8 minute read
A moving target
After a white-knuckle ride of a year for the global economy, Greg Becker, president and CEO, of Silicon Valley Bank (SVB) Financial Group, must have been delighted – and perhaps a little surprised – to be able to announce, in July, that the Group had nearly doubled the size of its balance sheet over 2020/21 and added a record 1,700-plus new clients in the most recent quarter.
He credited that increase to ‘consistent focus on client engagement and expanding the range of services we offer. These investments – in people, technology, and infrastructure – are directly supporting our growth and peer-leading profitability’.
The importance of responding to client needs was a recurring theme in his earnings statement. And, after nearly 40 years of observing the behaviour of the entrepreneurs, enterprises and investors it supports, the ‘bank to the innovation economy’ has apparently become very good at it.
Meanwhile, technology company Technisys, also had a notable year. With $50million of venture capital backing from Redwood Capital and five clients (with more in the pipeline) in North America, the company established an HQ in Miami in June and began adding to its teams across the Americas. To date, it has enabled banks and fintechs to elevate customer engagement for more than 100 million banking customers in 16 countries, including its birthplace of Argentina, with its next-gen digital and core banking platforms. Commenting on its move into the US at the time, the company said that Whether the old adage ‘the customer is always right’ is valid or not, the core issue for business has always been how to predict and respond to their changing needs. David McHenry from Silicon Valley Bank and Michael Haney at Technisys share their views
what differentiated it from other existing large and very well-known platform operators there was its more flexible approach. It aims to help clients focus on their individual customers, working out not just what they are trying to do and enabling that, but understanding the motivation behind it – how they are feeling, what they’re likely to do next – and then helps clients respond appropriately.
“Banks are no longer just transaction processing corporations, centred around the financial product itself,” says Michael Haney, who joined Technisys to lead its Digital Core business in North America last year. “It’s about providing insights into their customers’ financial health, providing actionable data that they can use to achieve their goals, meet their needs and, ultimately, improve their financial health.
“So, banking becomes an enabler, rather than just something a person needs to do. We’re now assembling various deposit, lending and payment products into a capability that addresses a specific customer need, such as early pay/early wage access products, which are really taking hold.”
Technisys’ target companies are challengers, speedboat launches by legacy banks and non-financial services businesses that want to embed banking processes into their customer journeys. Its foundation product is its Cyberbank Core platform which, along with what it calls a digital engagement accelerator (Cyberbank Digital), gives banks access to a Cloud-native and API-centric, end-to-end digital architecture and third-party API marketplace that allows them to dynamically change and scale their products, based on customers’ behaviours and needs.
Those behaviours and needs changed dramatically, of course, during 2020, and amplified calls to improve banking for the under- or unbanked segments of the US economy (people and business) using better data and innovative personal financial management (PFM) and business financial management (BFM) tools. Among Technisys’ first customers outside Latam was Rellevate, a neo bank concept built around earned wage access solutions, which is reaching out to the underbanked through employers.
Technisys’ platform underpins Rellevate’s Pay Any-Day service, which was launched last year in the US. Targeted at the hourly waged, it works with employers to provide staff with access to money they’ve already earned without having to wait for their regular monthly payroll cheque. In this way it hopes to reduce reliance on traditional pay-day lenders with their sky-high interest and service charge fees.
In Canada, the Cyberbank platform is powering the country’s newest digital banking app, Brightside, from ATB Financial, designed to enable customers to spend and save without switching banks. It has also enabled Brightside to give customers the ability to order and activate a payment card, and set up savings features like Round Ups and Save Automagically, all within the app on their phones.
Haney believes those mobile devices are going to start being supplemented by other ways of interacting with a bank, too – via smart speakers and smart watches. In short, where customer banking actually needs to be. And data will be fundamental to both determining and driving that customer behaviour and informing product development.
