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00:01Hello everyone and welcome back to Vivitech, we're still live from stage 2 and I am Asha Sunford, delighted to
00:08be your host today for the Scaling Up Sessions.
00:11So this session is the second in a series focusing on the major markets shaping the future of tech.
00:18So just to give you some background, the deregulation of finance and digital transformation have boosted the financial services sector.
00:26Today it represents over a third of Europe's unicorns, as the boundaries between traditional banks and fintech continue to evolve,
00:36so what do we need to watch out for?
00:39So I'm delighted to discuss this topic with my panelists, my guests here, very happy to welcome Chloe Mayenobi, Chief
00:47Growth Officer at Solaris Bank, and on my right, Rob Moffat, partner at Balderton Capital.
00:53Welcome to both, it's great to have you.
00:55Great to be here.
00:57Well, thank you, thank you to others.
00:59Right, so your first time here, Rob?
01:01No, second time at Vivitech.
01:03Second time, and Chloe?
01:04First time.
01:05First time, okay, great, so you're enjoying Vivitech.
01:08You're enjoying it.
01:09Oh yeah.
01:11Okay, so Chloe, I will start with you.
01:15Let's look a little at the context, I mean the pandemic unleashed like a new level of demand for online
01:23payment services, we've seen that.
01:25So how did your growth trajectory change since the pandemic?
01:31So our growth trajectory is going very well, and maybe backed on the pandemic as well.
01:38So I would leverage on the online payments that you just mentioned.
01:43And what I would say is that the consumer behavior has changed dramatically.
01:48And if there would be a word that I would, that learning from the pandemic would be the word ease.
02:00And I do believe that the customers want easiness, right?
02:06And that's exactly what a company like Solarisbank can bring to any customers, is that embedded finance is to ease
02:19the way of the final consumer.
02:23In bringing financial services to any customer journey, then it's become very easy for any customer to drive its way
02:37in any cases.
02:39So if I take the two sides of the road, so any retailer or any big corporate would now be
02:52able, thanks to financial services that we can bring, to be as well, or to bring financial services to their
03:00customers, right?
03:01And enrich dramatically the path for conversion and all this.
03:09So it will, for them, be a gain in sales, a stickiness, enriched stickiness from their final customer.
03:25And it will also bring a lot of data from the final customer standpoint, it will be a very easy
03:34way to get everything at the same place.
03:37Before, they would go for a lending thing to the bank.
03:41They would go to another spot to get loyalty.
03:51But now, with embedded finance, they will get everything on the road, right?
03:56Account, card, loyalty point, lending facilities, and the ability to use their crypto, for instance.
04:07All right. Thank you for sharing.
04:09So, Rob, what would you say, which sectors in fintech today are attracting more investment, and why is that?
04:17Yeah, so, interesting sectors in fintech.
04:21I think, start with the sectors that aren't interesting right now.
04:23I think crypto is no surprise that that's probably not the top of people's minds, based on what's happened to
04:29crypto prices.
04:31And I think lending could be tough over the next two years.
04:34I think businesses that have been lending with zero defaults for a couple of years, that is no longer going
04:38to be the case.
04:39I think what I am excited by, payments, every year is a sort of trend year for payments, because payments
04:46keeps evolving.
04:47And there are exciting new trends around open payments, around payments automation with companies like Primer,
04:54and around B2B payments and payments automation with a local company here, Numeral, and others.
05:00So, there's a lot going on in payments.
05:02I think B2B and embedded, as Chloe mentioned, is definitely a big trend.
05:05There's a lot to happen on B2B.
05:08And then the final theme, I think, is around financial wellness.
05:11This is going to be a tough financial time for a lot of people, the majority of the population.
05:15So, how do you help people get control of their finances, whether that's getting control of their budgeting,
05:23whether it's targeted lending at fair costs, whether it's investing, and investing in sensible and low-risk approaches.
05:30So, we're seeing a lot around those areas.
