Joining our host Ed Walters this week is Simon Darchis, Head of Partnerships at Finwise Bank, to discuss his trajectory in the financial services sector from Europe to the US. With this multi-cultural background in finance, Simon explains the intricacies of fintech, unraveling the cultural and regulatory differences that shape these distinct markets.
Financial services
It’s not a secret that the American economy is driven by debt, whether that’s commercial or consumer. “In Europe, we have the stereotype that for every dollar an American earns, he's going to spend three, so the difference has to be made up somewhere,” Darchis said.
Lending in Europe is not as widely available, and credit cards are virtually unknown — they exist, but they're not common.
“I can remember my parents telling me, ‘Never spend more than you earn,’” he continued. “Coming from those cultural differences, fintechs just grew in debt in different directions in America and Europe. That's why, when you look at the fintech industry, the first sub-sector that popped in America was the lending space.”
In Europe, the space in fintech that rocketed up was neobanks. Think of services such as Venmo, spaces to facilitate peer-to-peer transactions.
“Most countries in Europe — with the notable exception of Germany and the UK — don't have credit agencies,” Darchis said. “If you're to apply for a personal loan, you do it at the branch of your bank that you'd normally go to, and you go through manual underwriting.”
The pivotal role of adaptability in navigating financial services
As head of partnerships, Darchis regularly enacts a firefighter level of attention, keeping operations smooth and personnel content alongside strategy and planning.
He jumps across three buckets of people he serves:
- Internal personnel at the bank
- Partners
- Regulators
By keeping a finger on the pulse of these three buckets, alongside the ever-changing landscape of fintech, he ensures a productive and proactive system.
“It's always a little bit of a juggling act to make sure that everyone stays happy and on the same page,” he said. “It also means trying to stay up to date with the current trends, making sure that the bank is not falling behind on the next trends and products.”
Adapting comes with evaluating risk. And, as a bank, Darchis emphasized the importance of finding a partner who meets the needs of the bank while maintaining regulatory compliance.
What it takes to navigate hyper-specific partner selection
Darchis’ biggest tip for staying selective while partner-hunting is to never be afraid to say no to a partner. Saying no to the wrong partnerships is just as important as saying yes to the right ones.
- Look at product market fit. Is this a product creating a need or solving a need in the market?
- Look at the culture of the partner. Did they ever run into issues with regulators or the law? What is their leadership like? What are the backgrounds of their key members?
- Look at their compliance strategy. Do they have a culture of compliance? How have they handled compliance in the past, and how are they planning on approaching it in the future?
“Once we pass these first hurdles, we have a pretty extensive due diligence process," he said. “We want to make sure that you have strong financial backing, that if you're playing on the lending side of the space, you have access to debt, and you have access to equity if you're going to be financing everything yourself.”
The stage of the potential partner should also determine the level of procedure and history available for evaluation. A more established fintech will likely have more policies and procedures in place when it comes to regulation.
Keeping compliance and trust at the center of these negotiations is paramount for navigating partnerships across any and all cultures.
Stay tuned for new episodes every week on the Leaders in Lending Podcast.
