Standard Chartered innovation fund eyes FinTech investments in the region

The lender is building a venture portfolio focused on digital transformation in finance

Standard Chartered Hong Kong offices. The bank had a good first quarter. Reuters

SC Ventures, a fully owned subsidiary of Standard Chartered, is currently in talks with potential partners to jointly invest about $100 million (Dh367m) each in three financial sector start-ups and is scouring Middle East and Africa for more co-investment options.

"We are now working on at least three ventures [start-ups] that could involve partnerships and third party investments," Alex Manson, the head of SC Ventures told The National, without specifying the geography of potential transactions.

The ticket size of the joint investments depends on the nature of the venture but the funds raised for the deals being negotiated will be less than $100m, he said, adding that the bank is “resisting the urge to throw too much money” at any one company and wants to help scale the start-ups with the help of partners and co-investors.

Standard Chartered has already partnered with PCCW, Hong Kong Telecom Trust and Ctrip Financial Management to launch a new digital-only retail bank in Hong Kong, which was among the first to receive a licence to operate from the Hong Kong Monetary Authority. Standard Chartered holds 65.1 per cent in the joint venture, while PCCW, HKT and Ctrip Finance hold 10, 15 and 9.9 per cent, respectively.

Mr Manson has met some of the bank’s strategic clients and investors in the UAE and sees potential investments in the second-biggest Arab economy.

“This place is ready,” he said.

“There’s lots of ideas and energy behind financial innovation in this market ...  there are a number of things we want to follow up in the UAE” in terms of deals, he added.

The lender, Mr Manson said, is looking to co-invest in start-ups across its footprint of Asia, Africa and the Middle East.

“I anticipate that at any point in time we will have 10 to 15 ventures in our portfolio [in different stages of growth] … But we are at an early stage of building that portfolio,” he said, declining to specify the total amount of funds earmarked for investments in ventures.

Banks are increasingly looking to establish dominance in digital services and next-generation technologies in a bid to simplify and speed up transactions. Conventional lenders are also looking to set up their own neo-banks – digital-only banks – or bring on board financial technology (FinTech) firms to incorporate their faster and cheaper solutions in their respective banking services.

SC Ventures, established in 2017, is also taking minority stakes in FinTech firms through its $100m innovation investment fund, which Mr Manson said is on course to be fully invested by the end of 2020. Increasing the size of existing FinTech investments is an option, he said.

SC Ventures has already invested undisclosed amounts in FinTechs such as Ripple and Paxata. Its typical investment at an early stage FinTech is $5m or less as it participates in follow-on funding rounds as well.

“In the FinTechs that we work with, we only take minority stakes and that is with the view to partner and help them scale,” Mr Manson said.

“Our objective is to rewire the DNA of banking and transform it … to bring the capabilities [of FinTech ventures] to the main [Standard Chartered] bank,” he noted.