Santander InnoVentures’ achievements have been built on its senior management’s engagement with new trends, new technology and new companies, as well as a healthy and good quality deal flow. Joy Macknight talks to managing partner Mariano Belinky.

The change culture embedded in Santander Group’s philosophy as a challenger bank makes Mariano Belinky’s job as managing partner of Santander’s $100m venture capitalist fund much easier. The group is focused on developing products and testing new ideas to capture greater market share and increase client penetration, rather than defending territory.

“A cultural appetite to try new things is part of Santander’s DNA,” he says. “It starts at the most senior level of the institution and allows us to push for change with much less friction than in other organisations.”

Mr Belinky joined Santander InnoVentures at the end of 2014, almost six months after its launch by Ana Botín, then chief executive of Santander UK and current executive chairman of Santander Group. The seven-person team sits in London and reports directly to the group’s head of strategy, Victor Matarranz, and head of innovation, Jose Maria Fuster.

InnoVentures was one of a number of initiatives the bank launched to return to growth and serve customer needs, following seven years of dealing with the global financial crisis and resulting regulatory storm. “The feeling was that we – the industry – missed almost a whole generation of significant changes in customer behaviour and the way our customers interact with our products and services,” says Mr Belinky. “We needed not only to catch up, but also get a step ahead.”

Over the past 18 months the fund has built a network of core investors and ecosystems in the US, continental Europe and Israel, and is currently launching in Latin America.

Adding value

InnoVentures’ focus is investing in fintech start-ups, specifically those it can partner with to bring value to the banking group’s customers. It asks three questions of potential investments: can Santander add value to the company? Can the company bring value to Santander’s clients? Will the bank learn something in the process?

“If there are reasonably positive answers to those questions, then we do due diligence like any other venture capitalist would,” says Mr Belinky. In addition, a senior sponsor at the bank must commit to engaging with the new company on the business side.

The fund has five investment verticals: payments, lending, big data, wealth advisory and digital channels. The latter is a catch-all for distributed ledger, application programming interface or API-based banking, cyber security, insurance, and so on. It can write cheques for up to $10m in exchange for an equity stake in the business of between 1% and 12%. “We have a hands-off approach and don’t normally take a seat on the board, unless there is real value for both parties. We try to limit the constraints a company might suffer from having a large strategic investor involved,” says Mr Belinky.

Currently InnoVentures has five projects. On March 30 it invested in MyCheck, a frictionless payment system for the hospitality industry. Just a few days later it announced its investment in Cyanogen, which is focused on building an open-platform operating system. The fund has also invested in iZettle – a company providing fully integrated payment solutions.

In October, it invested in Ripple, which is a distributed ledger/blockchain company focused on international payments for financial institutions, as well as lending platform Kabbage. Mr Belinky is hopeful that a few more deals will be finalised by the end of the year.

Threat or enabler?

The fund systematically analyses how start-ups will impact different parts of the bank’s business. “We look at major categories loosely aligned with our investment verticals,” says Mr Belinky. “How will the company evolve? Is it a threat or an enabler? How could it be further unbundled or rebundled? We try to understand which could eat into our revenues and which are enablers that we should work with.” InnoVentures recently completed an analysis in collaboration with consultancy McKinsey and will publish the results in early 2016.

While many start-ups are ‘monoliners’, i.e. they solve just one piece of the consumer’s financial needs, Mr Belinky believes retail banks face greater danger from those companies that already have a broad relationship with the consumer, such as Facebook, Apple, Amazon or Alibaba for smaller businesses. “The real threat is when rebundling happens in companies that have a relationship and trust established with the client,” he says.

In terms of disruptive technology, blockchain will continue to dominate industry discussions over the next few years, according to Mr Belinky, with pilots and simple products emerging in the near future. He also sees banks working with lending platforms as a significant trend. “This marks the birth of an asset class, so to speak. Beyond the Lending Clubs of this world, think more of a secondary market where you can buy and sell these loans and a securitisation market,” he says.

“Today there are two models: the marketplace, which is an intermediary model that captures fees but places the loans with investors; and the balance sheet model such as Kabbage, one of our investments, which is where the loans stay on the balance sheet. I think a hybrid model will emerge, where you keep some of the loans and distribute or securitise the rest.”

PLEASE ENTER YOUR DETAILS TO WATCH THIS VIDEO

All fields are mandatory

The Banker is a service from the Financial Times. The Financial Times Ltd takes your privacy seriously.

Choose how you want us to contact you.

Invites and Offers from The Banker

Receive exclusive personalised event invitations, carefully curated offers and promotions from The Banker



For more information about how we use your data, please refer to our privacy and cookie policies.

Terms and conditions

Join our community

The Banker on Twitter