By Daniel Song
Jeremy Berger is the portfolio director of Life.Sreda, one of the first fintech-only venture capital funds in Southeast Asia. Through its two funds, Life.Sreda has made over 20 investments across the US, Europe, and Southeast Asia, with seven exits to date. Berger also manages Arival Bank, a venture-backed digital banking startup.
He talks about his journey, the future of digital banking, and why traditional banks won’t serve crypto businesses.
I’m originally from Chicago, then I went to Florida to study global business at the University of South Florida. During my second year in university, I had my first taste of entrepreneurship. I started one of the first athletic organizations in the school’s history and led that for about three years.
Long story short, after I graduated, I worked in the corporate investment services world for about two years. I quickly realized that it wasn’t for me—just sitting in front of a computer all day, analyzing stock portfolios, creating proposals, etc. There was no real social interaction and for me, it was boring.
So after that, I went on to work for a couple of fintech startups, one of which was my own. Then, about a year ago, I decided it was time to make a change. I wanted to do something unique, something that not many young Americans could experience. So I packed my bags, bought a plane ticket, and went to Singapore with no hard job offers on the table.
For context, my dad lived in Singapore for about 15 or 16 years as a venture capitalist. So, I had the pleasure of meeting with a lot of investors and startups over the years. I understood that, more or less, this is what I wanted. That was my focus when I came to Singapore, and I ultimately crossed paths with Life.Sreda.
Do you believe that we’re still in the early stages in fintech and what trends are you most excited for?
No, I don’t think we’re in the early stages by any means. I actually think we’re in the Renaissance period. I’m not saying that we’re at the climax, but I think we’re almost there. There are over 5,000 fintech companies already, and that kind of signals that fintech is here and it’s not going anywhere.
I think it’s one of the biggest industries in terms of corporate innovation potential with Fortune 500 companies. On a very high level, it’s safe to say that fintech has definitely matured over the last five or 10 years. We also think as a firm that digital banking is probably the biggest trend to come about in the next few years.
What do you think are the key drivers and challenges of digital banking?
I think the first key driver is compliance and digital identity. Right now, one of the challenges is effectively expediting the onboarding process. So, maybe you can open an account for your customers, but what are the compliance mechanisms behind it? You want to make sure you stay compliant, especially with the different regulatory implications. Customers don’t want to get lost in multi-channel onboarding; it should be frictionless and fast.
The next driver is a new business model called fintech banking. Fintech banking is a concept where you have an open-API banking approach, allowing your platform to integrate other key fintech products and services. One big pain in the current market is qualitative product accessibility.
The last driver is workplace culture. When I talk about workplace culture, it means not only how you are promoting yourself as a business to your employees and customers but also how you are improving the user experience. Do you understand them well enough? Are you giving your digital bank appropriate branding?
How can digital banking benefit the customers, especially in Southeast Asia?
One of the biggest things we need to understand right now is that typically no bank can deliver five to 10 premier financial services/products on one platform. Often, customers navigate many different banks and fintech companies to find the best products that meet their needs.
You’re talking about downloading numerous apps on your phone, creating different accounts, etc. This creates an extremely chaotic experience due to the different logins, unaggregated data, and complex movement of money. Customers shouldn’t have to download and explore 20 to 30 different providers to seek satisfaction. Digital fintech banking solves this dilemma by bringing the most optimal fintech products/services into one banking interface for users.
As for Southeast Asia, I believe such an approach has an opportunity to thrive in places like Indonesia, the Philippines, or Thailand where you find many people with little to no access to legitimate banking. In general, the fintech banking concept should first be pioneered for underserved retail or commercial banking markets like SMEs, startups, the gig economy, and crypto businesses.
Is there a potential for fintech companies to cooperate with rather than replace traditional banks?
One quote always comes to mind. In 1997, Bill Gates said, “Banking is needed, but banks are not.” Surely, I don’t think banks are ever going to go away; perhaps, the actual branches will. A good example is Bank of America closing over 1,700 branches over the last 10 years. Nevertheless, I think digital banking will certainly be at the forefront.
I also think there’s a big opportunity for fintech companies and banks to collaborate, but it has to be a mutually beneficial relationship. You can look at partnerships like JP Morgan Chase and OnDeck, N26 and TransferWise, or Holvi and SumUp.
At the same time, fintech startups need to be very cautious in terms of who’s bringing what value and who is empowering which service. And does it make sense for a fintech company to get involved? Again, it’s very easy for a fintech firm to become subjacent.
Why won’t traditional banks work with crypto businesses?
We built Arival Bank on this very premise. At Life.Sreda, we were approached by hundreds of crypto companies, asking where they can bank. We did our due diligence and leveraged our fintech network to quickly realize how universal this problem is.
We spoke with Carlos Torres Vila, the CEO of BBVA Group, which is one of the largest banks in the world. He gave us some reasons why traditional banks won’t work with crypto businesses. First is the feasibility of reeducating their employees. It just doesn’t make sense. Their current roles and functionalities are not prepared to work with, onboard, and provide the products and services that crypto businesses need.
The second thing is that compliance is not designed and tailored for crypto-related businesses. Compliance is always such a legacy process. But in the crypto world, because the economy is so nascent, it’s really hard to create some sort of innovative compliance protocol with a traditional bank. It takes a lot of resources, time, and dedication.
Lastly, pivoting business models is just high-risk. Yes, you’d get new revenue streams, but at the end of the day, the profit margin is quite low compared to other consistent and stable customers. So, it doesn’t really outweigh the risk in this scenario.
