Behind the growth episode one: Conrad Ford of Allica Bank

Conrad

When you've got 50 people, unless you're not self-aware at all, you'll begin to realise you're the bottleneck, right? You're getting frustrated that things aren't moving as quickly as you thought they should be, but it turns out that everyone's waiting for you to make decisions, and you're making so many decisions, you're making bad decisions.

Lara

Welcome to Behind the Growth, an S&W podcast, exploring what it really takes to build and scale a successful business. I'm Lara Lewington. Each episode features founders and senior leaders sharing the stories behind their growth journey, followed by a conversation with S&W experts to explore the key takeaways for our listeners.

Today, I'll be speaking with Conrad Ford, Chief Strategy Officer at Allica Bank, about the thinking behind building one of the UK's most interesting challenger banks and how the business has navigated the complexities of scaling in a highly regulated industry. Before I head into that conversation, I'm joined by Emily Berry, head of fintech at S&W.

Emily, welcome.

Emily

Thank you.

Lara

From your experience with founders, leaders and fintech, what are you most excited about in this conversation?

Emily

So I think Conrad has a really exciting story. Firstly, as the sole founder of Funding Options, it'll be really interesting to hear about his journey in that early-stage business through to transitioning that and eventually selling the business, and then on to Allica Bank: A real success story in the UK.

They were last year named as the fastest growing UK private company, which is incredible, and recently became a UK unicorn. We're actually here at S&W working with ten of the UK fintech unicorns, which is an amazing feat and something we're really proud of, helping those businesses scale and grow here in the UK and internationally. So, I’m really excited to hear about his growth story and how it's similar to some of our other clients.

Lara

Well, we will talk unicorns and more. And then afterwards, your colleague Andrew Jacobs, who is head of regulatory consulting, will be joining us.

Emily

Yeah, really exciting to have Andrew's input after the interview. He brings a wealth of experience into regulatory compliance, risk and optimisation. It's a really strong service line for us here at S&W, and a real string to our bow in the fintech sector for regulated businesses. So I’m really excited to hear how he sees Allica, and how they've grown from a regulatory perspective and overcome those challenges.

Lara

I look forward to both your insights.

Hi, Conrad, welcome to Behind the Growth.

Conrad

Hi. Thank you for having me.

Lara

Pleasure. Now, you had a senior job at Barclays. You then became a founder, and now you're at Allica Bank. Can you just explain a little bit about your journey to start with?

Conrad

I went into investment banking where I could study accountancy. I was a few years there and then and stayed in banking for seven or eight years, as you just alluded to, although I hadn't had a plan. The plan certainly wasn't to have a corporate job until I died. So, I decided to become a founder.

Lara

Tell me about the business you founded.

Conrad

So, I founded a business called Funding Options, which is a comparison service for small business lending. I spent about seven or eight years building that business Funding Options, and then I left it just before Covid kicked in.

Lara

How was that timing? Leaving it just before Covid?

Conrad

It was incredibly lucky, actually, because the main reason I left was I was kind of done. I had nothing left in the tank. I was the sole founder, and for those that have been through that journey, it's brutal.

Lara

When you say you had nothing left in the tank, just for anybody who's listening to this and is maybe in that place themselves, how were you feeling then, and what did you feel you needed to do to escape, to get out of it? You just felt it was time you had to stop doing it?

Conrad

Yeah. And actually, the reality is I was I felt it was time for me to leave long before I actually got to leave. Because, if you're a sole founder, the analogy I'd give is you're kind of the brain of the body. I'm not saying I was the intellect of it, but basically you take out the brain, the body dies.

So, I had to go through a period where I was kind of building depth of leadership team, boards, chair, those kind of things that basically meant the business could keep going without me. And I was always super clear in my mind that when I left, I had to leave. You can't stick around. When it's time to go, you go. In other words, the person who takes over from you, they must have the same authority that you had. And if you're a founder, you are talismanic.

Lara

And then came Allica. Tell me a little bit about your role there. Exactly what it is you do day in, day out, and the skills that you have brought from that experience as a founder to the bank?

