Chat with Fintechs: Chris Vanden Berghe, CEO, 4xLabs
The History and Industry of Money-Changing
Money-changer is defined by Oxford dictionary as “a person whose business is the exchanging of one currency for another.” The business of money-changing goes way back in time, many evidence and historical records have shown the existence of such business in ancient civilisations during the Greek and Roman empires. In the Bible – Jesus was recorded to have gone into the temple of God and threw out the money-changers and other traders. Historians have found usage of coins in 600 B.C and that some forms of money-changing were common along the Silk Road during Han Dynasty (around 140 B.C to A.D 32)
In Singapore, money-changing business require licenses and are governed by the Monetary Authority of Singapore (MAS). MAS defines money-changing as “the buying and selling of foreign currency notes and may be conducted under a sole proprietorship, partnership or company.” The Singapore Foreign Exchange Market Committee (SFEMC) publishes a semi-annual “Survey of Singapore FX Volume“, in its April 2017 report, it found that the average daily reported Foreign Exchange turnover was US$ 386 Billion. In 2013 MAS published the “National Money Laundering and Terrorist Financing Risk Assessment Report“, in it MAS stated that the total business volume in the money-changing and remittance business was about $36.8 Billion.
We know that money-changing is not free, and the margins that end users pay can be quite high. And it can be quite troublesome and time consuming for one to physically queue up at the popular money-changer or even trying to decipher which one offers the best rates. My personal experiences are definitely not unique, it is common, after having queued for 30 minutes and when it is your turn next, to be only turned away by the money-changer because he/she has ran out of stocks.
Fortunately, one company decided that enough was enough. In 2012, 4xLabs was founded and they created currency exchange innovative solutions that were quickly adopted by the money changers in Singapore. The subsequent attention attracted backing from Dymon Asia Ventures. In May 2017, 4xLabs received another round of funding from Dymon Asia Ventures and OSK Ventures International.
We met Mr Chris Vanden Berghe, CEO of 4xLabs over coffee and had a chat to better understand their setup, discuss and exchange views on things in the industry.
Chat with Fintechs: Mr Chris Vanden Berghe, CEO of 4xLabs
TFAGeeks: Hi Chris, it is great meeting up and having a chat over coffee, understand that you have a few projects lined up now, thank you for taking time off to share with us your experiences and opinions. We have read about 4xLabs, how the idea of starting the company came about and how it has evolved over the years. Could you share with us what is the main factor that differentiated 4xLabs from the many other competitors?
Chris: There are a number of companies that are trying to do something similar, but most of them are focused on the B2C experience and collect money changer rates and data by crowdsourcing. We approach this issue from a different perspective by working with the money changer community directly to solve the issue of price transparency for the benefit of both the customers and the money service businesses. Our solution is to provide these money services businesses with a platform that allows them to digitize their day-to-day business operations, which is basically an operating system for all their business needs called Biz4x. Through Biz4x, money services businesses get access to real-time FX rates, a risk intelligence database for customer screening, eKYC features, a point of sale system to manage their business, rate board display, as well as the capability to post rates directly to an online directory that allows them to accept customer currency bookings.
The main thing that differentiates 4xLabs is we are focused on helping money services businesses find a footing in this digital economy, by providing them with a much needed solution that not only fills a market gap, but helps them to accelerate their own growth and become more efficient by streamlining business operations and giving them greater control. All prices and data that the customer receives are input by the money changers themselves into the platform we provide, rather than crowdsourced, and are hence more accurate. If money changers do not regularly update their rates, our system then allows an algorithm to kick in to display an indicative rate that takes into account historical rate setting as well as mid-market rates, to make sure prices quoted reflect that of a current reality.
Our vision is really to digitize the thousands of brick-and-mortar currency exchange businesses and connect them to a growing online community, which would help them to get ready for a digital world that might look very different from their current reality with rapidly evolving innovations like digital currencies and new compliance requirements.
TFAGeeks: When one searches on the startups focusing on FX – there are more than a handful in that space, do you think that we are witnessing a bubble in the Fintech industry? What are your thoughts on that?
