Welcome to part two of our COVID-19 special. Once again, we have three experts in their field, who are going to offer their assessments and predictions. First, we welcome back Anthemis’ Partner, David Galbraith, who goes big picture, imagining the future of everything from transport to healthcare, to supermarket supply chains, and how technology will continue to transform it all. Our second guest narrows in on the future of FinTech. We are talking to Thierry Zois, and he is part of the investment team at the Dutch Venture Capital fund Finch Capital — and they recently put out a report titled, “The Future of Disruptive and Enabling Financial Technology post CV-19”.
So, our Structural Shifts’ host, Ben Robinson, talks to Thierry about the report’s highlights and then dives deeper into talking about the future of challenger banks and discussing the importance of things like honest employee communications within an organization.
And then, Martin McCann, CEO of Trade Ledger, completes the conversation. He says a lot of government leaders have talked about going to war against the pandemic, but when it comes to overseeing banking and how to really help SMEs, they are leading with a peacetime mentality. Martin gets into the why behind this and then what the repercussions could be, and how we might be able to change course. In the UK, could the government join forces with FinTech to solve its problems? Are we about to see a rapid product innovation cycle for trade finance? Martin discusses all of this and more. Enjoy the show!
the trade-off in any system is between efficiency and resilience. An efficient system is perfectly adapted to a particular environment and if that environment changes, then it’s very fragile — David Galbraith
[00:02:02.17] Ben: Dave, welcome back to the Structural Shifts podcast. You’re a deep thinker anyway, and I can imagine that since you’ve been in isolation, since your role is to look at future investment opportunities, you’ve been thinking about the pandemic and the post-pandemic world a lot. So, we wanted to pick your brain and have you share some of your thinking. What’s the right place to start? As we look at the post-pandemic world, what’s the right prism through which to look at future opportunities?
David: Two components. So one is, there’s an enormous amount of noise, at the moment, and even the experts don’t know the answer to things like, “Are people immune?” So, all the decisions that have been made by politicians, for example, and things like lockdown are based on insufficient information because they will get this, but people have to make calls. So, no one has the right answers and the more you read, the more you realize that even the experts differ, at the moment — the information isn’t there, there is no agreement in terms of peer-reviewed papers at the scientific level, there are no answers.
David: But, there are some macro trends based on the response that will be permanent. And the two, at Anthemis, that we’ve focused on is that there were secular structural changes that were happening anyway and that this shock to the system isn’t going to reset those changes, it’s going to accelerate them. And then, some of those examples would be trivial, like more people are likely to use video conferencing or work from home. But some are not less trivial, like, is there going to be a Chinese-driven global hegemony versus the US one? So, the one aspect is this acceleration of structural changes and the second is that the trade-off in any system is between efficiency and resilience. And by that, what I mean is, an efficient system is perfectly adapted to a particular environment and if that environment changes, then it’s very fragile.
[00:04:26.19] Ben: So you’re talking about just-in-time supply chains.
David: Precisely! So, an example of that would be, French supermarkets had far less disruption in terms of empty shelves than UK ones, because there was more inventory in the French supply chain because it was actually less efficient. There were a lot more local producers and the country is actually less dense so that inefficiency made it more resilient to a changing landscape. And so, we’ll see much more focus, I think, going forward, on people having to create insurance for changing environments through redundancy.
[00:05:10.19] Ben: And if we’re practical about that, what could be some of the examples of that, beyond more inventory and supply chains and maybe more locally-sourced products? What other ways do you think we might see that trend towards greater resiliency manifest itself?
David: If we look out there, there’ll be lots of changes to the way people interact in the supply chain. So, a bizarre one was, let’s say, Delta Airlines decided to change the way that they would board aircraft. In the past, first-class passengers would pay lots of money to sit with a glass of Prosecco while people passed them, and now they’re vulnerable to people coughing on them, so they’ve decided to change the way that planes are boarded. And so, you could argue that’s, in a weird way, an insurance policy against being coughed on, so it’s a redundancy in terms of changing a system to make something more desirable that was less desirable in the past. I think we will see all sorts of weird, subtle adaptations to change — let’s take the views on public transport. Obviously, it’s more efficient to pack people full on public transport — as full as possible. Now, it might be a good idea to have actually more vehicles on the road in terms of public transport — more buses, for example — and less people on those buses because you might want them to be less packed.
[00:06:37.11] Ben: And how do we effect some of those changes, for example? If you imagine a world where we want to have more people using public transport, such that this proportion of public transport on the roads versus private vehicles is higher, and then we want the density of those buses and trains to be lower, how would we actually practically make that happen?
David: So, this goes back to the fact that there are unknowns. The world will be very, very different if it turns out we have a vaccine, and this is a one-off or if people are immune for five years after having gotten this thing, versus immune only for three months, and it being seasonal every year. So we don’t know. All we can do is create plausible scenarios for a range of outcomes and those scenarios are very, very, very different if this is endemic, versus it’s a one-off.
[00:07:35.26] Ben: And if it’s endemic, do you see that the state takes a bigger role? So the state obviously has prepped warlike powers to intervene and make us stay at home and to take a bigger role in our lives. Do you think that could become semi-permanent?
David: Absolutely. I mean, we’ll see the so-called Asian model being the one that is seen to be better than the highly individualistic Western model. Wherever the trade-off is, the argument over things like privacy in exchange for, let’s say, us sharing contact data so that our whereabouts is known, and that provides us with some safety — that argument might be over. That being said, when you look at Google and Apple teaming up on this or is that the opposite approach might be that they’re taking the view of trying to make this anonymous. Another option might be to make it highly transparent, to go for radical candor in terms of information sharing so that no one abusive actor can take advantage.
[00:08:43.09] Ben: And I suppose the difficulty will be if we do get a vaccine, it will be shutting down some of the things that we temporarily had to do to stop the spread post-pandemic.
[00:08:54.04] Ben: So if we look at some of these secular structural trends that are accelerating because of the pandemic, which ones do you think are most interesting, from the point of view of investing or creating new business models or new businesses?
the landscape of everything has changed and therefore there are new products and new opportunities. There’s a switch toward adaptability, but it doesn’t mean that all the insurance changes. It just means that the market for insurance has increased.