05:32OK. So, Chloe, as a platform for one-stop shop services, which services do you think are here to stay?
05:41Which ones have, you know, the greatest growth potential?
05:45What would you say about that?
05:46Is it like the buy now, pay later?
05:49Crypto, crypto, we heard crypto trading.
05:51I don't know, probably it's not the right timing.
05:54Well, we've been hearing a lot about BNPL on the last two or three years.
06:00We've been hearing a lot about crypto as well, crypto custody, crypto whatever.
06:05We are at Solaris Bank.
06:07We believe that the account is the basis that we should think, well, that should be the center of everything.
06:15Just because it's the basis to any other financial services, right?
06:21So, as you said, we are a one-stop shop.
06:24Whatever financial solutions, you will find it on the shelf.
06:28And it's also fair to say that financial services are commodity.
06:36What brings value is our partner in defining the customer journey of their customer, right?
06:45And in targeting, in bringing the right solution, the right product, the right feature to a targeted segment of people
06:55that have specific needs, that's where the value comes from.
07:01So, to answer your question, I don't see any product getting on the rise or some, like, just devaluated.
07:10But I do believe that the value comes from the adequacy between the right product to the right person.
07:20Right.
07:21So, actually, after reaching high records of valuation of tech stocks, we've seen that plummeted during the first half of
07:30this year.
07:31And some major fintech players, actually, that went public, have seen their share price more than halved.
07:37And some potential IPOs have even delayed their listing.
07:41We've seen that.
07:42So, Rob, what can you say?
07:43Will these corrections in the public market spread out into the private market?
07:47Are you seeing any signs of the valuations coming down?
07:51What can you say about that?
07:53Yeah.
07:53So, you're right.
07:54The public market valuations in all tech companies are down a lot.
07:59The last panel was on speedy delivery.
08:02And that's definitely been hit hard.
08:04But, yeah, a number of fintech sectors have been hit very hard.
08:07Insurance, obviously.
08:10Robinhood and anything around investing, anything crypto-related, are down 80%, 90% even.
08:15Way more than half.
08:18And, yeah, we are seeing that spread to private markets.
08:20So, what we're seeing at the growth stages, the Series C, raising $50 million plus, is those hedge fund-type
08:28investors, the Tiger Global-type investors, have pulled out completely.
08:33So, that whole pool of money is gone.
08:36The late-stage VCs, Sequoia Growth Funds, people like that, they are investing.
08:41But, funds that they were investing over one year or 18 months, they're now investing over three or four years.
08:48So, the pace is probably half of what it was before.
08:51And that's translating to less demand for rounds.
08:54Some rounds not happening at all.
08:55And other rounds happening at lower valuations.
08:59And, I think part of that was valuation multiples just got too high in 2021, even 2020.
09:07So, multiples were just too high.
09:08It was, you had to believe everything would go right and interest rates would stay zero.
09:12And then they might make sense.
09:14It was definitely a kind of complete discounting of risk.
09:18And we know that's not the case for tech startups.
09:21Even at more advanced stages, there is still plenty of risk.
09:25So, I think we're seeing valuations get sane again.
09:29The market always overcorrects.
09:30And I think we're a little bit in the overcorrections phase at the moment.
09:34But, by the end of the year, I think we're probably back to where we were 2018, 2019.
09:39Which is still plenty of funding.
09:41Right.
09:41I've been doing VC since 2009.
09:43And it's a much, much bigger market in Europe than it was then.
09:47And plenty of funding around for good companies.
09:49But at sane valuations and sane amounts.
09:54Not companies raising too much, growing their burn far too much before they have clear product market.
10:00More realistic.
10:01Exactly.
10:02Yeah.
10:02Would you like to build on that?
10:04I'm sorry, because I didn't hear what...
10:10Say yes.
10:11For you to know, the sound is like echoing.
10:14So, I'm struggling to understand.
10:16No worries.
