clarity about the company’s mission and vision is also key to one of the four principles Colin Walsh, CEO and founder of neobank Varo Bankhe learned and applied in his leadership role from his nearly twenty years of experience before founding Varo Bank.

Its four fundamental principles include:

Consistent mission and vision alignment: Walsh emphasizes the importance of aligning investors, the board of directors, employees and stakeholders on the company’s vision and growth strategy. This involves consistent and clear communication, relevant incentives and difficult decision making, all while prioritizing profitability.
Financial discipline: “I established a culture of financial discipline at Varo,” Walsh said. This means charting a clear path to profitability, making data-driven decisions about resource allocation, and avoiding excessive cash burn in the pursuit of growth at any cost.
Adaptability: Given the ever-changing fintech landscape with new technologies, regulations and economic conditions, Walsh believes CEOs must be flexible and willing to adapt strategies as needed. What has worked in the past may not be effective in a profitability-focused environment.
Operational efficiency: Under pressure to achieve profitability, fintech CEOs can optimize their operations to maximize margins.

What proves effective for one CEO and his company may not translate to another, but combining the experiences of others with self-reflection can lead to favorable outcomes.

Source

Fintech

US Agencies Request Information on Bank-Fintech Dealings

Published

6 months ago

30 July, 2024

FinCrypt Staff

Federal banking regulators have issued a statement reminding banks of the potential risks associated with third-party arrangements to provide bank deposit products and services.

The agencies support responsible innovation and banks that engage in these arrangements in a safe and fair manner and in compliance with applicable law. While these arrangements may offer benefits, supervisory experience has identified a number of safety and soundness, compliance, and consumer concerns with the management of these arrangements. The statement details potential risks and provides examples of effective risk management practices for these arrangements. Additionally, the statement reminds banks of existing legal requirements, guidance, and related resources and provides insights that the agencies have gained through their oversight. The statement does not establish new supervisory expectations.

Separately, the agencies requested additional information on a broad range of arrangements between banks and fintechs, including for deposit, payment, and lending products and services. The agencies are seeking input on the nature and implications of arrangements between banks and fintechs and effective risk management practices.

The agencies are considering whether to take additional steps to ensure that banks effectively manage the risks associated with these different types of arrangements.

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Fintech

What changes in financial regulation have impacted the development of financial technology?

Published

6 months ago

30 July, 2024

FinCrypt Staff

Exploring the complex landscape of global financial regulation, we gather insights from leading fintech leaders, including CEOs and finance experts. From the game-changing impact of PSD2 to the significant role of GDPR in data security, explore the four key regulatory changes that have reshaped fintech development, answering the question: “What changes in financial regulation have impacted fintech development?”

PSD2 revolutionizes access to financial technology
GDPR Improves Fintech Data Privacy
Regulatory Sandboxes Drive Fintech Innovation
GDPR Impacts Fintech Data Security

PSD2 revolutionizes access to financial technology

When it comes to regulatory impact on fintech development, nothing comes close to PSD2. This EU regulation has created a new level playing field for market players of all sizes, from fintech startups to established banks. It has had a ripple effect on other markets around the world, inspiring similar regulatory frameworks and driving global innovation in fintech.

The Payment Services Directive (PSD2), the EU law in force since 2018, has revolutionized the fintech industry by requiring banks to provide third-party payment providers (TPPs) with access to payment services and customer account information via open APIs. This has democratized access to financial data, fostering the development of personalized financial instruments and seamless payment solutions. Advanced security measures such as Strong Customer Authentication (SCA) have increased consumer trust, pushing both fintech companies and traditional banks to innovate and collaborate more effectively, resulting in a dynamic and consumer-friendly financial ecosystem.

The impact of PSD2 has extended beyond the EU, inspiring similar regulations around the world. Countries such as the UK, Australia and Canada have launched their own open banking initiatives, spurred by the benefits seen in the EU. PSD2 has highlighted the benefits of open banking, also prompting US financial institutions and fintech companies to explore similar initiatives voluntarily.

This has led to a global wave of fintech innovation, with financial institutions and fintech companies offering more integrated, personalized and secure services. The EU’s leadership in open banking through PSD2 has set a global standard, promoting regulatory harmonization and fostering an interconnected and innovative global financial ecosystem.

Looking ahead, the EU’s PSD3 proposals and Financial Data Access (FIDA) regulations promise to further advance open banking. PSD3 aims to refine and build on PSD2, with a focus on improving transaction security, fraud prevention, and integration between banks and TPPs. FIDA will expand data sharing beyond payment accounts to include areas such as insurance and investments, paving the way for more comprehensive financial products and services.

These developments are set to further enhance connectivity, efficiency and innovation in financial services, cementing open banking as a key component of the global financial infrastructure.

Sebastian Malczyk

General Manager, Technology and Product Consultant Fintech, Insurtech, Miquido

GDPR Improves Fintech Data Privacy

Privacy and data protection have been taken to another level by the General Data Protection Regulation (GDPR), forcing fintech companies to tighten their data management. In compliance with the GDPR, organizations must ensure that personal data is processed fairly, transparently, and securely.

This has led to increased innovation in fintech towards technologies such as encryption and anonymization for data protection. GDPR was described as a top priority in the data protection strategies of 92% of US-based companies surveyed by PwC.

