Blanco Services, a fintech from the Netherlands providing digital services to the wealth-management industry, is looking to scale to other European and then Asian markets, says Joost Walgemoed, director and founder.
The startup’s ambitions are an example of how harnessing the technology of cloud computing and delivering a solution to let investment firms slash costs can enable small companies to expand into new markets.
But Blanco will face tests before it is ready to address the funds industry in Asia, let alone Luxembourg, the market first on its list to enter outside of Holland.
Blanco is launching a white-label service to asset managers, private banks and investment institutions catering to retail investors, including high-net-worth customers. Walgemoed calls it “wealth management out of a box”, combining technology that comes in modular components, and Blanco’s team of experienced financial professionals (Walgemoed has worked for BinckBank and other Dutch financial institutions).
Blanco provides back- and middle-office services, from customer onboarding and KYC to reporting and administration, with functions either blended or pay-as-you-go. It also can provide robo advisory.
“We can put a wealth-management business together in one day,” Walgemoed told DigFin.
He is working with small wealth-management firms in Holland now, and will then tackle big, institutional firms. He is also building a presence in Luxembourg, where he can address the Ucits market. He’s already weighing Singapore and Hong Kong, where he thinks there could be demand on the back of Europe’s Mifid-2 rules, which will burden anyone selling Ucits funds worldwide with plenty of new reporting and other requirements.
First, reach scale…
His first challenge will be achieving scale quickly enough. Walgemoed says the company will seek outside capital once it is ready to enter new markets. “The name of the game is scale,” he said, so even a startup from Holland needs to think about expanding worldwide. (And private banks and investment firms in Asia should think about working with startups from other regions, if they add value.) He acknowledges that he and his team know the Netherlands intimately, but cannot expect to grow anywhere else without hiring local sales and marketing people.
To get there, he needs to achieve critical mass in his home market. Walgemoed is confident about the company’s trajectory. “There have been no surprises in this business,” he said, noting that the fees wealth managers can charge will continue to fall, because of post-financial crisis regulatory costs and the transparency that technology brings to the industry. His clients can only survive by handling much bigger volumes, more cheaply.
But other brokers have attempted to win new business through rock-bottom fees, and failed to attract enough volume to sustain the business, says Patrick Bontje, co-founder and director at Topcapital, an Amsterdam-based wealth manager who is among the first to go live with Blanco.
…with sustainable revenues
Bontje told DigFin that he is implementing Blanco for his firm’s digital arm, iBeleggen (‘beleggen’ is Dutch for ‘information’). He set this up as an online alternative, with a lower minimum investment size, and expects over time it will become the bigger business. He is shifting iBeleggen’s onboarding and KYC functions to Blanco (from his current provider, BinckBank).
Obviously he is aligning his business with Blanco, but he does note that online brokers in the Netherlands have closed doors by pursuing a low-cost, low-fee digital strategy.
Blanco is pursuing a B2B business, rather than trying to scoop up retail customers, which it hopes will shield it from this sort of problem. But how many of its customers will grow if they can’t achieve enough scale as they slash their fees?
iBeleggen is also providing a lower-cost version of Topcapital’s advisory business, but Bontje says he will maintain a still-high minimum investment size, to avoid falling into the same trap.
iBeleggen will use Blanco just for onboarding and KYC, so Blanco will also need to convince more firms to take on its full suite of services.
Assuming Blanco gains the requisite scale in the Netherlands, it will then face the next challenge: competing in new markets. Walgemoed is confident he can leapfrog the likes of BinckBank (his former employer) because startups like Blanco can leverage AWS or other cloud providers to be faster and cheaper. But fintechs are doing the same in other markets. A company like Blanco might outpace status-quo players, but will then face similarly nimble fintechs elsewhere.
Will the industry allow for many small providers, or will a handful of firms end up winning the global market?
The Netherlands is too small to sustain a fintech business, but it is home to several major banks and insurers, and English is well spoken, making it a good testing ground.
Blanco is already gearing up for the fight. Although Walgemoed and his core management team are from Holland, their engineers and I.T. people are from all over the world. “We have people from all backgrounds, all religions,” he said. “We are building a company that isn’t Dutch; we can look like we are from anywhere.”
And most importantly, he says, it’s just a matter of time before global financial institutions have to adopt a service such as Blanco’s in order to survive.
He’s not the only startup founder with that thesis, but a small fintech that partners with (homegrown) global institutions will have a better shot at achieving scale. Does that give a startup from Amsterdam a better shot than one from, say, Singapore or Tel Aviv?