10:17No worries, Chloe.
10:18I heard a lot around valuation.
10:22And we were talking about this crazy valuation of 2021.
10:26Is that correct?
10:27Yes.
10:28Exactly.
10:29Down to...
10:29Yeah.
10:29Yeah, exactly.
10:30That's reality.
10:30So, do you see any sign of, you know, of valuation coming down?
10:36I mean, there was a correction.
10:37And we were talking about even if the fundamentals are quite there, the liquidities are there,
10:44but we are not seeing the same volumes.
10:46And this is...
10:47Yeah, exactly.
10:48So, maybe, Chloe, if you want to build on that.
10:50So, for us, it's something that we will care about a lot.
10:55Because, well, there's our own valuation, that's for sure.
10:58But Solaris Bank has started with neobanks mainly.
11:03And those other fintechs will be also maybe hit by those new valuations coming over in the future.
11:15So, that's something that we will monitor, like something on the fire.
11:22Right.
11:22But do you believe the fundamentals are there?
11:25Fundamentals are very there.
11:28And once again, I do believe that financial services, whatever they are, so fintech as a whole,
11:34is a key driver towards bringing value, once again, to the end customer
11:47and enrich all its behavior and its journey.
11:54So, yeah, fundamentals are definitely there.
11:56Right.
11:57I don't know if I need to speak louder for you to...
11:59You guys, you hear me, right?
12:01It's whenever you turn your head.
12:04On the other way around.
12:05So, you're doing some lip reading, right?
12:08Yeah.
12:08We try.
12:09All right.
12:10So, my next question is more on inclusion.
12:14Right.
12:14So, inclusion.
12:15How can fintech companies and investors be more responsible, you know, in what they provide to consumers?
12:23That's, I'm sure, this is something that you must be working on a lot.
12:30Chloe, you want...
12:31So, I would enlarge saying that technology brings, you know, will drive costs down.
12:40That banking as a service is commoditizing all the banking segments.
12:48And by, once again, by the technology, by being scalable, by decreasing the cost, and allowing any retailer or any
12:58company to actually bring financial services to their own customers.
13:04In that way, yes, it's a huge path to inclusivity.
13:09What's your take?
13:10Yeah.
13:13By nature, I'm a big believer in technology's ability to transform and to bring inclusivity.
13:19Part of that is because just bringing down the cost of financial services.
13:23I can now set up a neobank and my cost to serve someone is so low.
13:26So, people who are underbanked before because they were low income or no income or they were kids can now
13:32have bank accounts.
13:33And that's a cost-effective thing for Revolut to do or N26 to do to provide current accounts to people
13:39who were previously unbanked.
13:42It also allows lending in smarter ways.
13:45So, before, it was all about your credit score.
13:47And that was how you could get lending.
13:50Now, someone like Lendable can understand your financial position.
13:54They get access through open banking to your historic finances.
13:58It can work out, actually, yes, Chloe can borrow $300.
14:03And that she is probably going to pay that back.
14:05And then that ability to start building your credit rating, start building your financial presence.
14:11And I think there's a, I think where I'd like to see more work is around product design and making
14:17sure product design is inclusive.
14:19I think there's still too many tech products being built by young white men, for young white men.
14:25And so, how do you change that?
14:29So, we're seeing, for example, investment products that are led by female founders focused on how do you think about
14:36investment?
14:38And there are different ways to think about investment.
14:40So, that's one piece.
14:41Another piece is around international movement.
14:43So, people who've moved countries, how do they get immediate access to financial services?
14:47So, I think there's a lot happening there.
14:49And especially, we see that in developing countries.
14:52Chloe, you wanted to say something.
14:54No, I totally agree.
14:57I think, and we were talking about the fundamentals.
14:59The product are there.
15:01Now, it's the design.
15:02It's the use cases that will be brought by everyone on the market that will change the game in inclusivity.
15:10All right.
