1090. News: Can anyone stop Revolut? Can Countingup and Griffin tackle SME pain? Can the FCA help UK fintechs scale?

22:14Ross Gallagher:thinking about, you know, tax in a silo and all of these things just adds to that administrative load, that administrative burden. And I suppose that's where there is so much upside here is that sort of bringing those things together and helping to streamline a lot of that. Yeah, because you can get drowned in the various platforms you use, the amount of reporting you have to do, and you still have to keep your business, which is, in a lot of cases, it's the center of their life. I don't think you have many people that come onto this podcast who've started incredible companies who are like, yeah, the best way I spent my founding years was working out our tax calculations.

22:57and it's being able to actually right size products, like banking products in a sense, because you get a lot of marketplaces in banking apps, but you very rarely get the tools.

23:10Ross Gallagher:Yeah, no, I couldn't agree more. Tom, keen to bring you in, what was your reaction to this story? Yeah, I think a fantastic announcement and it really for me highlighted whether it's tax, whether it's accounting, whether it's onboarding, that a big part of the problem is data fragmentation. And so I think where we're seeing new ways of tackling this, giving more access to financial services for small businesses. And I really echo a couple of points Phoebe made. I definitely, the sentiment around the high street businesses being the backbone of our sort of economy. I think that really resonates with the TAYA's mission.

23:48and so anything I think that's going to make tax easier for these businesses who actually need to be focused on what they do best is going to be a great outcome for those businesses that are able to adopt those services Yeah, spot on Veronica, what stood out for you? Yeah, I mean, for me as someone who's cried a lot doing my own taxes

24:11Ross Gallagher:And in different markets, right? I mean, you've lived everywhere Yeah, and in different languages Yeah, that's a good point Yeah, it's not fun. Like there have definitely been tears. You know, so actually it's the, what always struck me was that sometimes banking and accounting actually seem to live in very different worlds in terms of the interoperability between products, but even the relationships that providers have with each other. and that's I think in this case that's why it felt really significant to me and I'm like I should really check it on if this is available in more jurisdictions because I think it would save quite a lot of people a lot of tears actually.

24:50Ross Gallagher:Tom it's a really interesting point right because you know harnessed or delivered in the right way something like making tax digital could offer some upside for businesses right you know it could streamline processes and all of that stuff and everything that we're talking about delivered badly I suppose really what it does is it shifts the burden on to businesses and you don't really get the wraparound support that you need. So how do you strike that balance? How do you do this in a way that you're realizing that upside without just pushing more administrative burden onto some of those businesses?

25:24Well, look, I think that there's two things here, right? One is there's a lot of things that private companies like this example can do to help make it easier. but I think there's also a huge burden that the government needs to sort of lean into and provide this support. And that's why I mentioned earlier the sort of data fragmentation point, because if you think about initiatives such as open finance or smart data, we really need to be able to make it much easier and reduce the burden on those small businesses for them to be able to comply. and not just comply, but for them to be able to then access the services that are going to help them sort of scale their businesses.

26:04So I think we want to continue to see new services being provided by businesses in the market, but we're also going to need to see a bit more from, I think, government support coming in. And, you know, we recently hosted an event at Taya where we hosted Emma Jones, the Small Business Commissioner, with a lot of our fintech peers, and we brought in a lot of our members to come in and speak about their challenges. And the consensus across the room was that businesses face such a high level of friction and they lose a lot of time. You know, if they're waking up in the morning, the first thing they're thinking is, you know, have my settlements come in?

26:40How am I paying for the next amount of stock that I need? Have I paid my employees? They're not thinking, you know, have I managed to, you know, go through all my taxes and submit this? So anything that eases that burden is important. But if we think about, you know, the challenges they still face, then, for example, it's crazy to me that the data that's held on something like Companies House cannot be used to verify the identity of a business at onboarding, right? So how have we not found a way of joining up the sort of services and the data pipes that are held by HMRC Companies House in a way that is easy to use and reduces the burden on small businesses?

