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MBA's FinTech Start-Ups Target Banks' Territory

Nimble start-ups founded by MBA graduates are trying to take a bite out of banks' revenue streams with financial technology in payments, transfers and crowdfunding.

Wed Sep 24 2014

A troupe of MBA-founded start-up companies are helping to create a new breed of financial services business.

Business school graduates are aiding the revolution of the finance industry and are biting at the fringes of the biggest banks by disrupting their business models. These upstarters are using financial technology – dubbed “fintech” – and management skills gleaned from MBA programs to revolutionize the banking and financial services sectors.

A wave of fintech start-ups have emerged over the past few years, some of them run by graduates of Europe’s best business schools. Fintech firms are particularly prevalent in London, rather than Silicon Valley which is seen as the home of technology start-ups. But companies such as TransferWise, GoCardless and Zopa have become players on a global stage.

Taavet Hinrikus, CEO of TransferWise, earned his MBA at INSEAD in France but it was in the UK that he found inspiration for his fledging fintech firm.

Taavet was working for Skype in Estonia but moved away from the company’s base to live London. He was paid in Euros and every time he transferred cash to his UK bank account, faced a 5% charge levied by his bank.

Kristo Käärmann, TransferWise co-founder, had the opposite problem. The Estonian wanted to send capital back to his homeland from London to pay his mortgage payments. The pair struck a deal to transfer currencies between themselves – eliminating banks’ costs and saving about £10,000 over two years.

“That’s how the idea for a money transfer start-up was born,” said Taavet and Kristo in an interview with BusinessBecause. TransferWise operates as a peer-to-peer money transfer system, letting individuals and businesses send money between countries, charging a small fee for each transfer.

Since launching in 2011, the company has raised $33 million in investment from backers including Sir Richard Branson and venture capital firm Index Ventures. In June, TransferWise had processed global payments worth more than £1 billion – effectively saving customers millions in bank fees.

“It’s great to be able to say that TransferWise now helps people all over the world who face similar situations,” said the founders.

They are not the only ones to raise significant investment. Investors are pumping cash into fledgling fintech firms in their droves. According to Accenture data, global investment in financial technology ventures has risen from about $900 million in 2008 to nearly $3 billion in 2013, with the highest amount raised in the UK and Ireland.

The founders of these firms say that banks charge high amounts for relatively simple transfer processes. They want to move financial services away from the “old world of banking” with new technology.

An advantage fintech start-ups have over big banks is that they can concentrate on a small market sector, with a better understanding of how to use technology.

“We offer significantly cheaper and more transparent money transfers than banks – just 0.5% of the money being transferred, while banks charge up to 5%,” said Taavet.

“We can afford to do that because our technology bypasses the traditional international bank payments system and directly matches consumers and companies in different countries who want the opposite currency.”

Claire Cockerton, CEO of Innovate Finance, earned her MBA at London’s Imperial College Business School. The company, six months old, is a fintech industry organization that seeks to accelerate the UK's position in the financial tech market.

“The world of financial services is in a period of rapid change, and as we all know it needs to continue to evolve further – financially and in reputation,” said Claire at Innovate Finace’s launch last month.

Championed by the UK government, its members include start-ups like TransferWise as well as big corporations including Visa, IBM and Aviva, the insurance company.

“Our members are bringing new digital products and services to the financial services sector.... They come from payments, crowdfunding, peer-to-peer lending platforms, [and] they are bringing new digital currency technologies to the marketplace,” added Claire.

While fintech firms are taking a bite out of banks’ revenues, many of the biggest financial services groups are trying to head off the threat.

They are sandwiched between start-ups and big technology companies like Apple, which last week launched Apple Pay, a feature which allows customers to make contactless payments by waving iPhones over a terminal.

Barclays launched a mobile app two years ago, allowing customers from any UK bank to send money using a mobile phone number. The Payments Council, the UK group responsible for payment mechanisms, launched a similar service called Paym.

Fintech start-ups are moving into the mobile payments market, responding to consumer demand. A report from the British Bankers’ Association and EY, the consultancy, found that in the UK nearly £1 billion of mobile and internet transactions are processed daily.

TransferWise, for example, launched a peer-to-peer money transfer app last year. Taavet said that it had been designed to take the “hassle” out of transferring money overseas – saving users both time and money.

Mobile payments have made their way into Imperial’s business school. Yoyo, a system for mobile payments, has been trialling its services on campus – working with 32 bars and cafés at Imperial College this year.

About 4,000 users had registered within two months of the launch. Yoyo handles more than 30,000 transactions per month at Imperial, and is rolling out the app across the Westminster University campus and the University of Greenwich, both in London.

YoYo has just raised $5 million in seed funding, led by investment group Imperial Innovations and Telefonica Group, the Spanish telecoms giant, among others.

“Our fast early traction demonstrates that mobile payment combined with loyalty means value for retailers and convenience over cash or cards for consumers,” said Alain Falys, CEO.

Others have partnered with larger financial services groups. Santander announced a deal with Funding Circle that will see it refer customers to the online peer-to-peer lender, in June.

In return Funding Circle, which has helped 5,000 businesses borrow £290 million through its marketplace, will promote Santander’s current account and cash management services.

US-based Union Bank has also agreed a similar deal to sell some of its personal loans through the online marketplace Lending Club.

Fintech start-ups may have already begun nipping at banks’ market share, but the technology transition in financial services has only just begun. “This is just the start,” said Claire. 

Student Reviews

Imperial College Business School




On Campus

Innovative, Immersive and an Excellent Curriculum

The MSc Strategic Marketing course opens many avenues into the business world at Imperial. The coursework consists of group-based assignments, individual reports, and sometimes, examinations. The Careers team helps you with your CV, Cover letters, and other job application support. Imperial truly lives up to its name!




Very applicable courses

I enjoyed studying here for my master degree as I could feel that I was surrounded by very clever people, and I did learn a lot of knowledge that I could directly put into use into my current internship




Diversity and Professional Development

Imperial College London is an innovation hub with expertise across multiple industries. The international student body exposes students to endless cultures and experiences. Furthermore, the Careers team at Imperial is second to none as directors help guide students to the career paths of their dreams.




Business School

Imperial college business school has amazing facilities, amazing staff. I particularly like the business school cafe although it would be nice if they added a few more power sockets in the open space and heating for winter. The course is really good too. Very interactive classes and highly diverse environment.




Career Services

Very strong university with good quality faculty and a very strong career services team that prepared students well for the jobs market. Very nice facilities in the city center. Good sessions organised with employers.




Chinese students majored in English- now strategic marketing

My undergraduate major was English back in China and now an MSc student in strategic marketing at Imperial. For Chinese students who share similar experiences with me, you can get as much/deep as you want about marketing with some challenging group works and inspiring lectures. At the same time, if you just want to get the degree anyway with less effort, it's possible as well... ...