15:11So, I wanted to touch on the fact that we've seen like an acceleration of fintechs in developing countries a
15:17lot in Africa, for example.
15:18Because you were talking to people who are unbanked, not even having a bank account.
15:23So, this is something that is thriving in many countries, in many African countries.
15:27I don't know if you have some insight to share on that.
15:30Yeah.
15:31We're investing in two companies in Africa, in fintech.
15:34So, there's a company called Prodigy Finance.
15:37And that's allowing people to get postgraduate student loans from anywhere in the world.
15:41So, residents, citizens of 120 countries and around the world can get a loan to do an MBA in Paris,
15:48an INSEAD, and then go and work in the U.S.
15:50So, providing that access to higher education.
15:54And a company called Luno, which is enabling crypto access across Africa.
15:59So, the two investments we have made.
16:01We've looked at a number of others.
16:02Obviously, a lot happening in remittance and just the neobanking.
16:07And, yeah, there's a number of fantastic companies coming out of Africa on that.
16:11I think you can do more in Africa, Rob.
16:13Yeah.
16:14No, we should do that.
16:15Our focus is Europe.
16:16So, our remit, what we tell our LPs, is we are a Europe-focused investor.
16:20But we maybe stretch that a little bit where we can.
16:24You want to?
16:25Well, today, we are just in Europe.
16:27Well, Europe.
16:28For now.
16:29Yeah.
16:29For now, of course.
16:31For now.
16:31So, next move may be Africa.
16:33Right.
16:33To remain a little bit in the same topic, I would like to touch on financial inclusion.
16:39Right.
16:39So, really, we spoke a little bit about that.
16:41What do you think?
16:42To what extent is the development of fintech an opportunity to bring financial inclusion
16:48to underbanked communities?
16:50I don't know.
16:51Is this a reality in Europe?
16:53We're speaking about developing nations.
16:56What do you see on that front?
16:58Yeah.
16:59I think part of financial inclusion is, yeah, bringing in the unbanked and the underbanked
17:03and giving people access to financial services.
17:06But I think it's also about how do you get people to embrace their financial matters and
17:12to care about it and to not be terrified of it.
17:15So, I work with one company called Clio.
17:17It's focused on Gen Z, so young Americans, who have an average balance of $13, significant
17:26debts already, and they're only young.
17:28So, how do you help them to get control of their money?
17:31They've never had any financial education.
17:33So, Chloe speaks to you, gives you shit about your finances, about what you're doing wrong,
17:38how you're overspending, helps you get a budget, helps you get out of debt, helps
17:43you start to invest and build up a cash savings cushion.
17:47So, I think that financial wellness piece is really important.
17:50Another investment we have, WageStream, has got some similarities, but working through
17:54employees, what they call frontline workers.
17:57So, it could be hospitality workers or service sector or minimum wage often.
18:04And how do you help them get control of their finances and bring that financial wellness
18:08across your workforce?
18:11And Chloe, in financial inclusion?
18:13Yeah, well, once again, what we serve is a commodity.
18:19So, whatever, once again, whatever company would bring that to a larger scale of people,
18:29to new countries, we'll be happy to serve that.
18:34And I think, like, the technology is now there to help this arrive.
18:41And probably one final question.
18:43So, how do you see the future of fintech?
18:47Nice, easy, short question.
18:49Now, I think we're just getting going in fintech.
18:51You look at the size of the financial markets, it's multiple trillion.
18:56And in terms of the market cap of all fintech companies, it's, I don't know, I'd say well
19:02under 100 billion, maybe more if you include the payments companies.
19:06There is so much more to go for.
19:08You look at some categories like investments.
19:10Tech has hardly scratched the surface.
19:13Insurance, still in super early days.
19:16So, there's so much more to be done.
19:18And it's across sectors.
19:19And I think a big part of it is around the interconnectivity.
