The fintech revolution continues apace, and while many startups are hoping that newer and better tech will help them take business away from traditional banks, today a company has received a large round of funding to help those incumbent institutions better compete.
10x Future Technologies is a startup that has built a ground-up platform that incorporates machine learning, cloud services, encryption at all states and other newer technology. Aimed at helping large banks manage data and transactions, build new products and work with consumers, it has now raised £34 million ($46 million) in its first outside funding.
The Series A — one of the biggest for a European financial tech startup — comes from two strategic backers, Chinese Insurance giant Ping An and management consultancy firm Oliver Wyman. Both work extensively with financial services firms, and the idea will be to leverage those relationships to help 10x grow its business globally, and specifically deeper into Asia via Ping An.
10x up to now has been bankrolled by its founder and CEO, who is not your ordinary entrepreneur: up until last year, Antony Jenkins was the CEO of banking giant Barclays, experience that he said in an interview this week gives him a front-row seat to many of the problems that banks face today.
“I’ve lived with all those problems, and I’ve talked with bank chief executives who have tried and been unable to solve these problems,” he said.
Jenkins said that 10x is not talking about its valuation at this point.
10x, which was founded in 2016, has yet to launch a commercial product. Jenkins said that the first deal has been secured: Virgin Money is planning to launch a banking service on the platform sometime in 2018.
Virgin Money is a “greenfield” deal, a completely new offering from Virgin Money; but Jenkins said that in fact the aim of 10x is to work with large, existing banks (like his former employer) to bring them into the 21st century.
Banks today are full of ageing infrastructure and legacy systems that are patched together. Most of them have expressed a desire and mandate to update those systems for all the reasons you might guess. Among the most important are to make their data more secure (both because of malicious hackers and breaches, but also regulations like the PSD2), to make their services more efficient, and to launch new products to be more competitive with the new wave of financial services.
But the problem is that for many of them, up to now the prospect of rebuilding all their systems has been insurmountable.
“The legacy technology that operates in most banks is a major impediment to serving customers better, and increased challenges from regulation and more capital requirements make it hard to fix,” said Jenkins. “For all the money that they spend on technology, they still haven’t addressed this.”
In fact, according to IDC, financial services is set to be the biggest sector when it comes to spending on IT in 2017. Together with manufacturing, financial services will account for a full 30 percent of all IT spend, which will total $2.4 trillion this year, and grow to $2.63 trillion by 2020. (Those numbers speak to the task ahead for legacy industries, and also the opportunity for those like 10x that want to help them.)
10x’s answer, Jenkins said, is a “turnkey solution” to modernise this: it ingests legacy account data, on which it runs analytics to gain active insights and also to help plan and run new services. Built around APIs, it’s “very simple” to add in other services from third parties as well, something which isn’t always easy to do today.
In recent times, we have seen a wave of “new” banks being built from the ground up, with a fresh tech stack, using newer technologies like mobile to tap into a newer class of bankers. They include the likes of Atom Bank (also founded by a veteran banker from the incumbent world); Monzo; and N26. 10x is different in that it’s positioning itself as B2B2C — that is, it’s selling its services to other banks and does not intend to have a retail face of its own.
It’s that agnostic position, combined with 10x’s promise of making the large, legacy operations more modern, that interested its investors, who have a vested interest in helping their customers keep from becoming obsolete.
“The large majority of banks are highly constrained by legacy technology and rely on mainframe systems and other systems whose architecture is based on paradigms made 40-50 years ago. That is very difficult to change,” said Jonathan Larsen, the chief innovation officer at Ping An, in an interview. “Banks are at a competitive disadvantage, with fintech elements a reality at every stage of financial services today. Banks — even large and world-class financial institutions — have to adapt quickly or risk becoming less relevant.”