David: So, I think there might be lots of them. People were worried about automation and losing jobs and we’re now seeing a bunch of very underpaid people, like delivery workers or nurses, suddenly becoming proven to be utterly critical. So, I think you will see the relative importance of the premium pay for social proximity i.e. human caring professionals. So, then this will be part of the backlash — the value of human interaction will be at a premium. And so, how that plays out online in terms of online investment is that ordinary social media has remained largely flat but real-time social media — and that includes things like Peloton, and that includes Houseparty, and that includes people doing concerts live, that includes virtual busking by musicians — has increased by up to 75% because people will crave real-time experiences. And I think we’ll look back at this period when people were watching Netflix programs on their own, asynchronously, when no one else was watching the same thing and realize there’s been quite a lonely period of media, and so, I think that is something that’s highly investible in the future, is real-time shared experience.
Part of this whole acceleration of change that’s happening now, is that people can make decisions and not have to do six months of PowerPoint presentations to the rest of the company to make a decision to actually say, “We’re going to switch to Zoom video.” They can decide overnight — we’re doing this and this is the way it is. — David Galbraith
[00:10:43.03] Ben: Yeah, and I think one of the things that’s interesting is it introduces social network effects into businesses that we never thought had them, like Netflix. Netflix was a business that had some sort of data network effects in the sense that if they understood you better, they could make better recommendations, but had very few other network effects. But if we think that it really matters to watch Netflix at the same time as your friends and comment on it, then it brings a whole new level of value to it, a new level of locking in.
David: Precisely. I think that what happened with Netflix, it will happen with Spotify. There’s an opportunity — real-time music.
[00:11:18.19] Ben: Yeah. What about FinTech? Where do you see the opportunities in FinTech?
David: So, in this macro shift from efficiency to resilience — and we don’t mean an extreme shift where everything is purely resilient — it’s a balance, but that balance is being re-tipped towards resilience. Obviously, that’s what insurance is about. So, the opportunities for expanding the market for insurance are massive.
[00:11:48.11] Ben: I meant to mention this earlier, but is resilience the right word? Because resilience suggests that something endures disruption and it goes back to the way it was before.
David: It’s adaptable to a new environment. So it’s not that it springs back, like you say, which is the resilient notion — it’s something that’s fluid.
[00:12:13.18] Ben: So it won’t be the same insurance as before? The new insurance is born natively for the new post-pandemic world.
David: Certainly, there are new opportunities. Yes, the landscape of everything has changed and therefore there are new products and new opportunities, but the fact that there’s a switch toward adaptability, it doesn’t mean that all the insurance changes itself. It just means that the market for insurance has increased.
[00:12:45.04] Ben: The whole push towards digital financial services accelerates too. How do you see that? What will be the factors that determine the winners and losers there? Because any kind of FinTech company born post-2010 or whatever, is digitally native. So, what will be the winners between the ones that sprung up in recent years?
David: I leased a car recently and they wanted me to go to the local office to sign the paperwork. And of course, as soon as COVID hit, it turned out I didn’t have to do that — I could do it all online. There was nothing stopping them doing it online beforehand, clearly, in terms of structure. It was purely attitude and mindset, and a no-can-do attitude. I think that that’s part of this whole acceleration of change that’s happening now, is that people can make decisions and not have to do six months of PowerPoint presentations to the rest of the company to make a decision to actually say, “We’re going to switch to Zoom video.” They can decide overnight — we’re doing this and this is the way it is. And so, since a lot of FinTech was actually quite bland opportunities that were an upgrade to digital, which is literally getting rid of the paperwork and a lot of that stuff, the last barriers to that have just crumbled.
the number of people going to visit a doctor is suddenly going to reduce because doctors shouldn’t be exposed to lots of sick people at the moment — it’s actually dangerous for them — and so, telemedicine will increase massively at the general practitioner level, for that first interaction with healthcare services. A lot of that will go online. — David Galbraith
[00:14:15.25] Ben: So do you see more B2B than B2C opportunities then, in all those B2B FinTech companies that can help the incumbents to become more efficient and deliver a better digital experience — that might be where a lot of the action is?
David: I think our view at Anthemis was that what was happening to financial services was more than just an upgrade to the digital era by finance — finance itself was becoming more like the internet. It was structurally changing, so, the getting rid of paperwork opportunities — standard FinTech stuff — is just an upgrade. The B2B angles and the reason why there are more B2B angles is because of this expansion of what financial services can do when it becomes more like the Internet of financial services, meaning that you’re recreating the infrastructure of financial services, and there are B2B opportunities to plug that infrastructure into any vertical to embed financial services into other products that aren’t necessarily financial services companies. So, in the past, you’d go to your bank and you’d go to your insurance company, but now, your insurance is plugged into your car when you buy — it’s bundled with the product. So, this idea of embedded finances is a macro shift.
[00:15:39.23] Ben: And do you think it’s a macro shift that’s accelerated by the pandemic or carries on as normal?
David: Yeah, I think the structural shifts that were under change are accelerated. So the two accelerations in financial services, the last holdouts against FinTech crumble — which is the upgrade to the digital era — and then the structural transformation of financial services to become a network also accelerates.
[00:16:09.00] Ben: And what about in other fields? So I know probably this is taking you a bit outside of scope, but presumably, there’s massive opportunities in areas like healthcare, for example, that may be the things that you don’t look at every day, but I would imagine you’ve been thinking about.
The delivery of electricity is going to look more internet-like than it currently does. — David Galbraith
David: So, obviously, this is one of these areas where it requires expert knowledge to look at pure healthcare services. But, if you were to look at the business of healthcare or the structural changes it took, you can have a view and one of the possible views is that it decentralizes. There are two aspects of healthcare that might change. One is, the number of people going to visit a doctor is suddenly going to reduce because doctors shouldn’t be exposed to lots of sick people at the moment — it’s actually dangerous for them — and so, telemedicine will increase massively at the general practitioner level, for that first interaction with healthcare services. A lot of that will go online. And that sounds trivial, but I recently, during this process, went to the pharmacy to get a Ventolin inhaler for hay fever. I was told that I had to phone the emergency services because they wouldn’t fill the prescription and the emergency services in France told me that I had to see a doctor in person and when I told them I would just go on the internet, they said that wasn’t possible, but when I hung up the phone and I did go on the internet, within 15 minutes, I had the prescription and went back and filled it. So it helps the healthcare service to accelerate these changes, to decentralize.
David: So that’s at the first level. And then, at the second level, there was a New England Journal of Medicine article suggesting that the co-morbidities for most people that seem to be dying in hospitals have other underlying conditions. And then, one of those underlying conditions might actually be provided by the hospital itself. If your immune system is compromised, you’re entering a place full of sick people, and they’re concentrating sick people in one place — where we’ve seen hospitals actually, quite often have antibiotic-resistant bacteria and all sorts of things. It might be that the whole healthcare system has to decentralize as well and you’ll see elective procedures done in completely different places from trauma and things that maybe are best handled in large hospitals.
