About Fintech - Interview with Igor Pesin

During the two days of the Montevideo Fintech Forum, Uruguay Smart Services had the chance to talk with one of the Keynote Speakers Igor Pesin


He is 31 years old, and directs Life.SREDA VC, one of the most successful international venture capital firm, headquartered in Singapore and manages 2 finvestment funds focus on FinTech. 

Life.SREDA II, launched in January 2015, is a $100M fund with focus on A & B rounds, targeting mainly Southeast Asian fintech startups. They have already executed 8 investment deals so far in Asia (Fastacash, Lenddo, Ayannah, Mobikon, Yolopay, SoftPay, WishFinance, BAASIS).


Uruguay Smart Services: Mr. Pesin, It's a pleasure to have you in Montevideo. Tell us how Singapore (where you settled your company) became one of Fintech's more promising hubs?  
Igor Pesin: Singapore is the financial center; its main economy strengh is the financial sector. Many banks aren’t Singaporean banks; they are Pan Asian banks, the biggest banks in south East Asia and in Asia are in Singapore. Their customers are not only in Singapore, they are in all south Asia and they store their money in Singapore. Vietnam, Philippines, Indonesia, and so one their wealthy and corporate client have their money stored there. 

So it's like Singapore has to proof that they are the financial center of Asia. In my opinion, Fintech is one part of the strategy to proof that Singapore is this remains number one. Not only for its capital safety, currencies, stability of economy and politics, but also in innovations. It’s like to be in top of mind.



Uruguay Smart Services: Tell us more about the Fintech industry 
Igor Pesin: In the first place, Fintech is conceived not only as a disruptive innovation, but to support existing banks and motivate them to innovate. This initiatives are a making a good promotion of the country, making it more visible in the global map of Fintech and financial hubs. Through Fintech they can proof their leadership in the financial world. 

Second, which is more difficult, is to make Singapore a Fintech hub by helping Fintech companies and startups from Singapore to go to other markets. In the future the biggest Fintech startups will have their headquarters in Singapore, but operations in the entire Pan Asian region.
Let's see the value proposition of Singapore: when a fintech companies is looking where to establish their Asian operations, several companies choose Singapore. That is because first of all they have quality of life, because when you move people they do not select only for business purposes but also they want to live in a good environment. Singapore is the safest place to live and to do business. But it is not so easy as it seems. 

Uruguay Smart Services: How does the asian market behave? 
Igor Pesin: For doing business Asia is difficult because they are totally different markets, customers, environment, and this makes it different to engage in a different business experience. 

Singapore is a developed country, wealthy and banked country and the people have access to all different types of any financial services and products. This doesn’t happen in Indonesia for example. In this country they do not even know what banking service is, they don’t have this access and the gap is huge. They are used to pay by cash and don’t run their small businesses by any software.
When you move to a new country, you need a partner such as banks, payment companies or enterprises. In Singapore it is easy because all the system is quite transparent and is clear how to deal with them. In other countries is quite traditional the relationship.
But now the fintech companies are struggling to scale, because the market is small and it’s not sustainable to grow in the long run in only one market which is highly competitive. The demand for financial technology itself isn’t so high and the banks can easily compete in the long run with fintech companies.
It is difficult to work with banks in Singapore. These new players are in the eye of the banks worldwide, and they understand that they need to work together. If they want to innovate someday, they will do it by themselves. But they are not interested to work with third-party players.
Many startups raise money from venture capitals and funds; and they spend these funds and resources just to launch the product.

Uruguay Smart Services: How is the banking system coping with this new trend? 
Igor Pesin: Today Banks may be not be ready for the digital world yet, but they have a lot of competences and experience in core banking systems on how to be safe and secure. How to keep data safe, how to report for regulators for central banks. How to deal with big money accounts. 

It is different when a start up in the fintech industry has 50 clients and banks have million clients. They know how to build a trust relationship with customers. And this is a big challenge for a startup on how to build this relation and to have a client not online using this app, but having all its money in that startup is different.
Here is a difference between traditional services and the upcoming ones.
Startups have different competences; they know how to work with costumers, on their client’s needs and demand in order to be flexible to understand in terms of where the digital market goes and what they need to improve in their products. Costumer support as well is a key factor in this branch. Within the banks it is very difficult to chance the processes in how the costumers are being supported and attended.
This is an opportunity for startups because they know how to support costumers and banks that have a lot of experience in the backend, and these two worlds at the end of the day they will work together. These can the called “Bank as a service” or “Bank as a platform” concept with open banking as a regulation. Here is where the market goes; they will not compete, they will cooperate.
One important point is to understand that Banks spend lots of money and resources when they try to innovate. To create solutions from scratch is easier than to update solutions that exists for 20 years.

Another aspect is the internal culture wich is very difficult to change. It is understandable when you see corporations like Microsoft and how are you supposed to change its internal culture on how things are being done.
This is why innovations made by startups are much easier to do, it happens faster. And for banks it is evolving in the best way to access to the best solutions they need for their costumers by working integrated. Sure, in the short run the banks some way will lose some part of the business, but in the long run they will win. And not all the banks will survive, one those who are smart will make it.

Uruguay Smart Services: Tell us something about the secret for your success
Igor Pesin: It’s been a long way. We started five years ago when Fintech was only known as finance and technology. I’m 31 years old and if you look at the fintech industry it is quite young. Companies like Stripe, which is an 8 billion dollar company launched by two brothers who are now one of the youngest billionaires under 30 rated by Forbes, are young pushing companies. 