Conrad

So, for those that don't know, Allica is a bank focussed on what we call internally established SMEs. So, our typical customer is an SME business, maybe with somewhere between ten and 100 employees. It's not the really small ones, but not the big corporates. I would say I was brought in as a generalist because I'd been a CEO. My responsibilities, for example, include marketing. So if there's a CMOs, technically it's me; strategy, product and partnerships.

Lara

And looking at the overall picture of Allica. It's built for SMEs, but it's one thing to see a gap in the market, another thing to go and build a bank to fill that gap. What were some of the earliest challenges in that being got off the ground?

Conrad

The hurdle to be a bank is extremely high, and there's a good reason for that. Banks are, in the vernacular of regulators, deposit taking institutions. They are the institutions that are allowed to look after ordinary people's money: my money and Your money. So the bar for that has to be extremely high.

So, to get a bank licence in itself is an extreme moat. In the industry the big banks. We have the high street banks that we all know; they are in the industry called universal banks. What that means is they serve every type of customer, from the poorest student through to the largest corporation. Now, of course, from a strategic perspective, that means that they are jack of all trades. And that gives them a really soft underbelly, which is what we went after.

But although they serve every type of customer, they have two fundamental customer bases. One is mass market, which is mainly ordinary people, people like us, but also micro businesses, the really tiny businesses, the bedroom businesses, the one person plumbers. So, there's tens of millions of those customers in the UK. They're simple; they're high volume; they're homogeneous. And the entire model is to push them towards digital and self-serve. And they're pretty good at that, actually.

And the other extreme, the other big way they make money is the polar opposite, large corporates and governments. So, these are – there's very few of them, a few thousand. They're extremely high value and they're extremely complex. And the model they do there is the opposite of the mass market. They give you really high-quality people. In banking terms, they say coverage.

Our customer base, those mid-sized businesses are really awkward for these universal banks, because they're too complex for the mass markets, but they're too low value for the coverage model of throwing lots of people in suits. And for that reason, they get fundamentally underserved by the big banks. And we thought we'd build a bank that's from the ground up – processes, people, technology – everything focussed on this problem statement of how do you deal with the mass complexity of that segment? And here's the thing: It's a third of the economy, our target segment; It's not like some tiny niche.

Why we've been so successful and grown so quickly is fundamentally because the big banks have left a third of the economy on the table in this country. And by the way, this is true in many markets across the world as well. So watch this space.

But fundamentally that was the reason we had conviction. Now, if you build from the ground up and we did it all the way to our own technology; we've got hundreds of people in our engineering teams. If you build from the ground up, it means that as you scale, you get more competitive advantage and you get harder to compete with by the incumbents.

Lara

Were there along the way any areas of friction that actually turned out to be great opportunities?

Conrad

Well, funnily enough, I think you could actually say that's the entire strategy that we pursued. Why did the opportunity exist for a bank? Because the big banks found our customers awkward. What do they find awkward? They found awkward the fact that a medium-sized business, a larger SME is quite complex. They want some human attention. They want experts to speak to.

That awkwardness is one of the reasons why the incumbent banks had begun to serve them less and less, withdraw products, withdraw service levels. What I always used to say to my team is that complexity that they find painful, they run away from, we have to lean into it, because it's kind of those friction points are almost the magical moments from which you can build a really great business.

Lara

That's incredible. The product that you've built is obviously very specific to that need, that need of a huge chunk of the economy. How do you even start to approach that?

Conrad

I think you have to break it down into bite sized chunks. And one way we did that really well at Allica is these days we have a very wide range of products. We actually have more products available, things like lending products, savings and current account products than the incumbent big high street banks do for our segment, or certainly most of them. And we have multiple channels. We have half a dozen of different ways to the market, all the way from purely digital, all the way through to working with accountants, for example, who are trusted advisers in our segment. But on day one we focussed on one channel and one product. The product we chose was lending the largest lending products, because that's the primary way of making revenue in banking, and the channel was intermediaries because we thought it's a channel we can really make an impact in early.

So basically, we didn't try and do everything at once. We kind of went in with a focussed, let's call it a wedge, and then slowly built out from there. What's the hardest thing to do in terms of customers in our world? It's getting a business to switch their bank account to you. So, we left that to the end. And that's, that's that's the bit we're in now. So, you know, a business owner is actually more likely to get divorced than they are to switch their business bank account. But we're actually showing now that that's because the options were so poor.