[00:18:50.08] Ben: So healthcare, in a way, just becomes networked as well because bringing people into hospitals or, again, about economy’s at scale and things that are less important in a networked world?
David: Yeah. I think the structural characteristics of networks occur in all sorts of areas from container shipping i.e. modularity and being able to move things from anywhere to anywhere, as opposed to very hierarchical industrial views. But these things are ubiquitous, and they’re cropping up from container shipping to the internet, to financial services, and the next one we’ve been looking at is energy. The delivery of electricity is going to look more internet-like than it currently does.
the markets are irrational at the moment, not because things are going to be terrible or things are going to bounce back; it’s because we don’t know and therefore that isn’t priced in. — David Galbraith
[00:19:43.08] Ben: I just want to revisit something you said at the start, which is, there’s no consensus among experts about what this means or what the right response necessarily is. So, as you said, people have been making a big cause of shutting down the economy. I suppose implicit, in all the actions that have taken place so far is there’s a binary choice between human life on the one side and the economy on the other. I think the Italians have, in a way, set the precedent by standing up and saying, “We’ll put human life ahead of the economy.” But it’s not as black and white, is it? I just wondered if you had thoughts about the morality of the response we’ve seen so far in terms of shutting down the economy?
David: So, a lot of the suffering and actual death that will end up being caused by the shutdown — whether it’s direct like depression or suicide rates, which definitely increased in Greece after 2008 crisis significantly — a lot of these things are unmeasurable and long term, and could be things like people not having as much money and not eating as well or drinking too much or stress and heart attacks. We don’t know these effects, but they could be colossal. But a politician at the moment, being given a choice between two things — we saw the reaction against herd immunity because obviously, that’s directly measurable — if you make a call to let people die, at some point that’s politically unsustainable. Even Sweden has backed down from that, but that doesn’t mean sick people aren’t going to die because you’ve locked down the economy. They will. But there isn’t much immediate political cost for that call, which is why I think it’s maybe a bit kind to say that Macron has made the right call because Macron has doubled-down on lockdown, but it might be that there’s a lot of pain and suffering coming to France from locking down in a more extreme way than other places. We don’t know. Thankfully, I don’t have to make those kinds of decisions. I wouldn’t blame any politician from making either call because they have to make decisions, but they have to make decisions on insufficient data. And we don’t know at the moment. And not only the insufficient data — we may never know the cost of shutting things down, and it may be that that cost is far more severe in developing countries where there is no social safety net, that if you can’t cut someone’s hair, if you’re a hairdresser, you literally starve. These kinds of things are going to be very unpleasant.
[00:22:33.06] Ben: Last question. There’s been lots and lots of discussion about the shape of this recovery. I suppose, leaving aside the black-swan event of a vaccine in the next three months or whatever, how do you see this playing out in terms of it being U-shaped, L-shaped, V-shaped? How quickly will we get back to decent economic growth again, and how much do you think these things have been factored into people’s economic models?
David: I think the range of scenarios is still massive. So, you still could see a V shape recovery — it’s still plausible. But that range of scenarios also includes some very long-term depressions. We don’t know. Nobody knows. And certainly, because we don’t know the actual doubt isn’t priced into the markets. So, the markets are irrational at the moment, not because things are going to be terrible or things are going to bounce back; it’s because we don’t know and therefore that isn’t priced in.
[00:23:56.16] Ben: And what does that mean for venture capitalists then? What’s the right way to think of this as an investor?
David: So, if those range of outcomes are a V-shape recovery or a U-shape recovery, it would have to be a very long year for the difference between those things to actually affect venture capital because you’re looking at 10-year cycles and things bounce back in the next six months or in the next two or three years. It actually doesn’t make that much difference in terms of the outcome as long as they bounce back. So, of those range of scenarios, only the really extreme ones would affect venture capital over the investment period.
[00:24:32.19] Ben: So do you think most venture capitalists, therefore, are being unnecessarily pessimistic or taking unnecessarily strong action in not backing many companies?
David: So you’re seeing people say things that are different from what they’re doing?
David: And you’re seeing a whole spectrum of what people say. So, it’s largely noise.
we have seen in the market that a lot of corporate VC pulled out on investments due to the whole uncertainty. — Thierry Zois
[00:25:01.11] Ben: Thierry, what we wanted to discuss was the report that you put out a few weeks back, which is entitled “The Future of Disruptive and Enabling Financial Technology post CV-19”. We’ll share the link to it for the listeners, but in essence, it’s a 26-slide presentation, jam-packed with interesting data predicting what might be some of the near and medium-term impacts of COVID-19. One conclusion that seems to jump out from the report is that there’s this clear dichotomy between consumer-facing FinTech companies that face lower volume, shrinking assets, etc. and the B2B FinTech companies whose technology is now in really strong demand because financial services see that they basically have little choice but to become more digital more quickly. Would you say that’s fair, that that’s this overarching conclusion?
Thierry: To a certain extent, yes, but overall, it depends on which industry you’re in. So if you’re a FinTech that is in the trading space, like Robinhood, Box, Flow, and other players, they’re experiencing a lot of growth at the moment and the main reason is because volatility is its best friend, so they’re seeing a lot of people coming, signing up onto their website — and that’s mainly also due because the market is so crazy, but also because people have a lot of time, they do not have anymore the same spending so they save quite a bit of money and they say to themselves, “Hey, why shouldn’t I launch myself up to such a platform and see how the whole stock exchange market works?” But of course, then you have other consumer-facing technology such as, let’s say, N26 or Revolut, that they’re taking a big hit because they are really focusing on their clientele to actually travel and to use their effects, which they have built into their application in order to spend and use their card — which is currently more on the rare end. So, it really depends on which vertical you’re looking at. But, overall, yeah, consumer-facing generally takes a bigger hit.
