A year and a half into launching its fintech-oriented corporate venture fund, Siam Commercial Bank may give it the go-ahead to launch additional strategies.
Polapat Arkkrapridi, a.k.a. Paul Ark, managing director of corporate venture capital at Digital Ventures, the SCB unit, says the original $50 million funding is a “starting point”.
“We’re considering a separate corporate-venture structure for China, or funds for specific types of investments,” he told DigFin. These could include late-stage fintechs or large-scale companies.
So far Digital Ventures, founded in 2016, has deployed about 60% of its capital. It holds direct minority stakes in four technology companies, as well as units in third-party venture funds run by Dymon Asia, Golden Gate Ventures and Nyca.
Tech hunt in Thailand
The bank also has an accelerator and Digital Ventures is encouraged to support Thai fintechs, but so far hasn’t found suitable deals. “The vast majority of Thai fintechs are in payments and remittances,” Ark said, which may not offer a lot.
On the other hand, he says banks and other large strategic investors need to do a better job at communicating with entrepreneurs about the kind of ideas they do want to invest in.
For example, tourists spend $50 billion annually in Thailand, creating opportunities in healthcare, insurance and other finance-related activities. Thais are big consumers via mobile, but the system in Thailand is messy, with storefronts fragmented among apps and payments stuck in multiple-step processes.
“The hurdle is not the tech,” he said. “It’s how a bank can work with small, agile companies and industry disruptors.”
He believes the timing is getting better for banks, other strategic investors, and fintechs in Thailand. The Bank of Thailand is pushing cashless payments, it and the securities regulator have introduced sandboxes, and the government’s investment promotion authority is introducing smart visas to encourage digital entrepreneurs to operate onshore.
SCB’s chief executive, Arthid Nanthawithaya, has become increasingly vocal about the need for the bank to become digitally sophisticated if it is to see off potential challenges from the likes of Alibaba, Amazon or Samsung Electronics, Ark says.
Part of Digital Ventures’ mandate is to figure out what that means. “We’re not sure we want to be a ‘digital bank’,” Ark said. “We do want to ‘be digital’ as a bank.”
It’s unclear whether that will mean transforming the legacy systems and heritage business, or creating a new, all-digital business in parallel; and longer-term visions must also compete with various departments’ immediate business needs.
“There’s no one clear proven vision, anywhere,” he said. “If the bank knew what it wanted, it could do it. So we are experimenting.”
It also means Ark spends as much time negotiating with SCB’s management as he does looking at fintech investments.
“You’re trying to be the bridge between the suits and the hoodies,” he said of his job, which is not just about generating financial returns on the portfolio but also about helping the bank learn from startups – and helping startups cut through the bank’s red tape.
But the strategic nature of Digital Ventures’ mandate can also lead fintechs to assume it is an automatic gateway to doing work for SCB, which Ark says is not the case: “There is no automatic mandate.”
Deepening Ripple relations
Ark reports to Digital Ventures chairman Orapong Thien-Ngern, former country CEO at Microsoft, who in turn advises SCB’s Arthid. The first Digital Ventures chairman, Thana Thienachariya, moved a year ago to become chief marketing officer at SCB. Ark's VC team also reports to Arak Sutivong, the bank's chief strategy officer.
Digital Ventures’ four direct investments began with a stake in Ripple, the blockchain-based challenger to Swift for correspondent banking payments. SCB is using Ripple to process remittances from Thai expatriates in Japan, in partnership with Japanese bank SBI.
“It’s been positive so far,” Ark said. “We’re looking to deepen our involvement with Ripple,” including finding new use cases, which could range from trade finance to real-estate registrations.
Finland’s Indoor Atlas, which measures magnetic distortions of mobile phones to map people in a particular area; is another investee company. SCB is experimenting with its maps in Bangkok’s Jatujak weekend market, letting merchants and shoppers pinpoint one another to facilitate transactions.
Pulse I.D., a Hong Kong-based anti-fraud fintech, and Israel’s PayKey, a social media/contextual payments tool, are also in Digital Ventures’s portfolio.
Would Digital Ventures invest in initial coin offerings (ICOs) or take on crypto-currency startups?
Ark says the space has a lot of potential. “I can see the day when ICOs become like IPOs,” with video calls and Slack discussion groups taking the place of roadshows and thick paper prospectuses. He says the fundamental promise of decentralized ledger technology is appealing.
But Digital Ventures would not go beyond what Thai regulation allows: “The bank gives us a lot of leash, but we can’t run too far ahead.”