what it is going to cost and what’s going to remain of the amount that you sent at the end of the day. So, things like SWIFT, where you’re making it easier for these payments to go through the banks, with more tracking information, fewer lifting fees, and more insight across the spectrum, are a huge step forward for legacy wires. “But blockchain is also an incredibly cool technology that has definitely moved from science projects into some reality. We’re looking at how that could change things like global trade, managing assets or powering payment, even though there are still questions about throughput and scalability for different models. Mastercard and Visa have amazing payment platforms, for example, where they don’t need to rewrite their transaction pieces right now, because they have a tonne of throughput and it works. But, as new developments come along, they might well pick blockchain technology to build some of their core underlying structure.” SVB itself had a hand in mentoring PayStand, a blockchain-based, payments-as-a-service platform, which took part in Class 8 of Commerce. Innovated, a US accelerator programme focussed on growth and innovation in finance, which gives access to SVB, First Data and their networks. Launched in 2014, the scheme has worked with 32 commerce, payments and other fintech startups and, since graduating, more than half have raised funding or been acquired. PayStand itself went on to raise $6million in Series A funding to scale its model. Fast and frictionless crossborder and other payment systems are not just good investment targets, they are also important to SVB’s
own journey as a bank for entrepreneurs. “We have some of the most demanding clients in the world that are all building great technologies and iterating very quickly,” says McHenry. “Whether it’s SWIFT gpi integrations and host-to-host, or building out our application programming interfaces (APIs) that are powered by open banking standards in the UK, or other API standards that we have in the US for developers, we’re balancing out [our legacy technology] with ways that our clients want to integrate with us.” In its last annual report, SVB acknowledged that it could not itself be seen to be behind the curve when it came to adopting the latest technology, telling stakeholders that ‘a failure to introduce products or services that the market demands… could have an adverse effect on our business, results of operations, growth prospects and financial condition’. So, it's taking the initiative. This year, the bank introduced a new Innovators credit card for startups, which offers ‘venture-friendly approval’ while protecting the holder’s personal credit score and scaling the amount of credit available with the growth potential of the business. In its investor briefing it also said it is committed to building a new digital banking platform.
Are we nearly there? Global venture capital activity continues to break records and, according to SVB’s own survey of UK companies, this year 50 per cent will look to VC for funding. There is a note of caution, though: figures suggest that investors are becoming pickier, preferring to back proven, later-stage companies with the capacity to generate lasting scale and enduring profits. While the first half of 2019 saw investment in start-ups increase by just over 45 per cent year-on-year, according to Innovate Finance, 85 per cent of that came from later stage venture capital and private equity growth investment rounds, with angel, seed and early VC rounds accounting for 15 per cent. Indeed, Kausik Rajgopal, a senior partner at global consultancy McKinsey, recently warned it could be the ‘endgame’ for the sector if early-stage investment dries up, saying ‘loss-making firms with models based on burning through venture capitalists’ cash are doomed’. Against the background, SVB promises clients that it will strive to increase their probability of success. For companies like London-based regtech ClauseMatch, for which the bank agreed a $2.5million loan package in May to support its growth in Europe and Asia, and Canadian startup Xanadu Quantum Technologies, which the bank recently helped raise $32million in venture funding to build the world’s most powerful computer, that promise means ‘fintech eccentrics’, wherever they are, can continue to dream big.
Ready for take off: SVB and its VC partners strive to power fintech startups
Issue 13 | TheFintechMagazine
Fintech Finance presents: The Fintech Magazine Issue 13