With a career in banking spanning almost 20 years, involving over 15 years experience in various global markets trading roles with Deutsche Bank as Managing Director, one could argue Tanmai Sharma knows the ins and outs of finance (covering trading and risk management) – and the challenges that come along with it.
Today, Tanmai is Founder CEO of Mesitis, a financial technology company that makes complicated asset management for high net-worth individuals seem like “a piece of cake”. Mesitis was founded from a personal challenge faced by Tanmai after retiring in 2013, when he was unable to find any tools available for private investors like himself to manage one’s wealth efficiently.
Mesitis is filling a clear gap faced by high net-worth individuals, having recently won Asian Private Bankers Technology Award’s Most Promising Fintech Startup in 2015.
Read on as Tanmai gives Call Levels his perspectives on what to expect for the fintech industry in the near future, as he goes as far a to mention the potential of robo-advisors, which he disclosed will soon be a Mesitis offering as well.
FinTech platforms target specific verticals of bank(s) and generally aim to improve services for customers — this has been the case with payments, currency exchange, lending amongst others — what FinTech trends are you most excited to see this 2016?
Robo advisors have been making waves in US, and to a certain extent in UK / Europe for a while now. I expect them to come into Asia in a big way. All our data suggests that they do a better job than human advisors (and at a lower cost). We ourselves are launching a Robo offering soon.
Insurance tech is very exciting. Insurance is all about applied statistics, both in the sense of trying to get as large a set of customers as possible, as well as mining that data to continuously fine tune the offering for different segments. Fintech makes it easier to do that, thereby making insurance both a safer (for the insurer) and a cheaper (for the insured) proposition.
I am also very excited about companies that are using big data to make lending decisions e.g. a friend of mine is working with a company that uses cell phone data to figure out whether a particular prepaid customer has a stable job or not. They then make credit decisions on that basis, thereby reaching the erstwhile un-bankable.
What I have not seen (and suspect will not come in a hurry) is Fintech in the safer lending areas like top quality residential mortgages or leverage against liquid financial assets (where banks currently have a cost advantage, because they sit of lot of cash deposits and are willing to make these loans at a very cheap price).
What components make for a good FinTech-Bank partnership? Or do you think FinTech firms should coordinate amongst themselves to offer a comprehensive offering?
There are 2 types of Fintech companies:
- Those that provide a service that improves a bank’s profitability e.g. Contineo helps banks reduce their costs of dealing in structured products.
- Those that are providing a service that eats into their margins e.g. most Fintech companies in payment space.
So while there will be banks very keen to partner with the type (a) above, there will be resistance in partnering with type (b). Companies innovate not for its own sake, but to improve their bottom-line, and eventually the bottom-line decides.
Right now there is a lot of excitement about Fintech and pretty much every bank has an Innovation program, or funding accelerators etc. However banks (like all incumbents) will face some internal resistance against doing something that drastically changes the status quo, especially if it hits bottom-line.
A good historical parallel are discount airlines. All major airlines tried to start a discount airline and pretty much failed. The really successful ones (e.g. Ryan Air or AirAsia) were rank outsiders, who weren’t worried about protecting a legacy business.
I suspect that the same will happen here. Banks will try and innovate but it will eventually be marginal in nature. Truly disruptive innovation never comes from inside. Anything that is drastically game changing will get shot down internally.
For example take wire transfers. There are Fintech companies using bitcoin and other methods to make payments at a cheaper price than banks. They continue to do so with impunity, even though banks could easily drop prices and squeeze them if they really wanted to (because a bank’s actual marginal cost of doing wire transfers is close to zero). However no bank is dropping margins, as it is very hard to give up a lucrative business with good stable revenue.
I agree that various Fintech companies dealing with each other to provide different parts of the value chain to a customer is more likely to succeed. This is especially true in areas not requiring ‘core bank’ skills like custody or cheap leverage.
What is the biggest disparity between what financial institutions say is important versus what they actually invest in?
As I said in the previous question, it will be very difficult for a financial institution to invest in some Fintech that will eventually eat their lunch. Banks will behave very rationally if you analyze their behavior keeping in mind their need to protect a high margin legacy business.
What’s your take on FinTech? Disruptor or Enabler?
I don’t think Fintech is about to replace banks completely. For example in case some Fintech starts taking deposits, there is a strong chance that they will get regulated and become more like a bank.
So my position is that banks will eventually become utilities (very safe, predictable, highly regulated) and be the custodians and providers of leverage. Fintech companies will do most the ‘fun stuff’, and use banks as required for doing custody and leverage etc.
So I would say Fintech is neither Disruptor or Enabler, more a ‘Modifier’.
What are Mesitis’s key takeaways for clients to remember?
We help customers make sense of their financial data. We answer questions like:
- What is my networth?
- How much money did I make last year?
- Did I make more money in Citibank or DBS?
- Am I too leveraged?
- Am I overexposed to property risk?
What are the main challenges you have experienced launching Mesitis?
To be honest, while it has taken a little longer than I would have liked, it has been easier than I expected.
We built our company on the expectation that all parties (e.g. customers, competitors, service providers) will always behave rationally and move towards a best possible solution for them. As long as you provide a good product at a reasonable price, which they cannot get anywhere else, there will be demand.
A challenge, if it can be called that, is that since we do not have a parallel in the US it takes a bit of time for people (who are not customers) to understand what we do. Customers and potential customers get the joke in 5 minutes.
To find out more about Mesitis check out their website, especially since as Tanmai mentioned, they are coming up with innovative products to further aid private wealth managers. Stay tuned to our Blog for the more Fintech Influencers to come next week!