27:22You know, this has been solved in other jurisdictions with a simple concept like a tax ID. So there's a lot that I'm seeing in terms of innovation and new services, which is great. But unless there's a bit of standardization that makes it much, much easier and reduces the burden, and that can't all come from the private sector. So yeah, maybe this is my soapbox that I'm happy to stand on, but I would call out for a little bit more in terms of support for that standardization that needs to come in the form of government and policymakers that are going to make this much easier.

27:55Ross Gallagher:I think that's absolutely right. And the company's house example is such a good one for potential quick wins that actually could have really material upside. I think the other point that you made that really resonates with me is bring businesses into the conversations, design it with them, because you'll take them on the journey. there's no point just kind of going ta-da here's a new system kind of off you go um but build it based on um their needs and their requirements i should say for our listeners outside of the uk um making tax digital is the government's push to move tax administration online um it requires businesses and individuals in scope to keep digital records and use compatible software to send tax information uh to hmrc that's her majesty's revenue and customs um phoebe one thing that i want to make sure that we touch on before the end of this story is the point around moving off the e-money license, becoming fully licensed, having that FSCS.

28:57Ross Gallagher:How important is that to solving for some of the problems that we've discussed? Don't get me wrong. Big fan of any account that's backed by an e-money license. But I think if you are a business like Counting Up, and Counting up is expanding this product beyond their own reach and they're launching with money supermarket it's really important to address the psychological factors around opening an account on a platform like counting up or through money supermarket where you can guarantee the fsds protection you can add that extra layer of comfort and the other big part of it is at griffin we're great believers in sharing the value back and interest is a big part of that.

29:44It's a big part of our business model. And I think having that capability on whether it's the savings parts or even you can look at what Tide did with ClearBank and you had interest being earned on your current account funds, which in the SME market is incredibly rare. The average SME savings account rate is probably half of what you can get as a consumer. being able to bed that into the product is really important alongside the deposit guarantee and it's very easy for us to offer our customers this real account to then push out into the wider market and it's a big part of our way of operating we don't actually offer a virtual iban structure every iban is a boots and braces bank account because we feel it's a safer way of distributing our accounts and that functionality into both the consumer and SME markets.

30:42Ross Gallagher:I love it. I think, you know, just to close on this one as well, I think when you look at the broader sort of economic context, certainly in the UK, and I think businesses getting squeezed in almost every direction when you look at things like business rates, when you look at things like, you know, the increase in employers' national insurance, when you look at things like the rising minimum wage, the national living wage, et cetera. I think anything at all that helps make businesses' lives easier, I think is a good news story. So, you know, huge congratulations on what I think is an awesome partnership and again, one that we'll definitely be keeping an eye on moving forward.

31:22Ross Gallagher:On that note, we're going to take a quick pause here and we should be back with you very shortly. Please don't go anywhere.

31:32Ross Gallagher:Night Bites with friends already hard to beat. That first too hot bite of fries you couldn't wait for followed by ice cold Pepsi. Now that hits different. Suddenly, the energy kicks back in, the night goes longer, and the laughs don't stop. Because Pepsi brings out more flavor, more fun, and more of the moment. Food deserves Pepsi. Grab a Pepsi Zero Sugar today.

32:00Ross Gallagher:Now, before we get back to the news, we wanted to tell you about our next After Dark event, which is now just over five weeks away. Fintech Insider hosts, David Breer and Kate Moody, hang on, where was my invite, guys? We'll be joined live on stage by special guests to record this very podcast and break down the biggest news stories of the week. In all seriousness, After Darks are always a heck of a lot of fun, and I will definitely be at this one to hang out. It's taking place in London on Thursday, 17th of September, and tickets are available now at 11fs.com forward slash after dark. There's also a link in the show notes below.