Lara

So, you're clearly there to fill this gap. How has technology played into that? How have you built the technology that you're using? How do you deal with that in such a highly regulated industry?

Conrad

It's all about getting customers to self-serve entirely digitally. In our segment, our customers, the majority of them actually want some kind of human element to the banking. In other words, they want someone to talk to. So, it's fashionably called high tech, high touch. So, in other words, our digital is not just about taking humans out of the equation; it's about making the humans more efficient and effective.

Lara

As it should be in most places.

Conrad

Yes, exactly. And the strategic bet at the heart of that, in other words, the thing that had to turn out to be true for us to really win was that although business owners wanted a human element in their banking, for the day-to-day stuff, if you got the digital good enough, they'd choose to self-serve. So, in other words, if you're making a payment, why would you bother picking up the phone to speak to somebody when you can do it digitally online?

So, basically, the bet we took is if you build the digital good enough – they'll choose to want to speak to somebody when it's something important, and actually there's kind of two polar opposite reasons things can be important. One of them is when we drop the ball. If something goes wrong, they want to be able to pick up the phone to somebody and that person to say, I've got this, I will own this, I'll get rid of it. And that's actually the thing they miss the most with the big banks. But there's also the positive version, which is actually there's moments of truth. So, let's say you're a pub for the sake of argument, and the leaseholder that owns the pub that you trade in has said, you know what, I'm going to sell it. Do you want to actually buy your own premises that you trade in? That's a really consequential decision. It's as consequential to you as buying your first house. In other words, you want to think; you want to talk to somebody. That's those moments of truth when you want to speak to a human being and an expert human being. And that's kind of the proposition we've tried to build.

Now, that was a really big bet. And if on day one, you know, I'd hired 100 relationship managers on that bet, that would have been a pretty risky thing to do. So, one of the things from my start-up background that I'm quite good at is how do you test that quickly? So, what I actually did is built a CRM, hired six relationship managers, and then we had live customers. And through this we actually did this in about three months. So, the point is basically to test, learn, iterate quickly. But that was the bet that had to turn out to be true.

Lara

And this goes back to the fact that you have managed to scale quickly whilst remaining profitable. How has that been possible and what challenges have you seen?

Conrad

Well, because we focussed initially on the actually the largest area of lending in our market, which is actually lending against business premises – so that could be the pub I just described, but it could be a warehouse or a factory, an office – we kind of went for the big revenue prize early, which meant that we were profitable very early in our journey.

The stuff that takes a longer time, so building a current account, franchise, building brands, which I'm deep in at the moment. If I tried to do those things first, then profitability would have been a long way away, and there's a lot of uncertainty. But we built a business with very good unit economics from day one. We knew the unit economics.

So, we chose to build a business that would be profitable early. And then the really hard bits, the bits that take a lot of time, the flywheel in the vernacular of an investor. So, for example, in acquiring customers, you can go and buy customers on Google every day, or you can build a brand and then customers come to you forever, certainly as long as they recognise and respect your brand. So, buy customers on Google on day one, but build a brand over the long term. It's about weighing the important but not urgent things and the things that will actually get you to profitability early and balancing those. By the way, that's something I've learned the hard way as a founder.

Lara

When you talk about that idea of building the brand and how you knew what you were getting yourself into. So, you were very optimistic about it. There is also maybe a question of trust over branding that it's a new brand. It isn’t even a concept and something that hasn't been available to people really before. So how easy was it to earn people's trust and to get companies to believe that this was what they needed to do, this would work for them and would provide all of those things where they felt the other banks had been falling behind?

Conrad

Yeah. I mean, let's be absolutely clear. It's really hard, right? Trust is, you know, trust is important in most segments, but in banking, it's obviously probably an order of magnitude more important. How do we do that? Fundamentally, our North Star and I'll talk about North Star and it's an interesting concept. Our North Star is to be the most recommended business bank. That is it.

And that's actually a good clue to the answer to your question. Because if accountants of a business, other trusted advisers, other businesses in their network businesses, particularly at the local level, they go to round tables, they go to networking events. They know each other. They trust that a lot more than what they'll see in an advert. So that North Star concept, the most recommended business bank. And our brand identity, which is an orange bowler hat, you probably can't see it, but an orange bowler hat.

