Standard Chartered Ventures is bucking the conventions of innovation

THE tale of corporates going down the “innovation” path often falls into two tracks: setting up a corporate innovation unit or a corporate venture fund. Standard Chartered (SC) Ventures is marrying both for Standard Chartered Bank.

While still a business unit of the bank, SCV operates as both part of the bank with its investments into startups, and outside the bank with the building of new corporate ventures. SC Ventures also runs intrapreneur programmes which allow Standard Chartered employees to pitch ideas, which could get investments, to get their ideas implemented. The innovation, investment and ventures arm also runs the programme for partners of the bank.

The formation of SC Ventures in this configuration is the culmination of learnings from previous experiences, according to Alex Manson, head of SC Ventures.

“If all we have is an innovation unit, it will fail, because it does not have the ability to deploy capital and people get tired of it and it will lose momentum. If all we’re doing is investing in fintechs, it is too small and adoption won’t be there. If all we do is build little ventures it is also too small and takes too long,” he says.

Instead, it’s a combination of all three that will lead to the transformation effects that Standard Chartered is looking for.

“The conviction was that any one of these three efforts on its own will fail to transform banking, but put it altogether we have a shot of creating ecosystems where we can plug in information, people and capital is very powerful,” says Manson.

This approach is contrary to what the local Singapore banks have done with their own corporate venture units, which just partner startups in solving specific problem statements that the banks have put out for that period of time. Such an approach also requires managing the tension of showing short-term results for the corporate parent and the innovation cycles that require time and investment, which Manson says has to be managed.

“Generally speaking, every one of our ventures has to be commercially viable. We will spend on ventures to experiment but we will cut the venture if we find that it is not commercially viable. We take VC-type risks and need to generate VC-type returns,” says Manson.

Some of the ventures built by SC Ventures include e-payments provider Zai, and digital assets custodian Zodia. There are over 40 ventures in development and 13 ventures operating on their own. Singapore digital bank Trust Bank is jointly reported with SC Ventures to Standard Chartered. (*see amendment note)

Trust Bank was a surprise in Singapore’s digital bank race, snagging a full bank licence and taking a spot of the three retail digital bank hopefuls. A joint venture between Standard Chartered and NTUC Income, the digital bank was also the first to launch to the general public, going live on Sep 1, racking up 200,000 customers within the first month. *(See Amendment note 2)

The decision to build a digital bank in Singapore stems from serving the underserved customers, and to cater to customer demand to digitise aspects of their lifestyle. Trust Bank says it can gather real-time data to gain customer insights on what matters to them the most.

This approach of building new ventures is dependent on how urgent it is to the corporate – is it an option, or something critical to avoid an imminent business failure like BlockBuster. The video rental company famously failed to react to disruption to its brick and mortar business model by Netflix, eventually filing for bankruptcy in 2010.

“Perhaps they are doing very well, then digitisation is fine, creates efficiencies and you don’t have to reinvent yourself. I advocate that in banking, it is existential,” says Manson.

The returns generated by an arm like SC Ventures would have to be looked at from a different lens than corporates normally would, with a different timing than the usual quarterly earnings schedule that they follow. Actively communicating what SC Ventures is doing is also a factor that would aid in managing this tension as well.

“A lot of our job is to advocate, we want to take Standard Chartered along with us and we want to take banking along with us. Everything we do in SC Ventures, anyone in the bank can come and check it out, we are completely transparent to the rest of the bank,” says Manson.

SC Ventures also invests into startups, with stakes in payment unicorn Nium, digital bank Line Bank and financial crime compliance startup Silent Eight. It is giving more than money with its investments, offering up the knowledge of operating in a regulated environment, the understanding of how their solutions can be used within banking, and the resources that Standard Chartered has to offer. (*see amendment note)

“We are worth more than just our money, we are a very big credible reference for commercial users and financial investments. A lot of financial investors want to talk to us about our portfolio companies, they ask us about the use cases, what’s it doing, it is really helping,” says Manson.

While the current macroeconomic headwinds and inflationary pressures resulting in a difficult economic climate, Manson notes that it forces an earlier focus on profitability. This would mean more resilient startups emerging out of the current market conditions.

When SC Ventures turns only five next year, the ventures built are still nascent and 2023 will be focused on doing the usual of bringing these ventures to maturity and scale, says Manson. Scaling ventures, investing into startups, these efforts are all part of building out the ecosystem, getting the banks, startups and their technology partners to work together.

“Getting the ecosystem to be in tune is the most powerful thing we can do,” says Manson.

*Amendment note: A previous version of this story incorrectly stated that Silent Eight was a cybersecurity startup and that Trust Bank was parked under SC Ventures.

*Amendment note 2: A previous version of this story incorrectly stated that Trust Bank had a digital bank licence and that it had 650,000 customers within the first month.