Pioneering Asian Fintech Growth with SuperCharger Accelerator
I recently had a chance to catch up with Renu Bhatia, Co-Founder and Managing Director of SuperCharger, a dedicated Fintech accelerator in Hong Kong.
Co-Founder and Managing Director of SuperCharger
She is also Co-founder of Asia Fintech Angels and President of Prospect Ventures, an angel investment group based in Hong Kong. Renu started ChinaMD and Tancho Investments, a realestate company developing residential and commercial real-estate in Hokkaido, Japan. Additionally, she is also an advisor to FintechHK.
Pioneering the Fintech Pivot to Asia with SuperCharger
[Kevin Moseri] How has the Fintech space in Hong Kong grown so quickly?
[Renu Bhatia] About 18 months to 2 years ago, there wasn’t a whole lot happening with Fintech in Hong Kong. In the last 18 months there has been a huge amount of development. Hong Kong did a huge Startup festival (StartmeupHK Venture Programme 2014) where Fintech was one of the sectors. And that was November 2014. Then you had Accenture start their B2B accelerator (FintechInnovation Lab) out here. Sometime in 2015 we had NxtBank and DBS bank start an Accelerator. But more than that, we had the government put together a steering committee to look at the regulatory environment to see what was needed to be done. At that point we launched SuperCharger on January the 11th 2016. We now have more than 55 Fintech Startups in Hong Kong and rapidly increasing. We have had some dedicated funds setup in Hong Kong. We have a 100 Million dollar dedicated Hong Kong Fintech Fund. The government has also indicated that they will be increasing the money they pump into the Fintech space. Hong Kong as Asia’s premier financial center must strive to remain Asia’s premier financial center. Therefore, it needs to embrace Fintech. Otherwise it’s going to lose its edge. The government has recognized that and is providing increasingly more support and visibility to this sector.
[Kevin Moseri] What was the reasoning behind SuperCharger?
[Renu Bhatia] We started SuperCharger on the premise that most of the accelerators that you see out there or are involved in the Fintech space are really in the B2B space. There are a lot bank accelerators out there. Even the Accenture accelerator is related to the Banking sector.
At SupeCharger, we are looking at the space in a broader sense. We believe much of the disruption will come from outside the sector. So just having or being involved with one bank did not make any sense to us. That’s why we were very keen to get different partnerships to help us. We started with Standard Chartered bank, TusPark Global Network, and Baidu APISTORE out of China. Baidu then provided us with all the data analytics. The way they analyze Fintech is through analytics.
Additionally, we brought to the table as many of the different stakeholders in the financial services industry. So we had people like Hong Kong Exchange, EY, Fidelity, Thomson Reuters, to name a few. By doing it this way, we could add far more value to our startups. Having them get more in-depth knowledge into the entire space rather than tiny bit of the vertical. That was very different.
And I think the other thing that is different at SuperCharger is that we looked at early-stage and late-stage companies.
Hong Kong is in a unique position. It’s always been a gateway to the east and Chinese companies looking outwards. We needed to leverage that position to create a point where late-stage companies could also be a part of the program. And that’s what we did. We had companies that had already raised millions of dollars be part of the program. So we settled for a global application process. We got 160 companies to apply, and we chose 8 (4 early-stage and 4 late-stage companies)
[Kevin Moseri] Where do you envision the growth coming from?
[Renu Bhatia] From an accelerator perspective, we just want to do Fintech. We have no specific desire to do other industries. I honestly think this vertical is huge and keeping abreast of the information and the growth that’s in this area is a full time occupation. However, I also think that people underestimate how much in many ways you could argue that China is probably the leading Fintech Hub. It’s because of the way it has approached Fintech. Look at companies like Lufax, look at Alibaba. What they’ve done with Ant Financial is great. Their business model is very different. Part of that is because in China you didn’t particularly have the legacy frameworks that can be an impediment to fast growth or adoption of new technologies. If you look at alibaba, it started off as an e-commerce business and with a B2B market place. Beyond that they realized they needed a payment system. Now you have alipay. Then they realized they have all these merchants, and they understand what they are doing. Using data analytics they could create a credit scoring model. You do that and you have the ability to leverage and sell many other products.
So yes, a very different way of approaching the Fintech space. As a distinction, the speed at which they do things is also amazing. Sina Weibo became a 100 billion dollar fund within 18 months. When Baidu launched a fund based on their data analytics, they sold 3 billion Renminbi worth within 3 days.
[Kevin Moseri] Is Fintech regulation a lingering concern for a lot of people as it is in Europe and the US?
[Renu Bhatia] The regulatory environment always seems to some extent to be chasing what’s actually happening there because new ideas are coming up every day. New ways of deploying technology are being invented every day. Thereby, new ways of pushing the boundaries mean that the regulators then have to scrutinize everything. Their main thing is the stability of the system and the credibility of the integral financial system.