So when it all started only few people had the right skills for Fintech. This is why we just learned and educated ourselves where we produce analytics articles and materials as for example Money of the Future is our fintech well-known report in the sector, which helped us to promote our business.
We started in Russia and the perception is that innovation and tech don’t come from this country, but from developed countries like USA, Germany or the UK. In order to proof that we are smart money we started to publish what we know, see and predict for this market and this helped us to build our reputation in the industry.
And at the beginning there were few venture capitals funds that had a focus for these fintech startups, so we had a lot of people telling us why are we working in this business with a very small market. So we were one of the first companies and we made good investments in some famous companies like Simple Bank, Moven, Sumup. So we decided to move from Russia top Singapore because we started to invest in the USA, Europe, Ukraine, Russia, it was quite simple. But once we realized that the biggest potential for Fintech was not in the developed markets but in emerging countries like Asia, Africa and Latin America.
So we decided we wanted to make first deals, and that is why we started with Asia. We approached many companies like partners, investors being based in Moscow, and we realized is almost impossible to work remotely with these markets.
So in 2014 we made the decision to move the whole company to Singapore in order to invest into Fintech in these emerging markets. And it happened to be the right movement, because today Asia is number one in Fintech by size and the emerging markets surpassed the developed ones. More than 50% comes from the emerging countries.
These markets are unbanked markets and costumers that need the financial inclusion. These markets also represent a younger population than the one of developed countries, with high levels of adoption of new technologies: smartphones, mobile internet and they start to use new services like e-commerce and do buy everything online.
And they are the costumers that need a new way of payment, so that’s why there is a lot of attention of investors in these new technologies and business opportunities.

Uruguay Smart Services: Whats your impression about Uruguay and the Fintech industry? 
Igor Pesin: Today there is no Fintech in Uruguay. Fintech is a part of the digital world. And in the digital world there should not be any boundaries, as national boundaries. Fintech companies based in USA, China, and India are successful because of the size of the market, number of clients, investors, etc. But if you are located in Uruguay you have to scale. It doesn’t make sense to focus on leading the industry in Uruguay. It would remain a small business and fail in the near future.
If we take as an example what is happening in Southeast Asia and Singapore, the majority of the companies are conscious that they need to scale and not focus in one market only (domestic market). In Asia as in Latin America all the countries are different. It’s important to understand that the cycle to enter into a new market is quiet long. If you launch a product in Uruguay you can’t go the next day and launch it in Argentina in the same way. All takes you to study everything and work on new partners, regulations, and standards. So once you decide to get to different markets you have to work in parallel faces.
Another important point is about mindset: about the language, knowledge of the market, consumer behavior, consumer experience with this type of technology and solutions, and here is the first step to understand and to launch the product in one market. And it will be very different from the other markets.
I believe that Uruguay can became a Fintech hub in the future. This means that people and companies that have the experience from other countries and come to Uruguay see that here there are all the conditions for a successful enterprise. In Uruguay you have a good quality of life, it’s a good place to do business, a growing environment for Fintech projects and a great connection to other markets. In the digital world it’s not a matter where they should stay, but you need to be close to your markets. The logistic to be connected to the markets you have to know about and to travel to. 

Uruguay like as Singapore, offers an interesting ecosystem with an active community. If Uruguay works in this aspect, where the Government, Central Bank, are trying to provide different schemes like grants, accelerators, regulations changes that helps this industry to be more robust. Uruguay and Montevideo aren’t yet a strong financial center. And this is what a vibrant venture capitals industry in terms of funds, angels, investors are looking for. The government should also be looking for visa, working permits, office space and co-working spaces and mainly key issues for granting an attractive environment which you can choose where you want to be. 

Uruguay Smart Services: And what was your ultimate learning during this enterprise? 
Igor Pesin: What we learned as cons from Singapore is that it is an expensive country and this is a very important point for startups, it is very difficult to access to working permits that welcomes everyone and the startups struggle with this, and that the other countries in the region are very different from Singapore which difficult the expansion to new markets.
A good example on how small countries are evolving as Fintech hubs is the case of Estonia. In Europe, Estonia’s government understood that this business is the future and worked in government bodies seeing that this puzzle of new technologies are coming together and creating a new investment opportunity for the country.

Uruguay Smart Services: Why is Fintech a worldwide trend? 
Igor Pesin: Fintech is booming. It’s not about solutions or technology. This is not new. What is new is how it is used.
A few companies are being listed in NASDAQ for example (IPO). Others are being acquired by banks, and that is why venture capitals are interested in these type of companies investing big amounts. And this investments are important to make this tech companies and any of them to grow. The pie of the financial industry is quite big. And thanks to the support of these investors and Central Banks, many of these startups and entrepreneurs understood that this industry will not only boom, but will certainly exist in the long term.
Investors have to understand that at some point these companies will grow and be sold to somebody and acquired by big corporations. This is how it works. We invest in the beginners phase, and then the startup will be acquired by a big company or financial group. We don’t acquire.
So in steps I would put it like: first it is important to get the attention of the government. Then I think it is very important to understand that fintech changes lives in the good way. It’s not that it simplifies, Fintech opens new ways to connect small businesses to the financial literacy. They have the phones in their hands, now they are having the solutions to improve their live thanks to a better way to sell their products.
I hope we can change more lives thanks due Fintech.

Uruguay Smart Services: Thank you!