Harrie Vollaard is head of Rabo FinTech Ventures at Rabobank , a Dutch banking and financial services company headquartered in Utrecht, Netherlands that is ranked as one of the 30 largest global financial institutions. Vollaard oversees a $60 million corporate venture fund that invests in startups and an internal venture-building program that aims to spinout its own startup companies. He recently spoke to The Innovator about Rabobank’s digital transformation and how the bank works with startups and accelerators.
Tell us about Rabobank’s digital transformation program
HV: Our digital transformation is focused on three areas: improvement of our regular lines of business, expanding into new markets or launching new services to keep in pace with changing needs of our customers and leveraging our current assets to create something completely new.
Can you give an example of how you might leverage the bank’s current assets to do something completely new?
H.V.: Trust is an asset of the bank and we can use that trust to create new services such as digital identity. With the introduction of the new service ebusiness we are doing exactly that together with Signicat, one of the startups we are working with. The point is to use our assets to find new revenue streams for the bank. Another example is we have introduced the platform Rabo & Co which is more or less a market place lending platform that looks at different money sources to fulfill a client’s financing need. The loans come from SME’s and we matched these with e.g. high net worth customers of the bank. We are changing our business model to keep up with the changing needs of our customers. In the past financial services were product driven but today financial products are a commodity, they can be exchanged with those of another bank, so we need to find a new way to differentiate ourselves from the others. That is why we have launched Tellow, a mobile-only app that helps freelancers keep track of receipts, tax information and invoices. It is a subscription based service that provides a service that addresses our clients needs and brings in a new revenue stream. The idea came out of our internal venture building program.
What about buy in from top management? How crucial is that to the integration of startups?
H.V.: We now have a digital transformation officer on the board of Rabobank and that is extremely helpful and a necessity to be successful.
What kind of startups interest Rabobank?
H.V.: Most fintech startups sell products and services that help banks out with certain problems in their existing product lines. Which is very relevant for the bank but not my focus. New business models and products and services that bring in additional revenue streams is what we focus on at Rabo FinTech. We have done four investments that meet this criteria. We also have a couple of investments in accelerator programs.
Many large corporates now join accelerators, with mixed results. Which accelerator programs have you joined and how does Rabobank benefit from these programs?
H.V.: We are members of Startupbootcamp FinTech in Amsterdam, New York City and London, the Rockstart accelerator here in the Netherlands and with RocketSpace in San Francisco. We join accelerators to get access to the fintech ecosystem and also to get an understanding of developments, trends, new business models and new revenue streams. For each accelerator program we have connected with at least two of the startups to run a proof of concept. But this is not the only benefit. What we noticed that other partners of the accelerator programs are large retailers that are also clients of the bank. We discovered that our large corporate clients are also struggling with innovation so we saw an opportunity to use our experience to play a matchmaking role and present what we are seeing in startup innovation to our large corporate clients . This is what we are doing with RocketSpace in San Francisco. We have partnered with RocketSpace and launched the Food & Agri accelerator program Terra to help our large corporate clients out with innovation and establish proof of concepts with startups.
How does Rabobank choose startups: Do you first ask the business units what problems they have and then go look for startups that address those issues or do you first look for startups and then check with business units to see how they might fit in?
H.V.: It is a combination of both. In my opinion you have to know what are the challenges are in different business lines. That gives you focus when looking at startups but you should not shy away from presenting new opportunities from the outside.
How does Rabobank integrate startups?
H.V.: We have entrepreneurs in residence in place. These are Rabobank employees that serve as innovation ambassadors and work with startups. They help startups to bridge cultural differences and also to learn the language of the business side. We also have a process in place that facilitates learning. Sometimes you are not sure if a new service is going to be successful or not and you need to test things out e.g. in a closed environment. You don’t want all the checks and balances in place at such an early stage. The regulatory authority in the Netherlands has created a sandbox for new services reflecting the way we work which makes it easier to experiment. And lastly we need to be API- based to work with external startups. It makes it easier to do business with outside parties but also easier to break away, when necessary.
Have you acquired any startups?
H.V. Yes, so far we have acquired 3 One of them is a company called MyOrder, a startup that developed a platform for mobile payments that lets you combine different value added services as e.g. loyalty cards and pay your parking spot in the city. Why did we acquire them? We know the transaction business but it is a commodity business. For the merchant the transaction is not creating value . However the merchant is interested in acquiring new customers and is willing to pay 10–30% of the transaction for that. That was what MyOrder was focused on. We knew we could help them scale and in that MyOrder would help us learn how to transform ourselves from a transaction business to a value added services business model on top of the transactions. Then, if the project was successful we could integrate it with our offerings. That is exactly what happened. We have funneled our learning into our current offerings. You can see the pillars of MyOrder in our RaboWallet (a digital wallet we offer that incorporates loyalty schemes plus parking functionality.
Once you acquire a startup how do you make sure that the key people don’t leave?
H.V. We acquired MyOrder in 2012 and the founder is still here. There is always tension between a large corporate and how much freedom the founders of an acquired startup can have. But when fintech startups try to make a go of it completely by themselves it is extremely difficult. It is hard to scale and they have to spend a lot of time and money on legal and compliance. The good thing is that as a bank you have everything already in place and a lot of people who know exactly what you have to do. If a fintech startup wants to scale, partnering with or being acquired by a bank, is a win win situation for both parties.
What have you learned from working with startups?
H.V. What I noticed with the accelerator programs is that most of the startups are in the seed phase, which makes it is difficult to scale their technology.
The size of the startups is too small. For example, if you have a problem you still call the founders. That is not a reliable solution. You need to have proper service and maintenance organization and that is something that comes with the maturity phase of the startup. On the plus side the interesting thing is that accelerators are mentor-based programs and we have learned a tremendous amount. As a result we adopted the lean startup mentality internally, meaning we talk to customers and see what their real problems are before we go and build something completely new. In the future we want to develop our venture-building program and spin out companies based on our own ideas and hire external entrepreneurs with a solid track record to run them. You’ll see a mix: we will continue working with startups but also create our own.