Lara

I spotted that the moment you walked in.

Conrad

It's a brand icon in the lexicon. People may not remember our name, but they'll be like, okay, it's the orange bowler hat, guys. It's no different to the red telephone of Direct Line or the meerkat of Compare the Market. It's a brand icon – Oh it's those guys, right. Yeah. But the point is basically people won't just because they recognise the brand – But if people say, you know, the orange bowler hat guys. Yes they will.

So we have our North Star. What does that mean in practice? We have lots of objectives and KPIs, but that's our North Star. And what we say to our team is if you're making a decision – A versus B, whether you're a product team or customer support team – don't go up the chain and get a decision from the CEO or from Conrad or someone else on the executive team. Ask yourself the question, which is the most likely to take us towards our North Star of being the most recommended business bank? There's your answer.

Now, why is it called a North Star? It's a popular concept. Before GPS, when people used to sail across oceans, the North Star was the one thing you knew with absolute certainty would be there every night, and you knew exactly where it would be. So, the North Star was the way you navigated across these open oceans. So that's your answer.

So, the trust thing is about recommendation – and we see this more and more. For example, professional advisers are often told by their clients you should be telling your other clients about them. These guys are amazing. So, that kind of word of mouth built around a recognisable brand identity is how we think about that problem.

Lara

How do you anticipate and manage risk when you're working in an iterative way?

Conrad

So, firstly, I think an iterative way done well is the least risky way of doing things. So, let me give a real-world example. Many organisations have transformation programs where they look to replace core systems, and the analogy we always use for that is it's an open-heart surgery. So, in other words, you're basically trying to change everything all at once. And open heart surgery unfortunately, is quite a high-risk thing to do.

The right way to manage risk is more about, knowing five years in advance that you're not on a great trajectory in terms of your heart, so let's start making some small changes, do some exercise, lose some weight. So, constant iterative change is actually safer.

Now, that may sound like a controversial statement, but interestingly, our regulator, the FCA, which I'm sure everyone knows who the FCA is, did a study of change programs, as they called it in the industry. They looked at millions of change programs, and they actually found that constant iterative change was less risky. It's obvious in retrospect, but very few do it. And we obsess about that. And as obviously as you get bigger, you need to find ways to make sure you keep doing that and keep having that ethos. And that's about delegating and building great talent.

Lara

You've talked a lot about the iterative process of what you're designing. Is it continually iterative, or does there become a point where it's done? You've got the right thing?

Conrad

There will never be a point at which it's done. We will always be incrementally improving. In our world, we have half a dozen major channels, a lot more than that for significant products. So some of them are more done than others, but the reality is the day in which everything is done and nailed down, there's no such time or there won't be when I'm around, because the world is always changing. You're always learning.

So, you look at acquiring customers, for example. Every cohort, you're looking for each one to be incrementally better. Now, in the early days, you're, you know, from one cohort to another, you may find a magical one third uplift. And occasionally you do still find that. But at a certain scale, if you find your 1% uplift in each cohort, that's very, very material to your business. So it's been announced that we've just hit famous unicorn status…

Lara

Congratulations.

Conrad

Thank you. I joke that we used to say in the early days of Allica, we were 10% done. This was a way of stopping the complacency. And we raised £100 million about three years ago. And I joked on a LinkedIn post and I said, I'm going to allow us to say we're now 11% done. And now three years later, we've just hit the unicorn status. And I said, I don't have authorisation, but I think we can now say we're 12% done. That's how we think at Allica. So, the idea that we're kind of like – we finish the job is just not in our culture.

Lara

You've also had to make changes along the way as to how you do things. What have been the biggest changes that you've made that you weren't necessarily that keen to make?

Conrad

There's an amazing expression from Jeff Bezos, the Amazon founder, in one of his shareholder letters. I love this and I use this all the time, even just to myself. He said, we are stubborn on the vision. We are flexible on the details. And that is that is Allica to a T. That was the vision. We were stubborn on the vision, but almost everything on the day-to-day execution will turn out to be different.

And actually, one of the areas I added particular value in my early days of Allica, was we would be launching new products and channels and somebody would have written a spreadsheet in the finance team a year before or six months before. And everyone would be just staggered like a rabbit in the headlights that, for some reason, this spreadsheet that somebody had made up, you know, at 11:00 on a Friday, wasn't turning out to be true. It never turns out to be true.