19:24So, the open banking, open payments, open accounting, a platform like Solaris working with a best-in-class
19:32AML player like Comply Advantage, working with someone else on payments, I think having those
19:39very clear integrations, thinking about finance in the same way you think about world-class
19:44software products, I think that's what I'm most excited by.
19:48And Chloe?
19:48So, what is very interesting in fintech is that we are all competing and cooperating.
19:55So, we are frenemies for those who have heard that expression.
20:00And it's more and more the case, right?
20:04Because fintech has been siloing a certain amount of services.
20:12And we all need the service of someone else in order to broader our audience.
20:17and our services ourselves.
20:20So, we will get partnerships more and more live.
20:23And that's what I see as a future of fintech.
20:27It's like being all together, well, on each of the parts.
20:31But it will be a very big hole, you know.
20:37The future of fintech is a big hole.
20:39It's not a big hole, a big wall.
20:44Sorry.
20:45It's going to be hard to build on that.
20:47It's, yeah.
20:50Big wall or big hole?
20:52That's, yeah.
20:53That's a wall, W-A-L-L, huh?
20:56W-H-O-L-L-E-O.
20:58W-L-T, right?
20:59A big hole.
21:00So, how does ecosystem work?
21:01Embrace the wholeness.
21:02The wholeness, exactly.
21:04All right.
21:04So, there are many entrepreneurs here, many startups here.
21:08For those who don't understand fintech yet, what would you like to tell them?
21:13I would say there is so much room to innovate.
21:15And the people who are going to innovate in fintech are not people from financial services.
21:20And so, one thing I've, the reason I do these talks is because I'd love more founders to start more
21:26things in fintech.
21:27Particularly in areas like insurance, like wealth management, where very little happens.
21:34Because, yeah.
21:35A great smart person, a great technical team can have a massive impact.
21:39And it's the people from outside the industry that ask the difficult questions, that have fresh approaches.
21:44And so, that's, yeah, the majority of the fintech founders we've backed.
21:48We've backed about 20 fintech companies.
21:51And the majority of the founders are not from financial services.
21:54So, yeah.
21:55It's encouraging founders to continue founding companies.
21:58Yeah.
21:58Because there's also this misconception of fintech being just people from the sector.
22:03Yeah.
22:04And it's a little bit intimidating because there's jargon.
22:07There's regulation.
22:08You need balance sheets.
22:10Yeah.
22:10Also, because you guys are not very clear.
22:12Yeah.
22:12I know.
22:13Exactly.
22:14And you try and pull yourself up and you realize you're just throwing some more jargon in the mix.
22:17But, yeah.
22:18I come initially from a finance background.
22:21So, I know what you're saying.
22:22Okay.
22:23So, no.
22:24I think often the best time to found a company is in recessions.
22:28That's the time when things are in flux, when incumbents are struggling, when opportunities come up, there is less competition.
22:36So, this is a great time to found a business in 2022.
22:40And what would you like to tell them?
22:42I would tell them, well, come to us.
22:44There's normally something that we can do for you.
22:48Whatever, whatever the industry, whatever they're building.
22:51I mean, exactly.
22:52All right.
22:53Well, they would need the financial services.
22:55That's for sure.
22:56Every tech company is a fintech company.
22:58Exactly.
22:59By definition.
23:00Exactly.
23:01Brilliant.
23:02Thank you, guys.
23:02Thank you.
23:03It was great to have this chat with you.
23:04Thank you so much.
23:05So, you have still questions about fintech.
23:06These guys are going to be around at Viva Tech, so feel free to talk to them.
23:11Thank you, Rob.
23:11Thank you, Chloe.
23:12It was great to have this conversation.
23:14And thank you to our lovely audience for bearing with us.
23:18Thank you very much.
23:19All right.
23:20Thank you.
23:20So, of course, stay with us because we're coming back in a few minutes to talk about deep tech and
23:27those behind their screens.
23:28So, remain on stage two.
23:30We'll be back in a couple of minutes.
23:32Thank you.
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