32:38Ross Gallagher:Now back to the news, and our final main story this week comes from Fintech Global, with a headline, five firms join FCA's scale-up support unit. The UK's regulator, the Financial Conduct Authority, has named the first five solar regulated firms joining its scale-up unit. They are ClearScore, Modular, Urban Jungle, Zilch, and the wonderful Teya. The program gives fast-growing firms a dedicated regulatory contact to help with areas including new products, regulatory processes, and policy changes as they scale. According to the article, this reflects a broader push by the FCA to support firms throughout their growth journey, from pre-authorization and early growth through to becoming large established businesses.

33:24Ross Gallagher:The FCA say their recent work with high growth firms has highlighted that governance, risk management and controls need to evolve alongside the business and that firms which invest in them early are better placed to scale sustainably. Tom, we mentioned that Tay is one of the first five firms in this new cohort. So obviously, I think it makes sense to start with you. First of all, I'd love to maybe just get the TAYA context around maybe why you wanted to be part of this scale-up unit. Yeah, sure. So, look, I think overall it just highlights the importance for me of regulation as a driver for innovation.

34:04If I think back to when I first got involved in advising fintechs back in the 2010s, it was kind of around 2016 that the FCA itself launched the first sandbox. And that really was something that clearly had great success, both in catapulting kind of London as a sort of center of fintech globally, but also the concept of that sandbox, right? It helped early stage businesses and it's now been copied in, I believe, over 90 jurisdictions kind of around the world. So that just shows you the success of that. But I think if we think about where we are now, particularly from a sort of London perspective, the market's much more mature.

34:42And yet we don't necessarily see all of those early stage fintechs progressing into kind of big global players. So I think this is recognition of two things, the maturity of the market in London and also the need to combine kind of that product-led innovation with the regulatory support. And if we can continue to do that, then regulation can be the driver for growth, as I say, rather than the thing that holds it back. When I think about Taya, we take our regulatory obligations very, very seriously, and we're a very product-driven company. So we've got hundreds of engineers. We're very ambitious in our product roadmap, and we see this engagement as an accelerator for that.

35:23So the ability specifically, for example, with the AI agent we have in our app, it's providing insights today. I think as we move to sort of the agentic space, it's really important that we're able to ensure the customers are totally clear and they understand what this product does and are in full control. It's also kind of at the cutting edge of the sort of innovative space when we think about product. and I want to make sure that we take customers on that journey. So as our product is very high usage, we've got lots and lots of touch points throughout the day. That's real-time feedback and we're able to use that and help us in looking at our roadmap.

36:04I'd like to think that this opportunity will enable us to help inform the regulator as well. And so we're able to continue to develop our products and do that in lockstep with the FCA. So a fantastic story that we're very, very proud of and we're excited to begin the engagement.

36:20Ross Gallagher:I love the point that you made about, because obviously the FCA's innovation sandbox, I think to your point was seen as such a gold standard globally. And of course, there's so many countries, as you say, that have modeled their own innovation sandboxes around that, but it's never just a one and done, right? You know, I think as the market matures, as you say, as individual companies mature, the regulatory context shifts, some of the regulatory challenges that you need to, that you're facing into that you're dealing with shift as well, right? Absolutely. And I think the regulatory challenges are maybe a measure of your ambition, right?

36:57And we have an ambition to become the primary financial services provider. And so we're going to be required to continue to develop and ship new products and features at quite a high speed. So if we're going to do that, then we need to go beyond the kind of challenges that we had when we were starting out. And that's where this level of support is going to be instrumental.

37:18Ross Gallagher:Tom, it's a slightly loaded question, but I suppose there has been a narrative that the FCA was seen as such an early leader when it came to fostering digital innovation and fintech. And then maybe that it's perhaps been overtaken over the previous years by some other markets. Do you see this, or at least in part, as sort of a statement of intent by the FCA in terms of their own ambitions to maybe retake that mantle sort of moving forward? Look, 100%. I think nothing stays stagnant and continues to be as good as it ever was. And clearly there was a bit of a brain drain that came out of that fantastic period of the FCA.

