A stranger in a strange land — banking edition

What makes a traditional banker become a champion of innovation?

Daniel Spier isn’t anyone’s idea of an archetypical tech entrepreneur, and he’d probably agree. He is, by his own admission, a traditional man rather than a tech evangelist. He is also a man with a vision about technology, society and banking. As the founder and CEO of INITIUM Group, Daniel has dedicated himself to bringing corporate banking services to some of the most exciting businesses on the frontiers of technology — and pushing those frontiers himself.

It’s not a role he had foreseen for himself. Before founding INITIUM, Daniel had spent over a decade at IDT Financial Services Ltd. as Managing Director, happily doing what corporate bankers do. However in 2018, he had an epiphany: many promising businesses in the new digital economy (NDE) are under- or unbanked due to outdated risk modeling processes. Seeing that there was a significant amount of money being left on the table, and that strong, promising businesses were being neglected, he decided to found his own bank.

“The technological aspects of this aren’t my forte- I’m hiring experts to manage that aspect” Daniel says. “But the banking business case is clear. There’s a lot of businesses that are being neglected, and a lot of money to be made in serving them.”

Joining the new digital economy

It was at this point that Daniel experienced first hand that the obstacles faced by tech companies in the new digital economy are also faced by any business wishing to work with them. To serve the new digital economy, you need to accommodate the technologies that power it — and this in turn can lead to partner institutions being tarred with the same procedural brush.

Daniel discovered this the hard way, when he attempted to open a bank account for his new company. Despite being an established banker who had maintained a relationship with the bank for over a decade, he was rejected without explanation when he applied for an account. Thus, although he was a “known quantity” with a proven track record, he was no longer an acceptable customer when he stepped outside of the expected business models.

“This was a shock to me, as one might imagine,” he says. “I had been a client for over a decade, and had what I thought was a strong relationship with my bank. But when I moved into this sector, suddenly they didn’t want to have anything to do with me. Despite the difficulties it raised for me in my founding process, it drove the point home that I was on the right track.”

Ironically, although this was a strong validation of his idea, he had been proven right in the most unfortunate way. However, like a long line of illustrious entrepreneurs before him, this setback merely strengthened his resolve to solve the problem.

Doing well by doing good

The challenges faced by the new digital economy in finding banking support are well known: the U.K. Financial Conduct Authority released a report documenting the issue as far back as 2017. However, the mainstream banks are still slow to accommodate some forms of innovation. “We have witnessed the denial of banking services first-hand across a number of firms [. . . .]. Difficulties have been particularly pronounced for firms wishing to leverage DLT [Distributed Ledger Technology], become payment institutions, or become electronic money institutions.”

Daniel doesn’t see this as a failure of mainstream banking. It’s merely a result of the way processes develop over time, and the institutional inertia that can ensue as a result. “INITIUM will incorporate best practice from the traditional banks,” he says. “There are many, many things they do right, and the principles haven’t changed at all. We just need a new perspective on the old methodologies, and starting afresh makes that far easier than trying to change embedded practices. I’m not doing this altruistically, just pragmatically. I’m a banker, and INITIUM will serve businesses from this sector which meet our risk profiles. It’s just good business for all involved.”

As increasing numbers of news stories break about businesses in the new digital economy being refused banking services or having their accounts closed, Daniel’s realisation seems timely. The need is definitely real, and the potential client base keeps growing — because, after all, the time is coming when the new digital economy will just be “the economy.”

About Initium Group
Initium Group is a future multi-jurisdictional corporate banking group committed to supporting the growth of its clients. We intend to become the bank of choice for the promising and solid businesses building the new digital economy and are open to investors to participate in our future.