Partnering is the way to go
In 2016, ABN AMRO launched ABN AMRO Ventures to invest in fintechs. Four years further, we talk to its head, Hugo Bongers, about what his team looks for when investing and how he sees ABN AMRO’s relationship with the fintech sector developing over the coming years.
What do you look for in a start-up when deciding whether to invest?
“From the outset, the approach of ABN AMRO Ventures has been to invest directly in fintechs and become a minority shareholder. Beyond that, the solution needs to be workable and fit with ABN AMRO’s bank-wide strategy. So we don’t invest if the fintech doesn’t have strategic added value for ABN AMRO. And we’re looking for companies that will solve a real pain point for our customers.
In turn, we want to be sure we’ll be adding value to the fintech. For example by becoming a customer or distribution partner, or through knowledge sharing or similar support. Our investment should support and facilitate the existing business.
Any fintechs we invest in must also remain independent and continue to expand swiftly. A fintech will inevitably face challenges, so a multiple perspective approach is invaluable. That’s why I prefer their team to be experienced and diverse.”
What do you see as the advantages of partnering with fintechs rather than developing inhouse?
“In some cases, it can make sense to keep it proprietary. But most of our problems have already been solved by the market and to be honest we believe that the era of developing everything ourselves is in the past.
One of our fintech partners, Tink, is a good example: we noticed a clear demand from retail customers for a solution that gave them insights into their spending. We could have built it ourselves but it would have required a lot of time and resources. At the time, Tink had 15 people working on the solution. Since then, Tink has grown tremendously to over European market leader with 300 employees and has deliver a big strategic and financial value to ABN AMRO. In addition, this partnership also brought a lot of value to Tink. There’s no way we could have committed those kinds of resources. Being an early-stage investor in Tink has put us in a very powerful position, and we’ve always had great access to the company’s founders.
This approach works well for both ABN AMRO and the fintech company, which benefits from the broad spectrum of professional support and knowledge we can offer them.”
What developments within the fintech landscape have been catching your eye of late?
“Initially, fintech was mainly focused on the consumer/retail space, which in general is where digital adaption is easiest and most advanced. But we’re noticing a lot of interesting B2B solutions emerging. As I mentioned, we actively look for solutions that will address clients’ pain points, and that obviously also includes the key pain points for our corporate clients.”
How can fintechs benefit from cooperation with a bank?
“A bank allows access to a large customer base and has deep expertise in risk management. Also, a bank provides the regulatory oversight necessary for fintechs to enter the market place. A bank’s resources enable to invest in technologies, such as artificial intelligence and big data. Also, a bank has strong existing relationships with their customers that have been in place for many years. Throughout their relationship, a bank has developed a level of trust and intimacy with their clients. In the end, we strongly believe that there is a mutual benefit and value-add.”
In 5 years, the investment fund has grown from EUR 10 million to EUR 100 million. How much further would you like to see it grow?
“In October 2015, when the fund still went under the name of ABN AMRO Digital Impact Fund, we invested an initial EUR 10 million in 3 companies. Two years later, the fund had grown to EUR 50 million funding 8 companies. Since then, we’ve again doubled the assets to EUR 100 million and today ABN AMRO Ventures is a shareholder in 14 successful fintechs.
The initial rate of growth can largely be explained by the time needed to get up to speed. Going forward, I think the ideal scenario is to have a portfolio of around 20 to 25 investments, but there is no real limit.
In terms of where we’re investing, we’re now spending more on infrastructure start-ups. This is because we remain a bit sceptical about B2C propositions, as they’re relatively expensive to grow. We prefer to look for a sustainable return.”
Hugo and his team are actively looking to invest in fintechs that will benefit ABN AMRO’s clients. If there are any specific pain points you think a fintech solution could address, please contact Hugo at hugo.bongers@nl.abnamro.com so he can make his search even more targeted.