38:07obviously a lot of the talent was then moved on to other challenges. I think this is a statement by Colin and the rest of the team to say, we're going to get back to what made us that kind of world leading innovative regulator. And I'm here for it, right? So I do believe it's a statement of intent. And I think this is only the beginning, right? This is just the announcement. You know, we haven't even had our first meeting. So I think when we get into September onwards and we're able to sit down and have these conversations, then I'm really hopeful that we're going to see that same level of quality, that same level of forward thinking.

38:40And I'm really confident that from what I'm hearing, that that's the intention. And if it does indeed provide that platform, then I see no reason why the FCA can't get back to that place. Love it. Love it.

38:51Ross Gallagher:I share that optimism. Veronica, obviously keen to bring you in on this one as well, given your previous role at Innovate Finance. what's your uh what's your sort of reaction your interpretation to this one yeah i mean i think it's really important to have that ecosystem involvement um and it's actually really underrated how important it is to have that support because the conversation about uk fintech used to be dominated about um authorization for for so long you know kind of getting in getting licensed and so forth. And we've just moved so far beyond that as an industry. If anything, I think it just gets more complex as you scale because you're talking about adding jurisdictions, adding customer segments, you're adding complexity as you scale.

39:43And if you have a dedicated contact, you can actually really support with that and understand actually what we were saying in the SME segment, the unique particularities of your own business, because every fintech is going to be a little bit different in and of itself. Having that dedicated contact actually can go so much further than I think a lot of startups can estimate.

40:04Ross Gallagher:And, you know, speaking of FinTechs, I mean, we've got such a great sort of range of perspectives to sort of talk to this one. Phoebe, obviously, you know, Griffin has been enormously successful, experienced quite rapid growth. So again, I mean, I imagine that you can see value in this type of initiative. Oh, hugely. And I think that the FCA is a principles-based regulator. It has the flexibility and the PRA are very similar as well. They have the flexibility to adapt as you grow. With us, as we move and we grow, we have more underlying customers. Our capital treatment changes. And I think that having that flexibility in our financial regulators is really, really important.

40:52but we've kind of come into the teenage years of a lot of the fintech startups of the 2010s, right? They were the startups, they were part of the sandbox, they were the early authorizations. They continue to grow. Like modular story is also incredible. And it's this new business which was a new business which is now becoming the norm and the regulators are kind of adapting to their emerging class because they've built the product and they've run the product for enough time now, but they're not going to behave like the predecessors that are sat in those regulators' portfolios.

41:34Ross Gallagher:Yeah, spot on. Tom, one of the things that you mentioned that I'm conscious I sort of breezed past, I think I breezed past it because we've almost got through our main stories on FinTech Insider probably for the first time in as long as I can remember without talking about AI. But I am going to bring it back because, of course, in a regulatory context, that's where it starts to become really interesting. So I'm keen to, I suppose, get your perspectives because you can't talk about the future of financial services without talking about AI. And of course, as it always is within financial services, you know regulation is going to be such a core determinant in terms of where that gets to over the next few years yeah a hundred percent and i think we're at a stage where this is true of all product developments but the more that there can be a feedback loop the more that the way that regulation develops can support that and keep customers safe and i think nowhere is this more true than ai where it's kind of always at the cutting edge of that product development but But it's also the place where we're in a kind of new space for the regulators.

42:49And as a result, there's two ways of doing this, right? The regulators can come in and kind of regulate something quite early, potentially not understanding it fully. And that can then hold back innovation and hold back growth, which ultimately will harm customers because it doesn't then bring more and more services and competition to the market. So I think that's the right example. and it's clearly a key area for regulators at the moment, whereby with this feedback loop, we'll be able to learn together, learn as we're developing products and making sure that as we're developing products, we're keeping the customer front and center so that they're kept in mind in terms of how they're in control of it.

