London Fintech Podcast
00:03:37 · Nik Storonsky, Tony Clark
[00:03:37] S0: I think kitesurfing is not about being strong but more about your technique. Generally the way it works, stronger is the wind, the smaller the kite you take. [00:03:46] S2: Right. So it's the same as in windsurfing where you adjust the sails and I guess the same as in sailing as well. So originally, you were a trader at CSFB and trading derivatives for many years, presumably having fun. Then presumably one day you woke up and thought, I'm now going to set up a startup, did you? [00:04:03] S0: Yeah, definitely. So, I was in trading for eight years overall. And then, yeah, simply kind of decided to go on my own to start something new. Banking became- well, not only banking but trading as well became very boring and generally not that rewarding as well. And I decided not to go on my own. [00:04:21] S2: Yes, I've noticed that people who make things happen in the world tend to be people who don't have an infinite boredom threshold. Some people somehow are either able to be bored and it doesn't cause them great torture and they carry on for their whole life doing one thing even though they lost interest decades ago. But other people who you're clearly one and I'm also one as well, they can only tolerate so much boredom and you think there must be something else to do in life. [00:04:47] S0: Yeah, mean the reality is that you need to have something inside of you that tells you every day that you need to kind of get something done, achieve something right and that's probably one of the qualities that you need to start a business.
00:04:47 · Nik Storonsky, Tony Clark
[00:04:47] S0: Yeah, mean the reality is that you need to have something inside of you that tells you every day that you need to kind of get something done, achieve something right and that's probably one of the qualities that you need to start a business. [00:04:59] S2: And so in derivatives, you were very much a B2B person at Credit Suisse, and now you're very much a B2C person. So what kind of thinking led you to when you woke up at 03:00 in the morning thinking, oh, I'm now going to start Revolut, a global money app which will give into bank rates? What kind of process led to that? [00:05:16] S0: Well, was, first of all, it was my personal problem. So I traveled a lot. I also sent money abroad, right? And I was always kind of fed up with the rates that I'm being charged. So then I started searching the market for the product, which would help to solve my personal problem. I didn't find anything. I ended up setting multiple bank accounts in multiple countries. And the whole, you know, construction was very clunky and not very user friendly, right? So, I decided, okay, why don't I do it for myself first, right? [00:05:44] S2: Alright, it's personal pain. [00:05:45] S0: Yeah, exactly.
00:05:45 · Nik Storonsky, Tony Clark
[00:05:45] S0: Yeah, exactly. [00:05:46] S2: Which is when Nigel Vuitton was on the show with a currency clan some time ago who clearly had done very well on the B2B perspective in that. And he told the story about being somewhere in France and having a nightmare just trying to send money back to The UK and having to use a fax machine and all that kind of stuff. And in terms of the early days of fintech, clearly some firms approached fintech from a very marketing perspective shall we say. I'm thinking particularly of TransferWise and Crowdcube and they're people without a background in FS. But other people like Nigel Verdon at Currencycloud and New at Revolut are coming from an FS perspective and the one thing that I've noticed over the years is that people with an FS background are tending to be more successful in Fintech which is in part a phenomenon that you would expect anyway so that if you were trying to disrupt aviation for example the chance of you or I disrupting aviation is quite low because we don't know the industry at all, we don't know why it is the way it is and what things which can be changed and partly like aviation I guess it's because it's regulated and these things make it very different. I think if you don't really have a background in FS or a background in a heavily regulated industry, you can get some initial momentum in terms of waving flags and hyping things, but it's very hard to go beyond that.
00:07:01 · Nik Storonsky
[00:07:01] S0: Yeah, agree. I mean, knowing industry definitely helps you, right? But then on top of it, you also need to be kind of a thinker, right? To be able to create solutions which are outside of the box, right? So you need to really kind of dig into problem, understand where the problem is coming from, what is the root cause, and then design a solution, right? We should provide like a better product for people than existing ones. I mean, assemble that. Transfer wise, I mean, didn't really invent anything new. There were, you know, tons of, you know, brokers existed before who could do, you know, transfers, you know, much cheaper than transfer wise at the moment. Right? So in that case, it was more like a marketing machine. But, I mean, what we really do well, we really add value to people. Right? So at the moment, you will not find any company in the market who will bring in more value than we. So because we simply give Intermac rates and we think that affects you to be free.
00:07:51 · Tony Clark
[00:07:51] S2: Yes. We're at Level 32 now, which is three floors above Level 39, which is one of the places where a lot of fintech started, it was one that was certainly associated with a lot of hype in that. And chancellor wise, came on the show. Well, actually, never almost came on the show. There were about three conversations I had with them, but the problem I always had with them, which is, as I say, in terms of a marketing machine, I couldn't see what they were doing that was new. And To the extent they had propaganda about what they were doing was new, it wasn't true. So the propaganda was that they were just doing peer to peer stuff, but actually 60% or 80% of it went through currency clouds at the back end. The propaganda was, Oh, banks are terrible, blah blah blah. Well, we know banks aren't perfect, otherwise there wouldn't be a Fintech around today. But the reality is without the interbank market, the transfer was deals wouldn't have got done because you go from the front end through the back end like the currency plan into hitting HSBC's API in a big enough scale. As you've said, were plenty of brokers around and that kind of thing. And so just in terms of advice to other people, so as you say, you can grow a business quickly if you're really adding value. So if you're giving them in demand creates, then you'll add value to them and you'll get lots of customers. But how do you avoid that costing you a complete fortune? Because if I give you wholesale rates on bananas, for example, I'm going to lose a lot of money giving you the wholesale price of bananas as opposed to the retail price of one banana.
00:09:12 · Nik Storonsky, Tony Clark
[00:09:12] S0: I mean, the rate is our huge advantage that we own the whole infrastructure. We we build it all in house, the whole back end, all all the connections. Right? And for us, it doesn't cost anything to exchange money at the moment because we are connected, you know, to multiple banks, multiple brokers. Also, this is some of customer flows. So they're being asserted. Right? So for us, I mean, the cost of exchanging money is negligible. Right? And we we chose to give InterbankRace to customers as a benefit. Right? And then effectively the whole business model, we cross sell, you know, other services. So by giving away free FX rates, we're able to drive, you know, incredible customer acquisition growth with zero marketing spend. Right? And then we're effectively cross selling our other products to our customers. [00:09:55] S2: Right. And from a technical perspective, I'd understood that the problem of this sort of wholesale retail thing about exchange rates was in part that, of course, a bank is very happy to deal with people, but they're only happy to deal in a certain size. I don't know what the number is. For the sake of argument, let's say it's 10,000,000. If you've got 10,000,000 US dollars, I'm looking out the window at HSBC. If you've got 10,000,000 US dollars, maybe HSBC will give me the best rate for 10,000,000, but if I've got 10,000 US dollars, even if I'm doing it via an API, they're not going to give me that rate, in the same way that a wholesale seller will sell me 10,000,000 bananas for a very different price of 10,000 bananas.