David McHenry, SVB (UK)
“Picking the right things to develop, devise and prioritise is all based on data and that’s something the banks are making a better job of,” says David McHenry, head of global treasury and payments advisory for the UK at SVB. “Maybe we sat on data in the past and didn’t use it as well as might have; but it’s going to be our success in the future.”
Silicon Valley Bank sees customer demand from two perspectives: its own in serving entrepreneurs and business customers, and as an investor in startups and scaleups that are focussed on, and driven by, their customers. It claims that around half of US-based, venture-backed tech and life science companies bank with it, and 65 per cent of VCs themselves. It moved into the UK to build a similar portfolio a couple of years ago.
“We have an amazing set of clients, who are driving their businesses, and doing a lot of these things that we’re talking about. From a competitive standpoint, it’s these hyper-focussed platforms that are growing and scaling rapidly,” says McHenry.
“It’s that idea of making data influence trading venue for private company stock. The aim is to give SVB’s fast-growth companies more liquidity options and broader access to investment – which, in terms of responding to client needs, is of another order of magnitude all together.
SVB Group CEO Greg Becker said he expects it to make more and more frequent strategic investments of that type in future.
“Markets and moods may change,” he told stakeholders. “What won’t change, however, is our faith in and focus on innovators and the innovation economy.”
If customer needs are a moving target, then both SVB and Technisys look to be keeping them in their sights.
decisions and drive your user interface, your user experience and your go-to-market strategy. That’s what we mean when we talk about iterative development, picking the way a client expects to work with a financial institution.
“At SVB, I think we have a fantastic engagement model, in terms of how we go to market, how we support early-stage companies, growing companies and multinationals, and their investors. When we talk about product development, we use data to tell us about our click-through rates, identify our challenges and failures and what’s happening on our platform. And we use it to make decisions about what we prioritise, what we streamline, what we enhance, and to identify the new areas that clients are looking to financial platforms to use. That means we are building the right integration and interaction into the future.”
The high net worth individuals that SVB has helped create in the tech space, for example, will have their private banking services enhanced by the recent purchase by SVB Financial Group of Boston Private Financial Holdings, which it hopes will capture a larger portion of an estimated $400billion opportunity among the bank’s clients. They will benefit from integrated wealth management, trust and banking services, with bespoke solutions and what’s described as a next-generation, digital wealth access portal.
Meanwhile, the bank is broadening its corporate account holder services through third-party deals and API integrations with a wide range of solutions providers. A referral agreement struck between SVB and payments service software provider Modern Treasury in May, for example, provides mutual clients with the ability to process payments directly through their SVB bank accounts. It will enable users to send, receive, reconcile and approve payments using SVB’s domestic and international payment methods and currencies. The integration is aimed at increasing efficiency and providing transparency around the full payments process for clients, adding to the portfolio of specialised banking services that are tailored to fast-growth companies.
In July, SVB also extended its Europe, Middle East and Africa (EMEA) partnership with currency management automation software provider, Kantox, to its corporate account holders in the US. They’ll now also be able to leverage the Kantox Dynamic Hedging solution to automate the management of their currency risk and give them instant visibility into both macro and micro foreign exchange exposures. Risk is automatically offset by booking, reporting and reconciling hedging transactions in real-time – and all with minimal human intervention.
According to KPMG, the US now accounts for more than 70 per cent of global fintech funding. The latest PitchBook-NVCA Venture Monitor quarterly report shows venture capital activity there was up across all sectors in the first half of this year. Figures showed total deals in H1 2021, reached $150billion across 8,406 targets, while non-traditional investors were on track to have raised a further $115.9 billion. On the fundraising side of the equation, $73.5billion was raised by 337 venture funds during H1 2021 – not far off the $80.5billion in the whole of 2020.
So, it was against a background of those metrics that, in July, SVB Financial Group also announced a joint venture with Nasdaq and a consortium of leading investment banks to create Nasdaq Private Market, an institutional-grade, secondary
