Move over old dogs, challenger banks are here to take over!
For the fifth edition of Fintech Chain Mail, we spoke to MBA 2017 alumnus Schuyler Weiss (CEO at +alpian) about building a fully licensed digital bank in Switzerland. +alpian is incubated by REYL & Cie, and aims to provide banking, wealth management and investment products to mass affluent customers via its app.
How did the idea of +alpian come about? And what are your plans with it going forward?
The partners of REYL & Cie were keen to explore entry into the digital banking market. I was brought on board to figure out if it was feasible to enter the market and, if so, how to do so. When we combined REYL’s strengths as a private bank with the opportunities we identified in the market, we were able to build the vision of +alpian.
+alpian is developing an affluent banking experience for clients in the mass affluent segment, delivered through its proprietary mobile application. The offering combines everyday banking services, personalized wealth management, and tailored investment products.
We have applied for a banking license, and plan to go live once we receive regulatory approvals. The funds from our Series A are being used to build the banking and technological foundation of +alpian. Future funding rounds will be used to fund our growth.
How does +alpian compare to other neo and challenger banks? What are your strengths in comparison to them?
Most challenger banks currently need to partner with licensed banks to offer banking services, which typically restricts their offering to the capabilities of their partner bank(s). Because +alpian will be a fully licensed bank, we can customize our products, services, processes and infrastructure in an optimal way. In addition, by first obtaining a license, we can demonstrate to the client upfront that we have put in the work to operate as a regulated Swiss bank.
Our offering will drive a more interactive and engaging client relationship than most neo banks. Leveraging our proprietary technology, we will be able to build a true partnership with our clients and better serve their underlying needs. Understanding our future customers will help +alpian deliver tailored product offerings in line with our strategy, unlike retail banks which typically focus on generalized mass-market services. That said, we believe our clients’ data is private and should be secured to the greatest extent possible.
Other challenger banks are getting a lot right on the digital side, especially from a payments and operations perspective. However the factors mentioned enable +alpian to address the affluent segment of the market in ways that others are not capable of at the moment.
How will neo and challenger banks meet the challenge of larger banks with deeper pockets launching digital offerings?
There is a trade-off between the trust of incumbents and the innovation of new players. While we take an innovative approach to building and delivering our technological solution, we were incubated and nurtured by REYL, and we aim to be a licensed Swiss bank. For these reasons, we feel that we are able to leverage many of the benefits realized by both incumbents and challenger banks, while avoiding some of the disadvantages of each.
In contrast to how Alpian was incubated at REYL, most incumbent initiatives are run from within the existing bank. This setup typically forces the innovative initiative to adopt the incumbent’s legacy procedures and traditional culture. Innovation is often stifled in such cases.
What are your thoughts on the Swiss and global Fintech ecosystems? Do you see opportunities for +alpian to pursue an international expansion?
In Switzerland, the B2C Fintech ecosystem is primarily driven by incumbents, which contrasts with most other markets where start-ups are more prevalent. The exception in Switzerland is the digital asset space (cryptos, etc) which is quite unique and driven by new players.
FINMA, Switzerland’s Financial Market Supervisory Authority, has done an exceptional job of maintaining the rigor and security of the Swiss banking industry, while enabling opportunities for incumbents and new entrants to innovate. Switzerland is a very good market to drive innovation; the risk just needs to be taken.
One challenge I see for broader expansion across Europe is the lack of homogeneity. Other markets, such as the United States, are more conducive for scale due to the size of the market and the commonalities of the language, culture, consumer behaviours and regulatory environment.
+alpian is focused solely on the Swiss market for the foreseeable future. There is a tremendous opportunity to provide a new way of banking to the Swiss affluent, and +alpian needs to ensure that the Swiss market is served correctly before considering expanding abroad. With that said, the opportunity that +alpian is looking to address exists in many countries across the globe, and if +alpian does not fill the need in other countries, another player will.
What do you think are the three most important trends in Fintech, and what is the potential scale of their impact?
The first is hybrid or embedded finance, which augments traditional banking by providing customers with access to financial services anytime, anywhere. This means that banks need to adapt to the world around them and find new ways to maintain customer relationships and trust. +alpian effectively seeks to capitalize on this trend as a regulated banking entity focused on enhancing customer experience.
Secondly, the entry of numerous Fintech players has put significant pressure on prices and margins for all players. This is especially the case in the B2C space where there is little room for differentiation and customers are increasingly seeking simplicity, convenience and service at a fair and transparent price.
Innovation in finance outside the traditional infrastructure is moving quickly – digital assets such as cryptocurrencies and smart contracts are great examples of this. While digital assets have a long way to go before becoming mainstream, the industry has tremendous potential.