David M. Brear, CEO and Co-Founder of 11:FS:
“11:FS is the leading consultancy on the UK market that builds next-generation fintech solutions, helps design, launch, and scale fintech businesses.“
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David, you’re one of the most influential people in banking, insurance, and technology, and I am delighted to chat with you today! Tell us about what you are doing in the Financial field and what’s your primary mission?
11:FS exists to change the fabric of financial services. We want to improve the lives of billions of people around the world who are underserved, overcharged, and overwhelmed by unleashing talent to deliver the content, products, and services needed to become truly digital. We’re powered by the belief that banking fundamentally changes the planet when you do it properly.
11:FS never wanted to be on the traditional waves, but something new. So when do businesses need 11:FS?
It depends on where they are in the journey—everything from inspiring or scaring them into changing through to running and making a thing happen. It’s like in that joke, “how many suppliers does it take to change a light bulb in a bank?”. If you’ve got a 12-hour flight to go and see your engineers, or you have to get your management consultancy people to do the strategy to tell your consultancy how to do the work, it just doesn’t work. Everything costs a lot of money and a lot of time. So, from our perspective, we try to create an end-to-end organization that can support people, regardless of where they are in the journey. And when I say “the journey,” I mean between digitization and digital. That’s what we set out to achieve.
How does the UK regime keep pace with the rapidly changing payments landscape?
I think the challenge sometimes is that if you’re in front, it’s easy to get complacent. They know this journey is a long one to go and actually, what we’ve done today only whets the appetite.
Banking technology is like sedimentary rock showing the different periods we’ve gone through, and everybody’s payments capability works differently. Some people have real-time payments, others have batch systems, and the impact of that is significant. I believe that in every geography, the industry is finding a way to be progressive. When you have intelligent people, you can find a way out.
Is it difficult, considering regulations?
If you’re genuinely passionate about the subject matter, then it’s not complicated. That’s probably the secret – hiring people who are deeply passionate about the subject matter they’re in charge of. Then it’s not a difficulty, and it’s more finding the time to stay on top of an industry that’s moving at 1000 miles an hour!
It’s not a secret that many companies and newcomers are passing through 11:FS each year: year-to-year, they’re facing new challenges related to compliance readiness. Can you share your thoughts on what being “compliant” means to fintech companies in today’s new reality?
Compliance in Financial Services has always been seen as a bit of a moat. Will the regulatory board and the regulatory pressures mean that people can’t get into my market? The arbitrage created in 50 states in the US is almost a 10 thousand person team requirement to measure all those kinds of things.
As we have seen historically a new opportunity is created when regulation changes. When you’re trying to maximize the opportunities that change within regulation brings about, you look at the market in a completely different way.
Don’t get me wrong, being compliant is super important. But I think seeing it as “a box that you tick” is where most organizations leave opportunities on the table.
New solutions are shedding light on contemporary fintech problems, aren’t they?
Interestingly, some companies scale faster than the compliance teams or operations can keep up with, which is a sign of a great product-market fit. But then, sometimes those things can become a little bit more complicated.
I think about how fintech businesses are going to market – finding a beachhead and creating a minimum lovable product that allows them to contain the amount of compliance regulation they have to adhere to. But as they become more successful they have to start answering questions to be able to deliver more features and products.
People think “the industry is going well,” “the problem is solved,” “fintech services are done” because we’re seeing billions and billions of valuations kicking out there. I firmly believe we’re still 1% done. There are so many different slices of financial services that are still very much untapped.
Perhaps you could brief on steps that startups must take entering the compliance zone? And when 11:FS steps in?
I’ll say – test. The best way to test a product is by actually putting it in the market, not putting it in front of 1000 people in a focus group because 1000 people in a focus group will tell you whatever you want to hear. When it comes to understanding the impact, we try to put products on the market quickly to iterate, test, and learn. It’s not a project for us; it’s more the establishment of an operating rhythm and a business. In terms of minimum lovable product, we take that same engineering approach as we do to compliance and regulation.
To give you an example, we’ve publicly talked about Mettle that we built with Natwest. We built that out from scratch rather than using their regulatory department, their licenses, or their compliance department. When you get a digital operating model (including regulatory requirements with compliance + regulatory reporting) the cadence of business changes speeds up.
Did you notice some innovative solutions companies turn to decrease spending and save precious time all in all?
It’s just a process of getting people who view what you can do and what you can’t do.
How can regtech help with the time and costs of the Compliance procedure?
Massively! Even basic levels of artificial intelligence can do things humans can’t do effectively. Putting the proper compliance controls in place will ensure the right frameworks, the appropriate flags when things are going wrong, and resolve any issues.
Automation and digitalization play a massive part in that. If you treat compliance or regulation like a backdrop or a box that gets ticked, then that’s where organizations start to get into trouble. Being compliant is always seen as somebody else’s problem, rather than part of everybody’s problem in the business as it should be. Providing excellent service to the customer isn’t part of everybody’s job; it’s nobody’s job, and it’s the same with compliance. You’ve got to make it part of everybody’s understanding and role within the organization for it to work effectively.
When does working with Advisors or CSP become an option?
The paranoia of working internally is feeling like somebody out there is always doing it better than you. I think the benefit of working with externals is that they bring you an understanding of what everybody else is doing. Every business is just a collection of people. Those people are just genuinely making it up with experiences.
Then it’s as much about changing from “how you do it” to “what you’re aiming to do.” Because of that, I think people need to be brought in, but it depends on a purpose, e.g.:
As a leader of the top consultancy who’s been working this beat for a long time, do you think that gaining a healthy fintech ecosystem is even possible? How do you see the ecosystem changing the market these days?
We were fortunate with the FCA, the PRA, and the Bank of England. Now we’re seeing regulators becoming more pro-change rather than protected from a prominent industry incumbent perspective (like MOS, HKMA, Samara in Saudi, some of the changes that we see with the Fed in the US).
It’s tough to change the world without money behind you to make that happen. As a five-and-a-half-year-old bootstrap business, I can 100% testify to that one, and it’s difficult but not impossible! So I think if every geo creates that fintech community, then it’s possible to make a massive change everywhere.
I was delighted to chat with you today, David. But I can’t end up here without asking about 11:FS’ first pitch: “Digital banking is only 1% done”.
How do you think that percentage has changed since 2016?
I don’t think it’s changed at all. It’s a view on the fact that this journey is never done. Every morning you wake up, something outside of your organization has changed. It’s on you – keeping up and looking to lead to the industry in terms of where you’re going. So for us, digital banking is only 1% finished. The regulation changes, the technology changes, the changes in compliance practices, and what it means to be compliant lead to the conclusion that there’s 99% of this journey to go. People who believe that there’s 99% more are looking for opportunities to make the industry better.