Different countries are adopting different models. There has been a lot of talk in the industry where many governments are seeking to create a sandbox around which some of these companies can sort of operate without interference from the regulators. What that can eventually do is that these companies will perhaps get supervised a bit more and get asked to essentially provide a lot more data so that the regulators can see if the new way they are approaching the business could potentially lead into problems. The concern is not if a small or large startup fails. The biggest concern is how that failure impacts the rest of the financial system and the ripple effect that might ensue.
And as you know, regulation in now at the forefront when it comes to government involvement.
[Kevin Moseri] When you remove the regulatory impediment, what other challenges do you think startups are facing in Hong Kong and Asia?
[Renu Bhatia] The biggest challenges are obviously. If you are in the B2B space, and you have a business model that will require a Tier-1 contract, you will approach the banks, the Fidelity’s or other big organizations. Your pitch will more like be “Here is what we are doing, this is where we can help you do something better”. The challenge is that it typically can take up to 18 months or more to get some of these bigger organizations to even look at onboarding these clients. That is very challenging for startups because there is an awful lot of capital involved in meeting those needs.
Getting through to these Tier-1 clients often ends up meaning that the original model that the startups were working on gets modified a bit in order to meet the specific needs of the big organizations. And 18 months to 2 years on, they have raised all that capital and have not secured a Tier-1 client. This is very problematic.
So capital remains an issue. Anything in the B2C side is very costly because of customer acquisition costs. The incumbents have an awful lot of things going for them namely the fact that they have credibility and name recognition. That’s difficult to pry away and hand to the startups.
Having said that, I think there are some areas with opportunities, especially here in Asia. Given that we are such a global hub for trade. Interesting concepts around trade finance married with logistics are a huge opportunity. Money transfer is also a big part here because of the fact that you have so many different countries in the region and so much movement especially cross border money transfers.
Additionally, anything to do with social inclusion for the people who don’t have bank accounts is will be very lucrative. Bringing them into the financial system is a huge opportunity. There around 600 million people with no access to banking.
[Kevin Moseri] In comparison to Europe, which has around 58 million people with no access to banking, 600 million is a huge potential market.
[Renu Bhatia] There’s a huge market in Asia. Many of the countries will not have the same economic model for growth like China, which developed a lot of manufacturing and which resulted in increased exports. That opportunity is going to be less and less available to many of the other countries that are trying to climb the economic curve. So for those countries, bringing the unbanked into the financial markets will unleash spending power and the ability to grow the economy.
[Kevin Moseri] What late-stage projects are you really excited about at SuperCharger?
[Renu Bhatia] SuperCharger has 4 late-stage companies and they are all very different. For example MicroCred which came out of Africa is looking to go into China. They have a very traditional model of micro lending and which they are looking to take into a technology based platform from which to do their lending so that they can scale much faster and be much more efficient. That’s a very exciting model and it’s towards the social inclusion we talked about.
We also have a company out of China which is also doing a lot of credit scoring using social media as well as any kind of government reports on individual credit. If someone has never had a credit score, they will never have access to cash. Even if it’s a tiny amount of cash. And we know having even a little amount of cash can unleash a lot of potential in people’s small businesses, and those are at the heart of many of these economies.
And we have a company out of India which is in remittances. They have a lot of people involved and are now looking to use a patented technology GPS location system around the country so you know exactly who you can go to immediately to transfer the money domestically without spending hours trying to figure out where to go.
What’s exciting about these companies is that some of them are using traditional methods like MicroCred coupled with technology in order to do things so much faster.
[Kevin Moseri] So is SuperCharger looking globally for applicants?
[Renu Bhatia] Yes. We run a global application process. Last time we had companies apply from over 20 countries apply. Pretty much every continent. You are going to find that smaller companies are going to come from the region (Europe) and the late stage-companies are more likely to be global. That’s where you are going to scale.
Part of the issue for me is that Fintech is localized because you are trying to solve local financial problems. You are trying to solve why people have their cultural attitudes towards money or how they look at money. You have to solve the problem locally first. And then you have to see whether there is an application beyond your borders.
[Kevin Moseri] Do all accelerators have the same outlook as SuperCharger?
[Renu Bhatia] I think there are few things to consider. Either you are trying to become known for one thing, which is one vertical in which case it’s about depth of knowledge or you are trying to create a white label platform. In which case you could do a Fintech accelerator, a Medtech accelerator, you can do an IoT accelerator just to name a few. All you have to do is create a white label platform and you can use all these industry verticals on it. There are very different models out there and they are not necessarily wrong or right, or better. I think there is a need for looking at late-stage as well at early-stage companies.
To me, just because you are big in your own market doesn’t mean you know exactly how to expand cross border. You don’t necessarily have the right contacts or you don’t necessarily know the regulatory environment that you need to operate in. To scale quickly, you need to be plugged into those contacts. This is where Hong Kong is kind of unique.
[Kevin Moseri] Thanks Renu for giving an outlook on SupeCharger, the Fintech scene in Hong Hong and the growth that we can all expect out of the Asian market.
[Renu Bhatia] A pleasure