We also expect that the road to IPO is going to be so much more difficult. It’s going to be really tough for companies to go all the way down that road, given that there is not, anymore, this hungriness as there used to be in terms of capital providers — Thierry Zois
Thierry: Now, if we look on the B2B side, I think it’s a very hard time if you’re planning on signing on new clients. The main reason is because they’re very old-fashioned type of sales and very long, so there are a lot of procedures in place and a lot of face-to-face is actually quite necessary, in order to build a certain trust; given that it is such a big animal, they really want to make sure that any technology or any person that they onboard is the right technology for them and the right cultural fit, so to speak. Therefore, in the current crisis, to sign up new clients at the moment is quite difficult, I must say. However, everybody’s working from home, like you and me, and also the ones that work at the incumbents, they work from home. And well, they will be working on existing portfolios or existing openings that they still have. If you had started already your sales a couple of months back, then the likelihood that you will close them is still quite high — it just obviously will delay a bit, but the funnel will come to it.
[00:28:25.11] Ben: Another thing I wanted to ask you is, in the report, you talk about this shift to digital-only triggering what you call a “big pocket online battle between incumbents and challengers.” What I wanted to ask you is, which challengers do you see as having big-enough pockets to win that fight? And do you think this might be the moment for some of the internet platforms to make a bigger move? And then, lastly, do you see that VCs are prepared to just keep writing checks to fund this battle, particularly where challenger banks are concerned?
Thierry: Yeah, it’s a very good question. So, maybe let me start on the VC side. It depends on which fund you are. The problem is, when you raise a fund, people might commit capital to this fund — let it be incumbents, family offices, etc, etc. — but given that it’s such a huge crisis, people then, suddenly, start thinking, “Okay, should we not allocate this money to something else and actually take up the penalty fee for us not being able to pay a fund?” So, there is definitely money in the markets. The question is whether they will be able to pull it out and use it in order to invest. And that’s why it’s also extremely hard to raise capital at the moment, both from a fund perspective and from a startup perspective, simply because there is not a lot in the market. IPO obviously will give a very big hit on valuation for the virus-given startups, but also notably on the later stage companies, such as where incumbents jump in — and generally incumbents are not so sensitive about valuation, and they’re okay to pay a premium, so to speak, but, given the current circumstances, there will be some strong negotiations. And we have seen in the market that a lot of corporate VC pulled out on investments due to the whole uncertainty. It really depends how you are funded, from where your money comes from, but yeah, definitely, there will be some tech companies that will be able to accelerate even further and use this window of opportunity in order to come out even stronger.
[00:30:50.11] Ben: In short, then, you’ve got these relatively deep-pocketed incumbents — although, clearly they’re facing some liquidity challenges themselves, potentially — versus the tech companies. And then, do you see consolidation in the challenger bank space?
Thierry: Absolutely. So, we see consolidation throughout verticals, which makes sense — the reason being is that many will come into difficulties when it comes down to business runway and just volume, so consolidation is the next logical step. But we’re looking more at lower valuations. So, anything between 50–150 type acquisitions, not bigger than that. We also expect that the road to IPO is going to be so much more difficult. It’s going to be really tough for companies to go all the way down that road, given that there is not, anymore, this hungriness — or we expect that there won’t be as much hungriness — as there used to be in terms of capital providers.
[00:32:01.04] Ben: Would you predict that the largest, most established challenger banks will fare okay? So, there might be some sort of flight to quality or whatever, away from challenger banks — in general, the largest ones and the most established ones will be okay. Some of the smaller ones, as you said, 50–150, they might get swallowed up by some of the larger challenger banks. What happens to the people in the middle, then?
Thierry: Well, that depends. They might shift towards the 50–150 million; some might take a hit also on their valuation and actually, they might have been worth more a couple of months back, but now, given the situation, they took a haircut, or they actually flourish. That really depends on their positioning and how they actually use this crisis in order to come out stronger. I can imagine scenarios where smaller challenger banks that are younger are being acquired because it’s a great acquisition moment, as well, if you have capital in the back, in order to gain terrain and dominate certain regions. And that, obviously, becomes also more interesting for the large incumbents, such as banks, to then look at the bigger ones such as N26, for example, in order to buy them and incorporate them straight into their digital transformation because these guys, we clearly see that they’re taking a huge hit by cutting down on everything, which is local change — the branches will need to cut on the operations and contact centers — and where they will need a lot of innovation is around salesforce, central business units, product development, and technology. Acquiring, then, such a player might be a very smart move for them in order to reidentify themselves, in a way.
[00:34:06.11] Ben: I think the valuations would need to fall a long way for incumbent banks to buy challenger banks.
Ben: Yeah, because otherwise, they’re going to see massive valuations, right?
Thierry: Yeah. They’re taking a tremendous hit. And I do not know. I mean, these are predictions. Already the challenger banks, they were part of a bubble; they raised crazy amounts of money with crazy valuations without actually having some significant revenue based on a couple of KPIs with multiples that were outrageous — or maybe not outrageous, but which have never been seen before in the industry. Maybe it’s just a correction and definitely, some people will lose money in all these transactions, but others will also flourish from it. So, you have both: you have winners and losers in this.
[00:34:59.09] Ben: And would you say that challenger banks was the area in FinTech where valuations had become most overinflated and therefore, where valuations need to come down most?
Thierry: To a certain extent, yes, I have never seen such a thing in terms of valuation on how they put the multiple on their revenues, for example, compared to any other industry. So, I think that the relative valuation like price revenues is 50x plus, whereas if you go to a consumer lending, maybe the lowest is 10x, and the highest is 30x. And if you go into enabling fintech like UiPath, it’s anywhere between 10x and 20x, because they actually have some significant revenue.
[00:35:50.03] Ben: You said earlier on that you think some of the midsized challenger banks could flourish, and you said if they get the positioning right. Could you maybe just more concretely, say what you think is the right positioning and the right response for FinTech companies in this pandemic and post-pandemic environment?
Thierry: Well, difficult question.
Ben: Yeah, it’s a big question so you can break it down.
Thierry: A company I like quite a lot is called Bunk and I do not remember exactly how they position themselves but the story goes as follows: basically, for every 100 euro spent or 1000 euro spent Bunk, for example, plants a tree for you. Given the whole COVID situation and how the weather is playing, at least in Central Western Europe, you’re seeing four or five weeks straight of sunshine and everything and you see how nature changed, so to speak, given the cut on CO2 emissions, cars, flights, you name it, you get it. I think that really speaks to the heart of many people out there. So, if you can make an offering that speaks to the heart, such as, “Hey, if you spend 100 euros or 1000 euros every time with this card, we’re going to go plant a tree, and that is thanks to you” I think it has a lot to do with the messaging and with what you identify yourself with. So, that would be maybe one way to position yourself, going more into the nature-friendly vision; that might be a path that you could choose in order to acquire more users and double-down on the ones that you’ve already acquired.
