Both Barclays and its competitors realize that a change is inevitable. They are lowering the barriers separating them from the world and the ecosystem. Cooperation between huge corporations and young startups, which would have been impossible a decade ago, is now a reality.
This is where the platform named Rise enters the picture. "We especially want to cooperate with young companies," says Barclays Israel COO Michal Beinisch, who founded and heads the local branch of Rise. "80% of this cooperation is designed to solve problems that the various bank divisions are encountering, while 20% deals with next generation technologies."
Beinisch continues: "Our goal is to provide a solution for every one of the companies in the Barclays group: retail banking, credit cards, investment bank, and so forth - and not just for one segment."
Relations between the bank and the startups is on three levels. The bank operates an accelerator whose second class recently got underway. It gives companies a work space and tries to position itself as a concern that supports the entire local fintech industry.
"Globes": What is Barclays actually looking for in Israel in the fintech sphere?
Beinisch: "Rise has seven centers worldwide. The three most prominent are in London and New York, the two largest financial markets. The third center is in Tel Aviv; it focuses on cyber, as well as other areas in which Israel stands out, such as cloud technologies. What is special about the Tel Aviv site is that we have a cyber laboratory. We realize that startups aren’t necessarily looking for money. There are cases in which they're looking for a partner in designing the product.
"There are about 70 accelerators in Israel, and we thought about how to provide real added value. 40 finalists come to us in each class, and we discard 20 of them. At this stage, we're doing a two-day marathon in which we select the companies. Senior managers in Barclays International are taking part in this event, and they say, 'This one's mine.' They sponsor the companies and accompany them from the moment they enter the program until a joint project or trial of the startup's product with the bank."
You emphasize young companies.
"Yes. More mature cyber companies usually don't come at all to accelerators. They prepare a power point presentation, and get $2 million from venture capital funds."
"The bank's systems are closed"
The combination of a startup with 3-5 people and a bank with tens of thousands of employees sounds like a difficult format.
"That's true. There are barriers in working with a large enterprise. It's a sociological and political matter. When you cooperate with a large enterprise, you are liable to step on a lot of toes on the way. There's also a technical point - the bank's systems are closed. You can't let a startup install its product on such a system easily, so we built an environment that simulates what happens at Barclays, in which the young companies can test their products."
What do you expect from the startups you are advising in the Rise framework?
"The company has to prove itself in order to reach a situation in which you justify working with a large bank. There are thousands of things on the way that have to be verified and many pitfalls. We undertake to try to provide them with the conditions from our side, and it was very successful in the first class of the accelerator. Eight of the 10 companies are already doing something with the bank. Some are testing their products, and some are in the proof of concept (POC) stage.
"Our job is to clear away the obstacles. Senior managers in the bank really want to bring as many new technologies inside as possible. The problem starts with the intermediate levels, for whom it's liable to be a headache. They might be working on something similar, or have less confidence in the solution of a small company coming from outside. Finding innovation is one talent, but knowing how to integrate it in the bank and make it happen already requires other talents."
And there are still cultural differences.
"There's a built-in tension, and everyone's aware of it. A startup has its own pace. If it doesn't succeed in making progress within a year and a half, it's likely to cease to exist. What we're doing is to shorten the process. On the other hand, some of the intermediate stages can't be skipped. You can't connect a cyber product to the system for all the employees at the banks without first checking the risks and hazards, but we help make the process easier.
"I think we have an interesting mix. On the one hand, we look like every other floor of the bank in London. On the other hand, in certain cases, we have the ability to make local decisions and run with them. In a certain sense, we're like a startup within the bank."
"The industry will have to streamline
What constitutes success from your perspective? How will the end consumer operate with the bank in a few more years?
"That's a very broad question, and the answer is different for different segments. In the retail sector, the bank is looking for innovation. They want the millennials to want to work with them - for the bank to be regarded as innovative. The problem now is that at the end of the process, there's some fax you have to sign, or you have to go a branch to be identified. The apps now in the market don't allow you to go through the whole process through the final click.
"That's the main thing for retail - to hang on to the young people and have them do everything through the bank's app. Other things to be changed involve cutting back the number of branches. Another thing keeping us busy is fraud in accounts and credit cards. This is an area that the banks are making a major effort to address, and companies that solve this challenge will be very successful."
On the one hand, you're a bank, while on the other hand, you're competing against hungry and rich technology giants with proven capabilities for providing a high-quality user experience
"Apple Computers, Alibaba, and Google are just as good at transferring payments as we are, but they don't want to be subject to regulation. Keep in mind that at the end of every cool technological deal, there's a bank account, so I don't think that the banks will disappear. The industry will have to streamline and adapt itself, use bots, and manage the interface only on mobile and in chats. Still, in the end, there's a bank account."
Could the small startups with which you are working be those who will eventually threaten you?
"We want to combine with them, and I think we can be partners, not enemies. Startups like these have very difficult regulator barriers. It boils down to trust. You're handling people's money. I think that we can be part of the revolution."
Can a company coming to you also work with other banks?
"Yes. A company that wants to be serious won't want to work just with Barclays, and the last thing we want is to restrict them. I met with Carmel Ventures cofounder and general partner Avi Zeevi, who is the guru of the fintech sector. He referred to the high-tech industry as co-opetition - competitive cooperation.
"He said that as a venture capital fund, he competes against other venture capital funds in the morning for funding a deal, and in the evening, they sit together on the board of a different company. I really like this attitude; it's new and revolutionary in the industry we're working in. It's also what the banks should do. You can't do innovation if you have a closed mind."
What will the future of banking look like?
The list of companies that have participated and are participating in Barclays accelerator gives an interesting look at the technologies that all of us are likely to use in the future. One of the companies that took part in the first accelerator class is Bstow, which "rounds off" credit card transactions and makes it possible to donate the rounded off amount to a charity selected by the user. This technology will be installed in the coming months, and will be available to Barclays customers in the US and the UK. Another company from the previous class, Option Samurai, offers capital market personnel information that will help them made better investment decisions.
The second class of the program includes Salaryo, which offers credit to freelancers, Leo Chief of Stuff, which makes it possible to buy insurance using a bot (without a human agent), and Ownerhood, which enables a number of people to jointly buy assets.
Published by Globes [online], Israel Business News - www.globes-online.com - on February 22, 2017
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