September 15, 2022

LFP211 – The Thinking Behind Being A Challenger Bank for SME Lending w/Conrad Ford Chief Product&Strategy Officer Allica Bank

41 minutes

Incumbent banks – as Fintech has found in the past decade are rather safer from having huge slices of their business nicked than many Fintechs have imagined. However Allica Bank, established by some pretty experienced individuals have a plan. In this episode we dive into that plan along with quizzing Conrad, who was last on the show as Founder/CEO of Funding Options on what the pros and cons of being a past Founder/CEO are – a little discussed topic.

We also take a look at the SME market and its three main components – micro-businesses which are somewhat private-client like, medium sized businesses and then what are effectively small corporates.

Once again we get a great example that any word, any labeling of a category – whether it be Fintech, Africa (coming soon) or SME is not really a thing but a handle on a series of things – which of course themselves can be further zoomed-into.

Topics discussed include:

Crossrail/the Elizabeth line as fast and efficient from Canary Wharf to the City – at a minor cost of £19bn to build and many years behind schedule

once a founder always a founder?

the romanticisation of Found-ing versus the reality

Conrad’s thought process behind in the end not re-founding

“being a founder is just dramatically harder than you ever realise”

“the highs are higher but, believe me, the lows are a lot lower – nothing comes [in a salaried job] close to not knowing whether you can pay your staff tomorrow”

OTOH the pride of having created a great working place and a business out of nothing

the paradox of having to attract VC interest via “fake it until you make it”, whilst when engaged having to have a grown-up conversation about how things really are

comparisons between Facebook and teenagers thinking they are the only one not going to parties and founders who know their own challenges but read all about others promoted successes

the antidote being only ever to compare others press releases with your own press releases

UK SMEs

5 million micro-businesses

500,000 established SMEs – the “M” in SME – Allica’s focus

x0,000 “small corporates”

the dynamics of micros/medium/small corporates when it comes to the economics of commercial bank coverage

the huge number of complexity within the above structure

how the change from localism in banking has led to the lending equivalent of the funding gap

how internal MegBank dynamics lead to them always moving on one direction driven by economics of coverage – with the “M” type of SME being somewhat between two stools – the mass more private client type coverage and the more bespoke corporate coverage

role of asset-backed lending

where VCs have been going wrong in approaching this marketplace

the problem with incumbents when it comes to leveraging technology in the gap

why Allica chose to be a bank to address this lending gap when other business models are available

parameters for deciding to become a bank in order to lend to SMEs

price wars

how to avoid being crushed by the ten ton gorilla in a huge market

the need for multiple products as a bank

Allica’s upcomng SME current account

Allica’s shoutouts, need, raise, and desired new colleagues (about 300 staff at the moment)

And much much more!

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By Tony Clark

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