43:26And we can then help the regulator understand how we're seeing it and how consumers and businesses may be seeing it so that they can then regulate it safely, but without holding back innovation. Yeah, spot on.

43:38Ross Gallagher:I think you nailed it. Veronica, final point to you. I think we're over time on this one, but I'm curious. I think we mentioned on the Revolut story about them potentially listing in the US. I think we've heard similar noises around Monzo and lots of other, what would have been considered the sort of darlings of UK fintech. Do you think this type of initiative from the FCA over a slightly longer time horizon, we might start to see some of those more successful fintechs actually listing in the UK? Honestly, over a longer period, yes, I think we can start to see it. I'm not necessarily very confident that Revolut and their cohorts who are looking at a listing in the next year will look at the UK.

44:25And I think that's a little bit more complex than just the regulation piece. It really has a lot to do with liquidity and capital markets as well. So in short, I would say we're getting there. it is going to be a little bit of a longer road because I think it's still not quite good enough for this current cohort of unicorns. And so maybe the focus should be is how can we, let's say, breed and nurture that next generation of unicorns? Future-proof it for sure.

44:53Ross Gallagher:Love it. All right, well, on that note, we're just going to take a very quick pause and we will be back with you very shortly.

45:05Ross Gallagher:Late Night Bites with friends? already hard to beat. That first too hot bite of fries you couldn't wait for, followed by ice cold Pepsi. Now that hits different. Suddenly, the energy kicks back in, the night goes longer, and the laughs don't stop. Because Pepsi brings out more flavor, more fun, and more of the moment. Food deserves Pepsi. Grab a Pepsi Zero Sugar today.

45:33Ross Gallagher:Okay, now for a quick look at stories we don't have time to cover in full. This one comes from Payments with a headline, Startup Bank Erebor Eyes Valuation of$8 Billion. The US startup-focused bank Erebor is reportedly in talks to raise$1.5 billion at an$8 billion pre-money valuation just months after receiving its banking charter. Founded in the wake of Silicon Valley Bank's collapse, Erebor is targeting startups with capital-intensive sectors including defense, energy, and AI. The bank reportedly had$4.6 billion in deposits by the end of July and has already passed$100 million in annualized recurring revenue.

46:15Ross Gallagher:Erebor says its edge is understanding assets and businesses that traditional banks may struggle to assess, including private securities, crypto-backed lending, and specialized industrial equipment. Obviously, what's really interesting about this is they're plugging what appears to be a very clear gap, obviously following the collapse of Silicon Valley Bank in the US. Some of those numbers point to some really, really strong momentum. That$8 billion pre-money valuation is really quite impressive, obviously receiving its banking charter and of course$4.6 billion already in deposits. points to a clear need.

46:58Ross Gallagher:And of course, a strong direction that aligns with where we're seeing the lion's share of funding when it comes to financial services, specifically AI and digital assets. So, you know, some good momentum, a clear need, and, you know, you'd imagine some learnings from what we saw in terms of the fate of Silicon Valley Bank. So really interesting one, and of course, one that we will continue to keep our eyes on. Okay, and now on to our and finally story, a story that we really wish wasn't true. This one comes from Futurism with a headline, AI Startup offers job interviews in exchange for tattoos.

47:40Ross Gallagher:Y Combinator backed AI Startup Lemon Lime held a recruitment event where attendees were offered an instant job interview if they got a tattoo at the event. seven people reportedly took them up on the offer with the founder saying the idea was to find people who were quote just as crazy as we are the stunt quickly attracted criticism i mean who could have seen that coming over the power dynamic of linking something permanent like a tattoo to the prospect of employment the founder later apologized acknowledged he had misjudged that pressure and offered to cover tattoo removal costs for anyone who regretted taking part um oh that's kind of gross this one um veronica i'll come to you first what's your reaction i mean if you really want my hot take on it and it's just one of those days but i just this is exactly the kind of thing i would expect from that sort of y combinator bro culture that has come out and like and I say this as someone who I have questionable tattoos like because I had nothing to better to do that day um but it's it's an idea that I think is very funny in the abstract but we we're way past this era of like drinking the company kool-aid especially now in in a post ai world where there's a real fear if you look at polls and surveys uh that workers have of being replaced by AI.