[00:37:43.25] Ben: And in general, what kind of advice are you giving to your portfolio companies about how to prepare for this crisis and how maybe to capitalize on it once we start to get through it?
Thierry: Yeah. I mean, it really depends. Some startups actually flourish, but the majority of them don’t. So, I think the most important is managing losses with speed and adequacy, and be realistic about fundraising landscape — so if you were planning on raising X amount, well, maybe this X amount becomes now X minus Y. And also, the time in order to reach that target has been significantly increased. I think also, during these times, psychology within the company is really, really important, so I would really communicate openly with the staff and put as much as you can in product development. Cut down the marketing spends and just focus only on return on investment channels, like high return on investment channels, and if you’re fortunate to come out of a country where there’s a government that supports these companies in crisis, then try to leverage them as much as possible — such as in the UK, Germany, France, there are many aids put in place in order for them to keep the startups afloat.
[00:39:12.28] Ben: You’re quite unique in the sense that you invest in Europe, but you also invest in Southeast Asia. What is the environment like in Southeast Asia relative to Europe now, as in terms of the levels of demand, the levels of funding, the levels of government support? And then also, how do you see it emerging post-pandemic?
Thierry: From a support perspective, I think Europe is better served — that has something to do also with history — but I think, from an economical point of view, I believe that Asia will recover way quicker than Europe will, but that’s still a gamble. I mean, they reopened many of their factories, but they see also, again, a jump in terms of infection.
[00:40:03.14] Ben: You guys surveyed, I think, 95 companies, asking them, “Once this is over, would you predict that there will be stronger demand for your product?” And two questions on this: first of all, everybody’s saying, basically, “Not sure” or “Yes”. And the two questions are, firstly, who, if anybody, is seeing stronger demand now? And then, secondly, is this the moment where FinTech really comes of age? Is this the shot in the arm that FinTech needed to get wider adoption from corporates and wider adoptions from consumers?
Thierry: I mean, from a digitalization point of view, absolutely! For incumbents, it’s really COVID-19 that really forced them, in a way, pushed them toward this direction because simply they didn’t have another choice. And perhaps, if we didn’t have this crisis that kicked in, this process might have been so much longer and before any implementation was put in place, we could have been maybe five to 10 years down the road. So, it’s kind of like an accelerated state, so to speak. And now, coming down on some companies that flourish and some don’t — it really depends on any vertical you can have. So I mentioned before the trading applications, they’re doing extremely well, whereas SME lending I can imagine is doing extremely bad because of the default worries that are in the market. The same with wealth management, de-risking investors withdraw, etc, etc. And there are other players as well, such as in the prop tech industry if you’re in the deposits or in the marketplace. But I think the overarching winner in this is mainly the companies that enable fintech to do better.
[00:42:08.20] Ben: Are there any particular companies or subsegments you would call out there? Because I think in your report, for example, you talk about, while SME lending might be tough, the platforms that enable SME lending are booming. So, which other subsegments would you call out in the B2B space?
Thierry: If we look at KYC, for example — at the moment, I think KYC will play a bigger role than ever before. And KYC not only just from the legal perspective, but also really in order to identify quality clients. For example, in the lending space, if you had the technology in the background that could run and really, really create the whole scoring card on your client like it never did before, that is extremely valuable for any SME lending platform, in order to secure their defaults. I think the whole KYC space is going to get a huge boost and a lot of attention from VCs in that space, given the current scenario.
[00:43:23.17] Ben: You’re in the process of raising another fund, right? How is that going in the present environment? I can imagine that’s quite tough.
Thierry: I would lie if I would say it’s not tough at all. Of course, it does. However, thankfully, we started very early on, so it’s a process also, not only from a startup perspective but also from a VC perspective. It takes a very long time to raise funds and because the majority of our investors are financial institutions, it takes also in general, a couple of months longer. Now, thankfully, because we already started touching base with all these incumbents beforehand and build a very good relationship and met them a couple of times face to face, now, thankfully, these projects are moving forward in these difficult times. Not as quickly as we hoped, but we’re very confident that we will be closing our third fund very, very soon.
[00:44:28.13] Ben: And even without that fund, are you still able to invest in new companies and reinvest in existing ones?
Thierry: So we’re still open. We have some very significant chunk of our money reserved for our portfolio companies. That’s just the strategy on which we perform — we can invest up to 15 million into a company, so that’s some significant money for the first bigger check investor. We just invested in two additional deals, recently, which we’re going to announce very soon. But overall, yeah, we’re still open. And in that sense, the business continues as usual.
I’m not sure that the pandemic is the only driver in the change of global trade. I think there’s been a shift in the ethos of global trade now for a couple of years. — Martin McCann
[00:45:22.03] Ben: Martin, I just wanted to start by talking about trade finance. I think one of the things that the pandemic has demonstrated to us is that our supply chains are probably much more fragile than we thought. And, for example, I think something like 80% of PPE comes from China. And so, what a lot of people are saying is that this is going to lead to acceleration and reshoring of production. Do you agree with that statement? And if so, how will that affect global trade finance?
Martin: So, I’m not sure that the pandemic is the only driver in the change of global trade. I think there’s been a shift in the ethos of global trade now for a couple of years. So, there was a clear benefit to moving most manufacturers and extending supply chains east when China initially opened its markets because of the cost of labor. But, what’s changed, I think, in the last couple of years, which started to drive this macro trend is the fact that a lot of goods manufactured in China are now for domestic consumption — and that percentage of domestic consumption has actually been rising for some years now, through the creation of the new middle class in China, in relatively recent economic terms. But I think there’s been a number of disasters in supply chains which have indicated the fragility of these very untransparent and stronger global supply chains. If you go back to the Japanese nuclear disaster from the tsunami, I think that that really underlines significantly the risks with trying to outsource, I guess, the responsibility for your supply chain to low-cost centers around the world.
cost should not be the only factor in determining how you structure a supply chain. So, the security of supply chains is actually becoming front and center in the way that supply chains are being designed, and that’s most definitely going to change a lot of trade in the next one to five years. But also, the lack of transparency has come front and center as well — Martin McCann
Martin: I think what this pandemic has done is two things — which build on that emerging trend — and you can see it in the numbers. It’s shown that cost should not be the only factor in determining how you structure a supply chain. So, the security of supply chains is actually becoming front and center in the way that supply chains are being designed, and that’s most definitely going to change a lot of trade in the next one to five years. But also, the lack of transparency has come front and center as well. The fact of the matter is, most people didn’t know that most PP equipment came from China. Most people who buy PP equipment didn’t know that it came from China. They’re just buying equipment without any visibility into the further reaches of the supply chain. But I’d say this is something that has been happening for a while. If you look at the numbers in terms of trade, effectively, at the highest level, trade looks like it stalled in terms of growth, but when you unpack that look within it, actually, it’s not really stalled in terms of growth; the way that we track trade is really aligned to physical logistics chains, where actually, what’s happening is a rebalancing of global trade as the economy moves on to a new phase globally. So, with more and more of the former low-cost production countries not consuming more of those goods — that’s not showing up in the trade figures, obviously — they are now producing a lot more services-based exports than they were previously.