I always say, you know, no business plan survives first contact with a customer. So basically, the most important thing is to launch, iterate and learn. And by the way, this is empirically true. This has been proven again and again and again. Organisations that win, they observe. In other words, they have data. They absorb the data and they act on the data. And this feedback loop, the quicker the feedback loop is, the more likely you are to win. It is as simple as that.

Lara

The focus on the mission, not the detail, is absolutely brilliant because I think it's something that whatever you do, you can apply to it. You've obviously sat in three different positions here, as well as everything else you've done along the way. But where you were at Barclays, where you were as a founder and where you are now. What are the greatest lessons you've learned throughout that journey that you think could be useful to others, wherever they are?

Conrad

The one thing I obsess about above all else is talent and associated culture. I think they're intertwined. In other words, you have to hire talent for culture.

Lara

You say talent for culture; can you just explain that a little bit more?

Conrad

You cannot build an exceptional company without exceptional talent. This is central to our ethos. If you're a senior leader at Allica and you're not hunting for talent yourself, in other words, trying to make sure that you have the very best people around you, you're kind of not doing your job right.

Now, why is that important? It's because when you've got 20 people, you know, you can be making all the decisions and all those things. But when you've got 50 people, unless you're not self-aware at all, you'll begin to realise you're the bottleneck, right? You're getting frustrated that things aren't moving as quickly as you thought they should be, but it turns out that everyone's waiting for you to make decisions, and you're making so many decisions, you're making bad decisions. That's how I always think about it. I want the person who will basically one day take my job because they're better than I am. That is my number one priority. So, you obsess about the talent.

Now, at a certain scale, it's not just about talent, it's also about culture. There's a famous phrase that, you know, culture is what happens when you're not in the room. Well, guess what? When you've got 800 people, as we do now at Allica, or roughly thereabouts, you're not in the room 95% of the time. So, it's no longer a phrase. It's now a reality. So, culture is the way by which you embed expectations. Now, it's not just about stuff. You know, we have our values that we care about outcomes that you deliver. But we have values in terms of how you think about how you treat customers and other colleagues. But also we actually really care about speed of execution. We want people who have a bias towards action. I have actually found in my career, most people, certainly most people I've worked with, would rather talk about what needs to be done or – what needs to be done, than actually get it done.

And the art is basically – I'm going to lean very heavily on Amazon. I think Jeff Bezos or Amazon talk about one-way doors and two-way doors. Most decisions you take, most things you do if you do them the right way, are two-way doors. You can go out the door. This doesn't work, you go back through the door. So, you may have a million visitors on your website. Test something on 100 of them: A two-way door. Occasionally you make a one-way door decision. You go through that door, it's really hard to get back in. Those are the decisions you need to think really hard about and take time. But the point is basically to try to get as much of our execution down to two-way doors and trust your team to think in that way.

We have, again an Amazon concept, called “bar raisers”: A small number of people are allowed to do the final interview at Allica. I'm one of them. I'm not analysing whether a developer is good coder. I take it as read my team is actually much more qualified to tell than I am. Do they have actual values? That's what I'm doing, and I go deep on their background, their motivations. You know, where's the fire in their belly come from? How do they work with other colleagues? These are the things I look for. And if someone does not reflect our values, they can be extraordinary at their technical ability, then my job is to veto that hire.

Lara

We're at a strange point right now where people are really worried about what AI is going to mean for their jobs in future. So how do you confidently build a team of people who are fully invested whilst that's going on in the back of their minds?

Conrad

That's a good question. I would actually say, if that's going on in the back of your mind, you're the kind of person who thinks about that stuff in the right way, a positive way, which is basically it's going to happen, and I want to be part of this…

Lara

Yeah, that's the realism there.

Conrad

Let's talk about one function that sits under me: product design. So, design is a very important discipline in modern companies. It's kind of like how you think about products from the first principles. Uber reinvented taxis: product design. That area is already being revolutionised with AI. We are seeing massive productivity gains. Of course, that's scary if you’ve spent your career as a product designer. This wave is coming anyway, right? Be somewhere that's actually embracing that, and at the front of that. That's the conversation I have with the team. We are very invested in making sure we're at the front of that wave.

