Ever since the GFC hit back in 2008, UK banks have been on constant watch, terrified of being on the receiving end of fines such as the $8.9 billion imposed on BNP Paribas for facilitating underhand Rwandan cash flow during the genocide years.
Unlike their counterparts in Australia, British (and European) financial institutions, consumed with cleaning up the mess accumulated over years of careless oversight of dirty money, have little time to be concerned with customer experience, let alone innovation.
For Michael Stachowiak, who heads Airwallex’s European Expansion in London, the UK customer’s distrust of banks comes as a double-edged sword for fintechs looking to expand there. We caught up with Michael in our second part of Talking to Airwallex to explore his experience of doing business in Britain, the British fintech landscape, and how it compares to down under.
How would you describe your role?
It’s been a mixture of relationship management and business development. It’s very client-facing – I talk to new clients, I pitch, educate them and sell them our product. And at the same time, I’m building relationships to partner with banks that we need accounts with as an FX provider, and that tends to be a much slower process.
I've been in the thick of decisions and observing the full pipeline from getting clients in the door to actually getting them trading. Sometimes this end-to-end visibility is a challenge, as I have to manage all of the clients' expectations as well as get them on board. But when you’re working in a company like ours, you need to be flexible. You have to make sure we can deliver as a team and that requires working with everyone from finance, legal, marketing, delivery and product.
How do partnerships work?
It’s definitely a ‘you scratch my back, I scratch yours’ situation. They work in different ways, but one main example is for expanding our global reach. I’ve been meeting companies who have similar business models to us, but have access to different corridors. We facilitate payments to certain countries such as China and APAC, and they have another part of the world we would like access to. So they plug into us, we plug into them – and we expand each other’s capabilities, becoming more global.
Do you think it’s easier to get in contact with the big players in the UK than Australia?
From a fintech perspective, there’s more companies over here, that’s definite. But there’s also this huge payments community: a group of payment service providers, and we’re now a part of it: we’re a PSP.
Here [in London] it’s about leveraging the people you know here and your network, because everyone knows everyone here.You’re really in a community, and it’s remarkable. You meet people one by one, you connect on LinkedIn and you realise everyone is already friends. Every competitor here is a friend as well. It’s to the point where if I meet someone in the industry now and I don’t see that they’re very well-connected to my network, I would wonder why they haven’t already met everyone else.
How does carrying out a business deal work in the UK?
People don’t want to do business immediately in the UK. You have to build a personal relationship - it’s never going to get done in one meeting. It doesn’t matter if you’re talking to the decision maker. You need to have a few conversations, you need to build rapport, you need to build their trust. They’ve got to like you, and they’ve got to want to work with you.
It’s a stereotype of British people, but it’s true! You need to be polite, show interest in their product, find out what their products are and what services they need. Take them out for a beer, get casual with them if you can. If you tick them off, you’ll only get a bad reputation and it’ll just make life harder. You’re all friends, you’re all competitors – but it's important to stay on good terms with everyone and support the work they're doing too.
Generally, things don’t happen very quickly. It takes time, because they want to introduce you to the expert, then you’re introduced to someone else, and someone else. In that sense there’s a lot of hurdles before you reach an agreement. Although, on occasion, when you just click – deals can happen very quickly. There was one startup I had three beers with, and we were shaking hands at the end of it.
Do you think you’ve honed your pitching technique since the beginning?
It’s ever-changing, you can’t always do it the same. You have different types of individuals: there are people who want all the facts, and there are people who want a big picture. You have to understand what people want, and how we can help them specifically.
Have you ever had someone react negatively, or distrust you because you’re from a fintech far away?
I think we’ve got people’s attention, but the next step is detail. The challenge is to have credibility once they’ve noticed you, and to prove that, you have to have the answers for everything. Because we’re still in our early stages, it’s sometimes hard to give a definitive answer on every detail. But we’re imminently going live with some huge partnerships - which I can’t wait to brag about.
Have you noticed many people discussing Brexit and the implications it might have on UK business and finance?
From what I’ve gathered, most companies that are already established here in the UK have Brexit blueprints, most of which involves establishing another office in Europe. But they’re all doing something: they’re all certain that something is going to happen and they’re bracing themselves.
It’s not something that comes up really, it’s just a fact here now. People have accepted that you have to plan for it. It’s dangerous to take the negative approach – fintech here is still ranked third in the world. I think personally for us, the UK comes as a first priority, then we can worry about the rest of Europe when we’ve conquered here!
How would you say UK and Australian banks differ in their treatment of fintechs?
There’s definitely a current trend in Australia where all the banks are jumping on the fintech bandwagon because they can’t do innovation internally and it’s difficult because they need time and money to innovate, but they have their daily jobs. So they say, okay, let’s get a separate team on the side to invest in exciting little startups. Because the banks in Australia are so well-entrenched and so incumbent, their only avenue to grow is to partner with fintechs to make sure they have a better offering for their customers than their competitors.
As a contrast, all the banks in the UK and US are snowed under with regulatory work and that’s their priority. They’re so hamstrung from the GFC, whereas the Aussie banks can be a bit more daring.
You said approaching banks in the UK was difficult, please could you elaborate?
It’s challenging. The banks have bogged themselves down and prohibited themselves from working with fintechs like us. The fact is that when we speak to certain banks, they want to bank us, but they have challenges trying to do it because they have certain restrictions.
Banks in the UK are less willing to work with anything that could remotely be considered ‘high-risk’, and most fintechs are finding it hard to be compliant with their hefty new regulations. The FX team, the transaction banking team, and the alternative payments team are all interested in what we are doing, but know that there are challenges in terms of getting past compliance.
Even the largest UK banks can’t deal with us because the way they structure their business means they can’t bank us until we have millions of dollars in revenue. They know this is a problem as for companies like us, it's about future potential. Fintechs need to be supported early, and the banks just can't support that at the moment.
A lot of banks in the UK have pulled out of the payments business altogether due to the KYC and AML costs and fines. However, this has left a huge vacuum for fintechs. There is demand for banking but no one left to service them: enter a company like RailsBank who work with savvy tech startups like Comply Advantage, Starling Bank and Solaris Bank to deliver banking services in a risk-averse manner. The big banks see this and want to get in, but can’t at this stage. Time will tell.