there’s actually a very, very rapid rise in global services export across borders, which is very, very hard to track by traditional methods and there’s less of a focus on the traditional logistics networks, which tracked physical trade previously. The main change that we’re going to see from this pandemic is there’ll be more of an insistence that supply chains are visible all the way through. So, I think what we’re seeing is just a natural evolution of trade. — Martin McCann
Martin: So, there’s actually a very, very rapid rise in global services export across borders, which is very, very hard to track by traditional methods and there’s less of a focus on the traditional logistics networks, which tracked physical trade previously. So, I think what we’re seeing is just a natural evolution of trade. I think trade volumes include services as well — more complex services particularly — and the gig economy is definitely increasing, just not easily trackable. And for me, the main change that we’re going to see from this pandemic is there’ll be more of an insistence that supply chains are visible all the way through, and that there’ll be proactive decisions made as to what products need to have more strategic owners in terms of understanding the complexity, globally, of how to get the final products shipped, versus things which are much more of a commodity where it doesn’t really matter whether or not they’re disrupted.
[00:50:12.16] Ben: And if the future of trade is much more intangible, much more services-based, what does that mean for trade finance? Does that sort of trade require the same level of trade finance or not?
It’s mind-boggling to think that in 2020 — we’re talking about 15 years after the advent of the Internet — we’re still using the same documents and finance mechanisms as have been around for hundreds of years. So, I think what we’re about to see is a rapid product innovation cycle for trade finance, which is more suited to clients who’ve got less tangible assets, and to more of a gig and services driven economy where those services are being delivered across borders. — Martin McCann
Martin: Yes. So services finance is slightly different in two respects. One is the term for which you need financing for is probably shorter because it has more to do with the payment terms of your contracts. Whereas with physical trade, it has to do with, the manufacturer and the shipping generally are the longest period of the credit terms which are required. It also means that the types of products are different, whereas when you’re looking at physical logistics, you have goods or components of goods, physical goods, which can be taken as security or at least assignment of those goods and the control of those goods can be used as a securitization mechanism. Whereas with services that’s not really the case. What you need to do is really look at the class of open-account trade finance products, really looking at the inflows and outflows from the companies that you’re providing credit to, and looking the less tangible assets that are available for securitization, mainly things like receivables, and looking at the other creditworthiness factors of those companies, as opposed to the physical goods required for securitization in more traditional trade.
[00:51:48.18] Ben: And how we’ll set up our lenders for that transition from tangible to intangible trade?
Martin: I think, generally, very badly. If you look at the level of innovation in trade finance, it’s been incredibly low for more than two decades. I mean, guarantees and letters of credits have been around for hundreds and hundreds of years. It’s kind of mind-boggling to think that in 2020 — we’re talking about 15 years after the advent of the Internet — we’re still using the same documents and finance mechanisms as have been around for hundreds of years. So, I think what we’re about to see is a rapid product innovation cycle for trade finance, which is more suited to clients who’ve got less tangible assets, and to more of a gig and services driven economy where those services are being delivered across borders. And the product category which is more suited currently, is that sort of open structured trade, where you can look at inflows and outflows into the financing and dominion over cash accounts as the way that you securitize that product.
[00:53:01.05] Ben: If we think about SMEs, just to change slightly — it seems to us that during the pandemic SMEs have been worst hit because they’ve got smaller balance sheets and are arguably less able to withstand the shock and then potentially less able to bounce back after the pandemic. How well do you think governments have done in supporting those SMEs and how well have financial institutions done in supporting those SMEs? And does it, in the same way, uncover deficiencies in the way that lending is done today because it’s been so heavily tied to physical assets?
Martin: If we look at the governments’ response to the pandemic, I think the strategy is right, that they want to get massive injection of liquidity into the SME sector particularly. Why is that important? If we look at the UK as an example, the UK SME sector employs over 20 million people in a country of 65 million people. So, if you don’t support the SMEs through this, you’re going to end up with a very deep and painful recession, if we lose all the SMEs because nobody’s going to be able to work by the end of it. And that just becomes a self-fulfilling spiral at that point in time. So, the idea is, the way they’re going about it, though, is basically using the usual channel. So, again, if I use the UK example, they’re trying to flow, let’s say, roughly a year’s worth of liquidity and credit into the SME sector, using initially 40 strong panels of lenders, which are traditional high-industry lenders. So, it’s a fraction of the capacity which would normally flow that credit into the market over a year and none of those lenders have infinitely elastic capacity to deal with new queries. Most of them are not specialists in SME credit decisioning or lending, and the information which they would normally utilize in order to come up with a credit decision model is not available any longer, or all of the SMEs would fail those credit decisioning criteria.
Martin: So, I think the schemes have been rushed out and not thought through well enough and I don’t think that we’re going to see massive distribution of — we take the UK again, as an example — the 330 billion; we’re not going to see that distributed anytime soon. Given that the SMEs in question probably have roughly a month of runway left on average, there’s no way for the government to actually distribute those funds in a meaningful way. So, I think there’s some major challenges with the way that government schemes have been developed. It’s a step in the right direction, but there’s a lot more work to be done to enable the distribution at scale of those funds. And the one thing which has been overlooked in all of this by all of the governments is technology. My view is that you need to use new types of infrastructure and technology, which can be adopted and deployed quickly, to solve this problem at scale. You can’t depend on the traditional distribution channels. There needs to be a more coordinated national effort on distribution, which involves new technology.
[00:56:27.27] Ben: Yeah. So, as far as I understand, there aren’t too many criteria attached to these credits that are going to SMEs, but we’re faced with a different type of bottleneck, as you say, which is not about how the lenders score the SMEs — which was a problem pre-crisis — but just simply we don’t have a scalable-enough technology infrastructure to deal with the volume of applications. So, I think, if I listen to you, it seems like, at its root, this is a technology problem rather than a risk scoring or any problem of methodology.