Lara

What's been the toughest complexity that you've had to face, which actually ended up becoming an opportunity?

Conrad

By far the toughest complexity is the fact that we're a bank. I mean, it's hard to overstate the kind of regulatory barrier of being a bank, certainly in the UK. Becoming a bank, being a compliant bank and having the capital that's required of a bank – these are really, really big things. How I think about that is that, for example, a question you could ask, I don't think it's a serious question, but you could ask, you know, what's going to stop Google from coming, out competing you, which is asked for 90% of tech companies, but probably not us. But the reality is the big tech companies spend their lives trying not to be regulated. Even something like GDPR is a horror for them. It's highly unlikely they're going to choose to be a bank.

So, the thing that we really obsess about is how we be a compliance, fully capitalist, strong bank, but at the same time, we don't lose the entrepreneurial DNA. And actually, I think that's our superpower, that we've kind of found that magical balance. The art of fintech is balancing the fin and the tech. And I think we do that extremely well.

Lara

We have a quick take round to do here, which is a few speedy takeaways from you that we'd like just a sentence for each answer.

What do you think is harder: starting or scaling?

Conrad

Starting.

Lara

What's the hardest thing to protect as you grow? I think I know what your answer is going to be here.

Conrad

Maintaining your culture.

Lara

That's it. In what way?

Conrad

Culture gets harder and harder to maintain or control when there's more people in the organisation and more and more people who don't know each other. Culture needs to be the glue that holds people together, but it's very easy for culture to go the wrong way.

Lara

Okay, what earns you trust in business?

Conrad

Consistency in doing what you said you're going to do.

Lara

What would you say to others going through the same journey or anything similar?

Conrad

I would say, stubborn on the vision, flexible on the details and believe. If you really believe in the vision and other people believe in the vision, then keep going.

Lara

And what do you look for in a trusted adviser?

Conrad

I look for a partnership. I look for a trusted adviser – somebody tells you things that you don't necessarily want to hear. In other words, they're not selling to you. They're telling you what you need to know.

Lara

Conrad, that was brilliant. Thank you so much for joining us on Behind the Growth.

Conrad

It's been a pleasure. I've enjoyed it. Thank you.

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Lara

Hello again, Emily and Andrew. Welcome to Behind the Growth.

Andrew

Thank you very much.

Lara

Now, Conrad and I covered a lot of themes there. But one of them was leadership. He describes moving from being the central decision maker to building leadership teams and governance structures around him. Why is that transition so important in an organisation?

Emily

So, I think as a sole founder it's so tough. You're there making all of the decisions. You probably can't afford to hire other decision makers in the business. You need that kind of fast-paced decision making. However, as you scale as a business, that becomes really, really tough and through that transition, when do you hire people and who are the right people to hire? And I've seen lots of businesses make the decision at the wrong time or the wrong people.

So, a lot of people then leave the decision too late, and actually that can be again, really tricky. So, I think Conrad talks a bit about it in your interview and says, actually, founders really need to build that kind of strong adviser network. So, strong governance team, strong boards, strong people around them and building that at the right level. But I think, you know, having an adviser that is an extension of your team is really, really important. From a legal adviser and accountant, to consulting – all of those advisers that are there in your corner. And as you grow, that kind of leadership team probably makes the journey a bit less lonely and gives you kind of access to thoughts and insights that you just wouldn't have had otherwise.

Lara

And there's also always this idea of culture. How important is it to maintain the culture that the founder wanted at the start?

Andrew

Absolutely. So, I'm really, really glad to hear Conrad mention about culture, because I think it's part of the success that isn't necessarily always voiced when we talk to founders or we talk to successful CEOs. So, I think conduct and culture overall combined together are really, really very important. So much so that we've seen in the UK the financial services regulator, the FCA, is now placing a lot more emphasis on conduct and culture. So, from the 1st of September this year, they are introducing new rules in respect of conduct and how firms are expected to operate for all those that are regulated in the UK. And, similarly, what comes alongside that is a greater emphasis on senior managers encouraging the right type of culture and the right type of leadership behaviours.

So, the FCA itself then looks at culture and being really predicated on four pillars. So, that's about the vision. That's about the leadership. It's also then about the managing and incentivising people. And then, last but not least, it's also about how conduct takes place and how people behave in a day-to-day basis.

