Nicholas Pratt talks to Graham Kellen, chief digital officer at Schroders, about its Cobalt programme for fintech start-ups and the importance of collaboration.
In May, Schroders announced the first fintech start-up to join its Cobalt programme, a new global in-residence initiative launched in March that offers office space and professional support to start-up fintechs.
Schroders is targeting tech companies that have progressed beyond the conceptual or early-growth stage and have a product that is relevant to the asset management industry.
Successful applicants will be given a residency of up to 12 months, in which time they will be exposed to mentors from Schroders’ different business areas and different product users and given the opportunity to pitch for investment.
It is led by Schroders chief digital officer Graham Kellen, who was appointed to the role in 2013 after working as a digital strategist and chief technology officer at Man Group. There, he was responsible for developing a client service strategy to acquire, service and retain billion-dollar mandates.
After more than ten years working in various roles for fintechs, hedge funds and investment banks, it was during his time at Man Group that Kellen gained first-hand experience of the institutional asset management market.
“The Cobalt programme is really about getting early-stage access to start-ups that have a solution in production but are not yet enterprise-ready,” he says. “The idea is to help them realise the benefits earlier and to provide those benefits to our own clients.”
So far, Schroders has received more than 20 applications. These will be filtered by its innovation practice, which will look at the location, sector-relevance and business case for each applicant before handing over to the Cobalt Council, which, says Kellen, has greater insight into the key challenges facing the company and is able to assess which ideas are the most viable.
“But,” he points out, “just because a start-up is not accepted on to the programme, does not mean that we don’t work with that company.”
There are no limits to the number of partners that Schroders takes on, Kellen adds. It is, after all, a global organisation. The only consideration is that the successful applicants are spread evenly enough between locations and business units.
Sending a message
The first successful applicant is Qwil Messenger, an instant-messaging platform that is designed to enable firms and clients across jurisdictions to communicate through a single application while also meeting the evolving data protection and privacy requirements facing businesses – an issue that has taken on increased importance thanks to the introduction of the General Data Protection Regulation (GDPR) in Europe.
“I think they have a really interesting proposition,” says Kellen. “We are finding more and more of our clients want to use social media and instant messaging, but we want that communication to be secure and efficient. There are so many use cases.”
At the moment, Schroders and Qwil have a six-month agreement. There are no formal partnership plans in place as far as the programme is concerned, says Kellen, and each participant will be dealt with on an individual basis.
Of course, Schroders has a private equity division, so an investment is always a possibility, Kellen says. “The main objective is to prove that we [Schroders and the fintech] were both right and that there is a viable solution.”
Alternatively, he adds, both parties might discover that the product is not a good fit or needs more work, which can also be judged as a successful outcome if both learn something from the experience. This attitude has not always existed when it comes to the asset management world and its relationship with fintechs.
“The Cobalt programme is part of a much wider transformation and research and development strategy,” says Kellen, who also leads in-house teams working with technology such as robotics, artificial intelligence, machine learning, data insights and analytics.
The name Cobalt was chosen for a reason, he explains. “We want the programme to act as a catalyst to inject new ways of thinking into the organisation and to spur us on to change our behaviour.”
He also hopes that the programme will improve the quality of collaboration. “I did not want to run a traditional incubator or accelerator because I think there are flaws with those models. The innovation happens outside of the business.
“The best way to develop innovative services is to be embedded with the practitioners and to co-create.”
There is a mutual benefit to being in the same building, says Kellen. “We don’t expect the whole company and all of its employees to relocate to our offices. Some fintechs may employ up to 30 or 40 people. What we expect is that there will be three or four employees that can sit alongside our staff on a daily basis.”
It is likely that these three or four will have some existing experience of working in a financial services firm, albeit not necessarily an asset manager.
“We want to expose them to the fact that asset management is not the same as a retail bank or an investment bank,” says Kellen. “Asset management is an intermediary business and we act as a wholesaler. This is not to say that we have no relationship with the end user, but there are a lot of layers and a lot of platforms involved.”
Fintechs are more commonly associated with consumer-focused sectors and processes – for example, the payments process in retail banking. It is easy to see why this may be the case. There are typically low-value, high-volume processes involved and technology
“With a business-to-business play like asset management, there are nuances to the conversation that they wouldn’t normally be exposed to and this is one of the benefits of the programme – an introduction to the psychology of delivering asset management.”
The education will not be all one way, though, as there will be things that can Schroders can learn from the fintechs, he says. “Fintechs typically have an unconstrained ability to come up with ideas. They are starting with a blank piece of paper and no limits on their thinking. Maybe they are using less established tools or technologies that traditional organisations and asset managers would not think of putting together. We get different perspectives and new ways of thinking.”
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