As Reinventure announces its third $50 million fintech investment fund, co-founder and managing director Simon Cant says its important for big banks to invest in the very startups that are disrupting their industry.
The latest fund brings the Westpac-backed VC firm’s total funds under management to $150 million, and follows two previous funds, which have invested in 20 startups.
Cant tells StartupSmart that, under its independent venture capital structure, Reinventure is focused on ensuring “our interests are financially aligned with those of the entrepreneur”.
Specifically, this third fund will be looking for startups that could be relevant to top-20 banks and their global operations.
While Cant says Reinventure will still be looking for Australian opportunities, with a particular interest in blockchain and artificial intelligence technologies, this fund is also steered towards Asia.
“We’re seeing a lot of disruptive and potentially disruptive businesses coming out of Asia,” Cant says.
“There’s a strong chance that we need to understand the market better, and understand whether there are opportunities that could be good investments.”
“There are a number of interesting technologies coming out of that market that sit inside the banking stack,” he adds.
In the Asian market, specifically, a lack of existing banking infrastructure has led to a gap for next-generation companies to emerge.
For example, Cant says, China has historically had “a very poor level of payment terminals, relative to a lot of developed markets”, and as a result the technology in the region “leapfrogged”.
“The payments systems rolled out by Tencent and Alibaba have skipped a generation,” he says.
“Now, [China] has more mobile payments than any developing market.”
But the financial services space isn’t exactly well known for its love of change, and there can be some hesitation in embracing the technologies that could change the status quo.
“No incumbent companies like disruption, and whether there will be disruption and what form it will take is still an open question,” Cant says.
But, he believes changes are coming to the industry in two major ways. First, there is disruption at the distribution level, with “financial services embedded into other experiences”, such as marketplaces or real estate platforms.
Then, there are “layers of the financial services stack that are being outsourced to specialists”.
In some cases, according to Cant, the same new technology product can be applied not only across multiple institutions, but across multiple industries.
“There are definitely different trends emerging from different corners,” he says.
This is why “the strategy from Westpac has always been ‘multi-prong’,” he says.
Cant stresses the incumbent financial services companies should be willing to learn from fintechs and other technology companies, and to invest in them.
“If there is a disruptive future, the most important thing is that you’re invested in the company that’s going to be number one,” he says.