And if we look back at what's happened and you look at businesses that have been well recognised, strong leaders over time, and one thing that is really, really clear is that if you've got good governance, you've got good culture, you've got good conduct that gives buyers and consumers a lot of trust.

And what happens is you really see it resonate from the inside out. And those are the companies that we know and love, and they're some of the best brands around at the moment.

Lara

You mentioned regulation, and Conrad referred to the high level of regulatory clearance needed to be able to create a bank. What are the benefits after a company has gone through that sort of process?

Emily

I think regulated businesses have their own types of challenges. You know, if I think about the journeys that some of my clients have been on and some of the companies that we've supported over the years, you really need an adviser that understands the nuances of a regulated business, and whether it's from the kind of early stages and the initial applications with Andrew's team or, you know, later stage regulation, actually there are loads of questions you need to be asking yourselves. Do you need an audit earlier than anyone else does? What do your investors want? You know, investors in financial services in fintech often have a higher level of scrutiny due to the risk involved. What is your tax position look like? Can you optimise it in any way? There are some really complex positions, for example in fintech businesses that can really be optimised, but if you get it wrong can be really, really costly. And as a regulated business, if you're getting things wrong from a tax perspective, yes, you've got, you know, HMRC on your case, but you've also got a lot of customers to stand up to as well.

Andrew

And I really like that Emily. I mean, I think you make some really good points there. It's difficult enough running a business, a fintech business, an early stage business or a business which is slightly more mature. But when you add a regulated dimension to it, it becomes that much more complicated and that much more intricate.

And one of the things to take away in terms of regulation is not only is the balance sheet looked at when firms go through, you know, this process of becoming authorised by the Bank of England and by the FCA and the PRA; ultimately a number of different areas are looked at. So, it's not just about financial resilience. It becomes about non-financial resources as well.

Lara

Conrad talked about the importance of incremental change rather than big transformation. What are your thoughts on that?

Emily

That constant change, the kind of moving at such a fast pace and having to make such fast-paced decisions is really interesting and goes back to one of our earlier points in terms of having that adviser that's on that journey with you and whether that's your lawyers or your accountants, but actually someone that's in your corner and really understands where the business is being, where the business is trying to go to. That's really important when it comes to incremental change. Someone you can pick up the phone to have a quick conversation.

Often, you know, in large businesses, in businesses with huge finance teams, that's someone internally. But you don't have that when you're a growing business, and therefore having those outsiders that understand that journey to understand the incremental change is really important.

Andrew

I think from our perspective in my team, but also in the wider consulting services that S&W offer, it really is about being with the client on that journey all the way. And it is also about coming back and making sure they're regular touchpoints. And I think one of the things that we do particularly well, and one of the reasons why we organised and set up a new consulting practice, was to make sure that we had a range of different services that businesses need at different times in their life cycle.

And also, sometimes we knew we need to be light in touch and light in cost. Again, to your point. And sometimes we need to really go in and be shoulder to shoulder with businesses and making sure that we are that trusted adviser, but also we're in the trenches with them.

Emily

Yeah, I think that's a really interesting point, Andrew. One of the things we've done recently for fast growing businesses, especially in the fintech sector, is actually send members of our team on secondment, so plugging those gaps where they're doing a transaction or there's a really busy time of year. They don't want a full time employee, but actually we can really plug that kind of short-term gap, which has been really powerful.

Lara

Our founders often don't know what's to come, be it a positive thing or a negative thing. And Allica had huge success in the UK. But if they're now talking about wanting to move into the international market, there's obviously a lot of challenges that would come with that for the banking industry.

Andrew

Absolutely. Now, contrary to what people think pro post-Brexit. There is still a lot of cooperation between the UK, for example, and the EU27. There's still a lot of cross dialogue between the various regulators in each country, and so I think it does make it challenging, and there's no way that you can have anything other than the clean copybook in one country if you actually really want to focus on international expansion.

I think we're trying to do a lot more now to facilitate, I suppose, reverse investment in the UK. But what I'd really suggest is that if you are looking to expand outside of the UK and you’re a regulated business, looking to go into one of the other jurisdictions that I've mentioned, then I think it's really, really important that, you have good governance, good systems and controls – as I said, having a very, very clean copybook from a regulatory perspective: Those three areas or those three facets really will make sure that you're accepted in a different regulatory regime. If not, you know, you can expect some real challenges to materialise.

