Fireside Chat: Banking Partnerships with Mariano Belinky
The venture capital arm of Santander has committed to invest $100 million into growing companies in the fintech space and has made five investments so far. The mandate of the fund is to look for companies within the following five areas: payments, lending, big data, investment advisory and digital channels.
The big question is how does Santander feel about investing into lenders. Mariano does not think that marketplace lending platforms will disrupt traditional banking business. It is clear that the alternative technology is here to stay and the companies that his venture invests in either offer a better service to existing clients or service clients that the bank itself does not service. Santander sometimes refer clients to Funding Circle, when the bank does not have the right data to assess the credit risk but the lending platform may.
So should the referral scheme be mandatory? Mariano thinks yes – there should be a path to make this possible. He thinks there are large segments of customers who are not currently being served because the banks don’t have enough information on them or banks are already at their risk limit for each particular customer. Lending platforms are in a better position to serve these customers. Metro Bank is deploying capital through lending platforms and Santander is looking for innovative ways to engage with upcoming fintech start-ups.
Santander InnoVentures recently joined an equity financing round in Kabbage, a lending platform for small businesses. There are two main arguments in favour of this decision. First, Kabbage has access to alternative data sources that allow them to make better underwriting decisions. Second, the customers that come to Kabbage for a loan mostly need small amounts of money – too small for the branch manager of a traditional bank to pay attention to, because the cost of originating a loan does not vary much between a $1 million or a $5,000 ticket size.
Mariano and his team are looking to invest into companies that already have a product, regardless of whether or not the company is already generating revenue. In some cases, where they think that the company may need industry wide support, they take a seat on the board.