Martin: Yeah. Well, you can separate those two dimensions. I do think that credit decision is still a problem because the industry has been really bad at doing credit decisioning on SMEs, because the credit models that are around they’ve basically been developed over the last 10 to 40 years, and they’re not really suited to small companies that are not stable, that don’t have track records, don’t have years of credit data — “thin credit files” is what’s called in the industry. The industry is not set up to lend to those types of companies in the first place. And that problem still needs to be solved because even with the government schemes that have been put in place, many of them only partially guarantee the credit. So, there’s still a need to do credit decisioning.
demand will always determine the shape of the market and in times of stress, you need to see rapid innovation in order to meet the changing demands of the marketplace — and if you don’t see that, you’re going to ultimately see a decline in your business and you’re going to see yourself replaced by nimbler, faster-moving, more digital innovation propositions. — Martin McCann
Martin: So, I use the UK example again: it’s 80% guaranteed, so the government’s taking 80% of the risk and the bank’s taking 20%. The bank is still going to do the same credit assessment as it always does, not 20% of the risk. The problem of technology is quite interesting. What we’re hearing from all of the banks that we talk to is consistent — none of the banks actually have the ability to do straight-through processing on applications for SMEs. All of the banks have paper in the system. In fact, we know of a bank — our own bank — who told us that they can’t put an overdraft facility in place which we’d agreed before the crisis because of a lockdown on one of their operations centers overseas, which means that nobody can go into the office and print out a physical piece of paper required to approve the overdraft. And that’s sort of symptomatic of where the banks are. I mean, they’ve moved from legacy systems, they’re moving at pace, but they’re not able to respond in a matter of weeks in order to deal with this unprecedented demand of credit applications.
I think there’s just going to be extreme pain by the SME sector, despite the goodwill and all the effort by the governments because they just don’t know how to deal with these problems and they’re using peacetime governance processes to try and deal with wartime situation. — Martin McCann
Martin: Whereas, if you look at new cloud-based infrastructure, it can actually respond. So, the consistent feedback that we’re getting is that overall, the banks don’t have the workflow orchestration and automation capabilities; they don’t have standard technical capabilities and automation capabilities such as centralized task management, role-based user management on all of their systems so that across different teams, people can see when stuff needs to be passed off. There’s not a dropping of the applications between relationship managers and credit managers and documentation. There’s no standard way of actually triaging documents and information through the entire system — stuff needs to be printed off from one system and then re-entered in another system, then documents need to be taken from one place and stored in a central place and then accessed from somewhere else. And in the meantime, they’re going back to the customer and asking them for the same information multiple times in many cases or asking them for information, which they’re not being precise about the requests and getting the information in a format which doesn’t suit the processing of the application automatically. So, these are the capabilities, which, you know, they’re not rocket science, but these are the capabilities the banks don’t have, because of the legacy of how the systems have grown up.
[01:00:33.18] Ben: So, if this is a moment where reputations are made and lost, how do you think the reputation of your lender, for example, somebody who says, “I can’t service you because there’s a piece of paper that I can’t get from India” or whatever — would you continue to use your lender post-crisis?
Martin: We’ve already set up another bank account with a new banker.
Ben: Okay, so, you’ve answered the question. So, you’re really voting with your feet, and you’re proving the point that businesses have long memories.
Martin: Yeah, well, we may or may not vote with our feet, but up until this point we weren’t looking at being multi-banked. Now we’re going to be multi-banked. So, demand will always determine the shape of the market and in times of stress, you need to see rapid innovation in order to meet the changing demands of the marketplace — and if you don’t see that, you’re going to ultimately see a decline in your business and you’re going to see yourself replaced by nimbler, faster-moving, more digital innovation propositions. Interestingly, alternate lenders are better positioned. So, many of the alternate lenders who have now been added to the panels will be able to deal with processing a lot better, but their scale is much smaller anyway. I mean, the funds that they have and the covenants on their funds are much more restrictive, so they’re not going to be able to solve the distribution problem at a national or international scale, either.
[01:02:06.23] Ben: So what is the answer? Because it seems obvious that the answer is to introduce better tech that can link the lenders that have the balance sheet with the SMEs that need the money. But, I guess, playing devil’s advocate, if SMEs only have a month of runway, it’s quite difficult to think that we could be up and running with an entirely new lending infrastructure in a month. So what do you think the answer is to this? Because it’s a very, very, very short window to address this problem.
Martin: Yeah, look, it’s a really good question. I think the problem is who makes the decision. That’s the problem. As with most success or failure criteria with technology projects, it is not the technology which is the issue, it’s the change management, which is the issue, and that’s the way it’s always been. So the question here is who makes that decision? How do we represent a national interest and how do we mobilize around that? The banks are going to work within, I guess, the swim lane that they know well, which is, the system’s process and technology, and the operating processes they have in place today and they’re going to tinker with them as best they can.
Martin: The government doesn’t really understand the problem, in my view, which is why they’re not addressing it — so they need the feedback to figure out how to address the problem. But then, it’s like, well, who should make the decision? Governments don’t want to interfere in commercial banking or business practices but commercial businesses are not intending to make the scale of change which is required to address the problem in the timeframes required. These are unprecedented time so there’s no right answer, but I don’t think we’re talking about solving the right problems. So, my own personal view is this needs a nationally coordinated response. There needs to be a central body, which basically comes up with a template for how the problem gets solved to create 10x to 100x capacity in the system in a matter of days or weeks and it basically either recommends or mandates that to the various different participants in the distribution of the funds.
[01:04:29.00] Ben: How confident are you that that will actually happen there? Or do you think that, like in any crisis, we’ll have to see a lot of SMEs hit the wall before this is escalated to the point where we actually do something as big and bold as you’re suggesting?
Martin: I think there’s very, very little chance that what I’ve suggested is actually what’s going to happen. I think for the individuals involved in making decisions it’s not obvious that that’s what the approach needs to be in the national interest or there’s too much fear that if they go with that route and get it wrong, their head personally is going to be on the chopping block after the crisis abates. So, I actually think that from where we are there is very little chance that there’ll be significant support distributed to save the SMEs in any country — bar a few. I think there’s just going to be extreme pain by the SME sector, despite the goodwill and all the effort by the governments because they just don’t know how to deal with these problems and they’re using peacetime governance processes to try and deal with wartime situation. That’s the analogy and it just doesn’t work. You need to think differently, you need to think from first principles on how to do this and you need to think pragmatically but it’s just not how the structure and fabric of government is set up, and there’s no one actor in the system, at this point in time, outside of government that I can see who actually is incentivized or has the vision to do all of this.