Emily

Regulated businesses are in a slightly unfortunate position versus kind of fast growth tech businesses as an example. Tech businesses can just go overseas, sell them, sell their goods to anyone, and there's no one asking questions. Whereas regulated businesses in the fintech space, for example, you can't. You have to have internal controls. You can't just going go targeting, you know, international customers, for example.

Andrew

Absolutely. And I think it's interesting that we're starting to now recognise that in this country. I mentioned the fact that it's getting easier now to invest in the UK, rather than perhaps going out and investing or setting up and expanding in different jurisdictions. We have the Office of Financial Investment, which has been set up over the last nine months or so, which is a multi-government agency designed to facilitate inward investment. We also have a new regulatory regime, which is being launched over the next 12 months or so. And actually, this is really focussed on the needs of fintech businesses. It's meant to enable businesses to be able to go to market quicker, and then either give them a period of up to 18 months, where they can prove concept of their business and actually that they're ready to go into a permanent regulatory state because they can achieve the relevant threshold conditions. Or alternatively, it gives them an opportunity to wind down gradually with no impact to the economy.

Emily

It's also really important to think about the other things that are going to impact you. So, people we've already talked about kind of culture and how do we incentivise people. But in order to expand overseas, you obviously need to have people on the ground. So, what does that look like? Are people moving from UK to overseas? Are you sending them on secondment? Are you hiring locally? What does that mean? Really basic things like how do you set up a payroll locally? Do you need an office there? Do you need a company there? What does it look like from a corporate structuring perspective?

We here at S&W make sure that we bring in all of the relevant teams. You know, regulatory consulting is a key one. What does it look like from a regulatory perspective? But then how do you optimise your tax position internationally, not just in the UK, and there are some real opportunities, challenges as well, but there are some real opportunities there from an international perspective. So, something that we really encourage businesses to think about early. Once you're kind of in those planning stages, again, the regular conversations with advisers help, you know: asking people what are the unexpected costs of expanding overseas, because that will really feed into kind of budgets and future growth.

Lara

This has been a story of fast growth in a really customer centric way. What are the takeaways there for other fintech businesses?

Emily

So, I think really focusing, as Conrad said, on what the product market fit is. So, who are the customers that you're looking to help serve, and what product are you trying to build for them, to serve them? And he talked about that kind of soft underbelly of customers, who the traditional banks were not serving very well. Yes, if you're a large client, you're being served by a customer relationship manager at a large bank. If you're, you know, a very small company or a small individual, you're being served by an online platform and you don't need anything more. But actually, there's a big gap in the middle and that SME market is huge and growing in the UK.

And so really thinking about kind of what that customer needs and is after and really looking at that as your kind of end vision to what you're trying to build as a company: I think was really insightful from Conrad. And thinking, you know, those fast growth companies, the same type – you know, Allica was one of those ones and is still is a fast growth company – and, you know, serving their own needs really and actually looking at that from an adviser perspective, how do we support those fast growth businesses?

And yes, the relationship bit is key. Having that trusted adviser, they want to be the trusted adviser of the bank sector, right. So being a trusted adviser to their clients, someone that someone can pick up the phone to is no different to what we do with our clients. So actually, people want someone that they can trust. They want someone that they can speak to easily and quickly, and someone that can have a practical answer for them. And I think that's the difference.

Andrew

For me, it's about really starting with the end in mind. And I think in particular that becomes very, very important when it's a regulated business. You can't kind of bungle your way into regulation. You have to be very clear about what you want to achieve, the markets you want to serve. And you also then have to really demonstrate clearly to the regulator that you know those customers well, you know what they need from a vulnerability perspective, from a care perspective, from a clarity and understanding perspective.

So, start with the end in mind is what I definitely recommend. But also, this point about knowing your customer really well, knowing your target market, the need, but actually fundamentally knowing what your customers need. For me, probably those are the two key points which have stuck with me from this success story.

Lara

Really valuable insights. Emily and Andrew, thank you so much. Thank you.

See you next time on Behind the Growth.

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