Arid Islam

Financial Expert, Sterlinx Global

Regulatory Sandboxes Drive Fintech Innovation

Since the UK’s Financial Conduct Authority (FCA) pioneered sandbox regulatory frameworks in 2016 to enable fintech startups to explore new products and services, similar frameworks have been introduced in other countries.

This has reduced the “crippling effect on innovation” caused by a “one size fits all” regulatory approach, which would also require machines to be built to complete regulatory compliance before any testing. Successful applications within sandboxes give regulators the confidence to move forward and address gaps in laws, regulations, or supervisory approaches. This has led to widespread adoption of new technologies and business models and helped channel private sector dynamism, while keeping consumers protected and imposing appropriate regulatory requirements.

George Blandford

Co-founder, UK Linkology

GDPR Impacts Fintech Data Security

A big change in financial regulations that has had a real impact on fintech is the 2018 EU General Data Protection Regulation (GDPR). I have seen how GDPR has pushed us to focus more on user privacy and data security.

GDPR means we have to handle personal data much more carefully. At Leverage, we have had to step up our game to meet these new rules. We have improved our data encryption and started doing regular security audits. It was a little tricky at first, but it has made our systems much more secure.

For example, we’ve added features that give users more control over their data, like simple consent tools and clear privacy notices. These changes have helped us comply with GDPR and made our customers feel more confident in how we handle their information.

I believe that GDPR has made fintech companies, including us at Leverage, more transparent and secure. It has helped build trust with our users, showing them that we take data protection seriously.

Dr. Rhett Stubbendeck

CEO & Co-Founder, Leverage Planning

Source

Fintech

M2P Fintech About to Raise $80M

Published

6 months ago

30 July, 2024

FinCrypt Staff

Application Programming Interface (API) Infrastructure Platform M2P Financial Technology has reached the final round to raise $80 million, at a valuation of $900 million.

Specifically, M2P Fintech, formerly known as Yap, is closing a new funding round involving new and existing investors, according to entrackr.com. The India-based company, which last raised funding two and a half years ago, previously secured $56 million in a round led by Insight Partners, earning a post-money valuation of $650 million.

A source indicated that M2P Fintech is ready to raise $80 million in this new funding round, led by a new investor. Existing backers, including Insight Partners, are also expected to participate. The new funding is expected to go toward enhancing the company’s technology infrastructure and driving growth in domestic and international markets.

What does M2P Fintech do?

M2P Fintech’s API platform enables businesses to provide branded financial services through partnerships with fintech companies while maintaining regulatory compliance. In addition to its operations in India, the company is active in Nepal, UAE, Australia, New Zealand, Philippines, Bahrain, Egypt, and many other countries.

Another source revealed that M2P Fintech’s valuation in this funding round is expected to be between USD 880 million and USD 900 million (post-money). The company has reportedly received a term sheet and the deal is expected to be publicly announced soon. The Tiger Global-backed company has acquired six companies to date, including Goals101, Syntizen, and BSG ITSOFT, to enhance its service offerings.

According to TheKredible, Beenext is the company’s largest shareholder with over 13% ownership, while the co-founders collectively own 34% of the company. Although M2P Fintech has yet to release its FY24 financials, it has reported a significant increase in operating revenue. However, this growth has also been accompanied by a substantial increase in losses.

Source

Fintech

Scottish financial technology firm Aveni secures £11m to expand AI offering

Published

6 months ago

30 July, 2024

FinCrypt Staff

Aveni, Investment Management, AI, NLP, UK

By Gloria Methri

Today

To come
Aveni Assistance
Aveni Detection

Artificial intelligence Financial Technology Aveni has announced one of the largest Series A investments in a Scottish company this year, amounting to £11 million. The investment is led by Puma Private Equity with participation from Par Equity, Lloyds Banking Group and Nationwide.

Aveni combines AI expertise with extensive financial services experience to create large language models (LLMs) and AI products designed specifically for the financial services industry. It is trusted by some of the UK’s leading financial services firms. It has seen significant business growth over the past two years through its conformity and productivity solutions, Aveni Detect and Aveni Assist.

This investment will enable Aveni to build on the success of its existing products, further consolidate its presence in the sector and introduce advanced technologies through FinLLM, a large-scale language model specifically for financial services.

FinLLM is being developed in partnership with new investors Lloyds Banking Group and Nationwide. It is a large, industry-aligned language model that aims to set the standard for transparent, responsible and ethical adoption of generative AI in UK financial services.

Following the investment, the team developing the FinLLM will be based at the Edinburgh Futures Institute, in a state-of-the-art facility.

Joseph Twigg, CEO of Aveniexplained, “The financial services industry doesn’t need AI models that can quote Shakespeare; it needs AI models that deliver transparency, trust, and most importantly, fairness. The way to achieve this is to develop small, highly tuned language models, trained on financial services data, and reviewed by financial services experts for specific financial services use cases. Generative AI is the most significant technological evolution of our generation, and we are in the early stages of adoption. This represents a significant opportunity for Aveni and our partners. The goal with FinLLM is to set a new standard for the controlled, responsible, and ethical adoption of generative AI, outperforming all other generic models in our select financial services use cases.”