[01:06:09.13] Ben: And if we move away for a second from the macro to the micro, what about individual banks? Are you still seeing the same banks and financial institutions you were dealing with pre-pandemic, continuing with their projects, and continuing with their strategy or do you see everything kind of being put on hold? Because when we were researching for this resource statistic, where 93% of technology companies said that they’d been adversely affected by the pandemic, with customers putting projects on hold, are you seeing or not that the individual institutions see that this is precipitating a need for much better tech, and they’re just pushing ahead anyway? So, what has been the reaction of customers and potential customers?
Martin: I think our industry is going to be one of the winners from the new reality that emerges after the pandemic stops locking down the world. We’re actually seeing an acceleration of demand from what I call late-stage prospects and customers. They want stuff done quicker because they realize that until they get paper and relationship bias out of their origination, and sort of credit management processes that they’re always going to be exposed to stressors in the market, and not have the ability to react as quickly as they would like to react. So, from that perspective, our problem is that the equity funding that we are planning to take on which was very close to being finalized, got pulled overnight, so we’re in a situation where we’ve got accelerating demand, but we’re massively under-resourced to deal with that demand — so, we can’t play as big a part in solving the problems as we would like to. And we’re also seeing that in the short term, most of our customers are, you know, arguably, this is the safe choice to do — they’re looking to utilize the existing systems processes and know-how within the organization in order to optimize what they currently have running. There’s a lot of sensible reasons as to why they would do that. But then, when you look at the statistics, where I think up until the beginning of last week, in the UK, again, there were about 90 million of funds distributed under the civil scheme and that’s against a target of 330 billion. And all of that needs to be distributed in a matter of months. So, there’s a long way to go and it’s probably no one size fits all, so all of the optimization and the problem-solving traditional channels are absolutely needed. Probably needed quicker. But I do think that there still needs to be new channels which are created as well, and a much more coordinated national interest plan around the logistics and the challenges of distribution of such large sums of funds.
[01:09:20.13] Ben: And do you think the government should be doing more to support the UK’s FinTech sector? Because it seems almost like you could do two things at once — kill two birds with one stone — because if you were to inject more support into the FinTech sector, and the FinTech sector, in a way, is the answer to the technology issue, then you could both build new infrastructure and inject too much-needed capital into companies that really need it.
There are going to be winners and losers, just as in every other business situation. The winners are going to be the people who actually realize what the new reality is going to look like — it’s fully digital when you talk about lending, there is no paper, there’s no relationship bias — and if you don’t use this scenario, as a way to accelerate your adoption to fully digital lending processes based on new modern infrastructure and technology, you’re going to be one of the losers. It’s that simple. — Martin McCann
Martin: A couple of points around the FinTech sector. I mean one is, the FinTech sector is unusual. It falls outside the funding schemes of most governments because it’s high-growth and massively loss-making. So it’s not a good credit risk if you just look at the numbers and the inflows and the outflows. So, it hasn’t been addressed, for the most part, by the schemes that are already in place. So you need to have a separate scheme to deal with FinTech. I do think that there needs to be a role for FinTech to solve the problem. What I talk about is the national interest to create that distribution infrastructure capability. But how do you do it without choosing winners and losers? So, I think there’s been wide criticism of how governments tried to do that before and one example I’ll use is the British Competition Remedies Fund set up in the UK last year, where 450 million was distributed because it was deemed to be illegal stated to the RBS during 2008. This was set up as an independent body, which in theory sounds like a good thing, but practically what happened was, the BCR basically made winners out of thin air, and massively disadvantaged the rest of the industry, and the process was done in a very, very unusual way, which has been open to massive amounts of criticism. And today, 100 million of that has already been returned. But now that 100 million is sitting there, it’s like, well, there’s a pot of money, which could be distributed much more quickly to help FinTechs that can provide part of the solution, but there’s no mechanism in place for government or this independent body to actually do that.
Martin: So, most of the discussion today has been around how to extend the distribution to FinTech lenders and that’s definitely critical — and arguably that is the highest priority. But you can flip it on its head and say, “How does tech in fin help better?” So TechFin as rather than FinTech — how do we harness that? Because we set up this task force of technology in FinTech and there’s now 10 organizations loosely associated with this task force trying to find ways to solve the problem and combine our solutions to try and form a bigger part of the solution, which would be easier for the nation or the industry to deal with. And what we find is that there’s just no one ramp. You know, there’s nobody who’s got an interest in having that conversation at this point in time because nobody understands the role that sector of FinTech can play and there’s too much to be done just to solve the problems of getting more lenders on the panel at this point in time. So, my view is that we need to be able to come up with a safe method for the distribution channels that exist to actually play with new technology quickly because the type of technology we’re talking about can be made available in a matter of days or weeks. It’s all cloud-based, it’s theoretically infinitely elastic and it’s completely digital, so it has no documentation and it can connect up customer data directly to the processes. And these are all capabilities you need to go to 100x capacity in a matter of weeks in a very finite period of time. And that’s what’s required. And then, it enables you to better track what’s going on post the distribution of funding as well, and potentially start claiming it back as well in a more automated way.
[01:13:33.13] Ben: So you’re saying that even post-pandemic, you would envisage that the task force will continue because that can become a very useful means to put together combined or composite applications to the industry needs and also to allow the industry to test and trial these applications much faster.
Martin: Yeah. I think it’s not a task force post the crisis situation. It’s just the way the industry works. It’s the new reality. And in every situation it’s a terrible human catastrophe, but it’s also a massive business opportunity. There are going to be winners and losers, just as in every other business situation. The winners are going to be the people who actually realize what the new reality is going to look like — it’s fully digital when you talk about lending, there is no paper, there’s no relationship bias — and if you don’t use this scenario, as a way to accelerate your adoption to fully digital lending processes based on new modern infrastructure and technology, you’re going to be one of the losers. It’s that simple. Because the way that the products have been developed has been stymied by the regulation in the industry. The gloves are off, all bets are off. Now, supply and demand has turned on its head. It’s how quickly can we ship? How can we get stuff out the door quicker? And the people who actually build a reputation for being able to do that quickly during this period of time, are going to come out of this with a real halo effect. The chaos and the stress in the system, this is only going to strengthen the system longer term and the people who actually see that there’s a connection between their response to the crisis and what the new reality looks like are the people who are most likely to be the winners.