49:10You know, it's no longer a cute, edgy joke, but it's like, well, why would I prioritize a company that I don't even have a job interview yet? Why would I do something weird to give up my bodily autonomy for someone who would, you know, put their employees out on the street the next day? You know, it's just, I want to give them the benefit of the doubt that like they wanted to be kind of cute with it, but so did not land.

49:38Ross Gallagher:No, no, it really didn't. Yeah, I just, I don't like it. Phoebe, what do you think? I mean, our CEO has to bully me into company-branded clothing. I'm not a big... It certainly takes swag to a whole new level, doesn't it? This is very eloquent, but it's really gross. Like, it is so gross. It sounds like someone got too excited watching the early episodes of Yellowstone where they're branding the farmhands and it's just it's it's not really a culture that i would endorse or want to be part of in any way i'm with you i mean it's that point that veronica made about that sort of like that um that bro culture but it's like yeah i know you're in the bubble but how can you get it this wrong um tom what do you think yeah i mean when i first heard the story i I assumed it was, it must have been those sort of temporary three months tattoos.

50:35And I think clearly there's been a push. They knew what they were doing, come on. They're going hard into the, you know, no news is bad news lane. And I think they invited this level of noise. But yeah, one to smile about unless you have gone ahead and got one of their tattoos. And particularly if you haven't then had a successful job interview, I think that would be a hard one to swallow.

51:01Ross Gallagher:Oh, such a hard one to swallow. Can you imagine? Like, an unsuccessful job interview is hard enough to deal with without a permanent reminder of the body. I mean, come on. Veronica, is there any sort of redemption in the fact that the founder did relatively quickly admit the mistake, you know, offer to cover the cost of removal? I can't even believe I'm saying this, but I don't know, humor me. I mean, actually, you know, Tom, you made me realize like, maybe they were going for rage bait, like, which is a whole other meta level of strategy, you know, putting us in the, in shittification of everything on the internet now.

51:45So I don't know what to think anymore.

51:47Ross Gallagher:You think, yeah, I mean, look, there's, it is, it is, I mean, it is Tom, to your point, it's the next level up from no news is bad news or whatever that saying is. I mean, here we are, and we've committed several minutes of this podcast to the story. So if that was their intention, then on some level, they've succeeded. Do you know what? On that note, I think let's not give it any more airtime, shall we? Look, that does wrap up today's show. Thank you so much to today's guests. Guys, where can people find out a little bit more about you and your companies? Tom, let's start with you, shall we? Yeah, teia.com.

52:23We've got lots of information about our summer releases. And you can find me on LinkedIn, Tom Murillans. Super, thanks, Tom. How about you, Veronica? You can find me on LinkedIn at Veronica Maria Glab or on Substack at FinTech at the end of the world.

52:39Ross Gallagher:Amazing. Phoebe? All things Griffin, griffin.com. We've also just rebranded the website and it's very pretty. So take a look. There's also lots of exciting customer stories on there. and they're about to ramp up. And we also have our own podcast, which was done in pure admiration of 11FS. And then I am reluctantly on LinkedIn, Phoebe Wallace. Awesome. Thank you, Phoebe. As for me, you can find me on LinkedIn. And as ever, if you want to find out a little bit more about what we do at 11FS, then please visit 11FS.com. As I say, that wraps up today's episode. Thank you so much for listening to today's show.

53:20Ross Gallagher:if you like what you heard please make sure to follow us on your favorite podcast platform of choice and if you really like what you heard why not share the podcast with a colleague or friend as always if you want to join the conversation find us on social media just search for 11FS or fintech insider or email podcasts at 11fs.com thank you very much again and goodbye