Chris: In general, investment in fintech has surged over the last few years and as a result, many startups have sprouted with a focus on a wide range of technologies relating to cryptocurrencies, robot advisors, insurtech, regtech, FX etc. It’s a hype cycle which happens all the time, unsuccessful ones will be weeded out naturally over time through the funding funnel. This could take a number of forms such as the cessation of operations, the business pivoting, getting acquired, getting funded at a lower valuation, or continued existence as a small company. Successful companies on the other hand might continue to expand as stand-alone companies, or more commonly, come to exist in another form by merging with or collaborating with other incumbents in the market. In the end, what will last in this space, will be fintechs with real innovation, be it in business or technology.
TFAGeeks: We know that Get4x and Biz4x are getting good response and penetration in the many markets that you are in, how did you manage to convince the traditional moneychanger businesses to buy into technology? What were the main challenges that you faced in the initial phase?
Chris: A key factor in our success has been the timeliness of our launch, as well as having the right product-market fit. We launched Biz4x in the year when the regulatory authorities in Singapore were beginning to take a tougher stance on compliance issues, and starting to urge money changers to adopt commercial software so they could do proper risk assessment and KYC – within a year, 40% of the Singapore money changers came on board our Biz4x platform, and we are now at 60% penetration in this market. Across the region, we are seeing this continuing trend where authorities are starting to pay more attention to anti-money laundering and countering the financing of terrorism measures, and putting pressure on the money changers to conduct proper due diligence. Biz4x makes it convenient and easy for them to do just that.
As with all new businesses, building trust is a main challenge, as well as displacing legacy on-premise systems. We’ve overcome that through a lot of market education and thought leadership. Our sales team spends a lot of time with the money changers gathering their feedback, and we often act very quickly to improve our SaaS products based on their needs. We work in short sprints, so we are constantly innovating and this helps us to stay timely and relevant since we are able to provide money changers with the features they request for.
TFAGeeks: How about those who have yet to come on board, or are still hesitant and skeptical about technology and your products, what do you think will be the compelling reasons for them to move forward and adopt 4xLabs or digital technology?
Chris: As we continue to build our reputation and grow awareness of our product globally, our customers are beginning to recommend money changers in their network to us. That definitely helps in terms of building credibility. Regulatory pressure will push money changers to look for solutions that can help them in their due diligence and regulatory reporting – we are in fact seeing a lot of interest and adoption of our solution in the less developed and networked countries. Ultimately, our solutions are built in consultation with the global money services business community and helps money changers streamline their daily operations, by logging into a single console to manage all aspects of their businesses. It allows money changers to leverage the latest in technology, and provides them with all the services they need to run a modern currency exchange business through an easy-to-use system. What this translates to in the real world is the creation of a solution that balances immediate needs by making them future proof, so that money services businesses can continue to grow their businesses with the Biz4x platform be it now, or in the future, where the technological and regulatory landscape might have changed drastically.
TFAGeeks: You hold a Ph.D. in Computer Science from KU Leuven, have an EMBA and MBA from Columbia Business School, what made you decide to join a Fintech startup?
Chris: I love to build stuff and after a few years as ‘intrapreneur’ in large financial services organizations, I wanted to start something for myself. There are many inefficiencies in the financial services world that large organizations cannot address themselves because of various reasons such as inertia, mindset or scale, that a smaller start-up with more flexibility and a laser-like focus can solve. At the same time, the start-up ecosystem in Asia has improved a lot in a short span of time with more funding, talent available for hire, and government support, so it was really a now or never moment for me.
TFAGeeks: Do you have any advice for aspirants who wish to join a startup? What are the qualities apart from the technical hard skills, that he/she should possess?
Chris: Having the right problem-solving attitude is important as everyone is pretty hands-on in a start-up due to limited resources. A fair amount of creativity and improvisation is required as well and the smaller team size means greater collaboration across departments, so a startup aspirant needs to be open-minded about taking on new tasks and responsibilities across various disciplines. Multi-tasking is an important skill, as is flexibility and adaptability, as things can change quickly for a start-up such as when a business pivot is required. For that reason, time management skills are important, as you may be inundated by various tasks, so knowing how to prioritise is key. Doing well in a start-up requires the ability to network and build relationships, as well as effectively communicate and present your vision. There are lots of ups and downs when working in a start-up, so one needs to be extremely resilient.
TFAGeeks: We know that you can code pretty well. So which is your preference, coding or managing the business?
Chris: In general, my focus at 4xLabs is more on technical guidance, I don’t do much coding myself these days, but I still code as a hobby, mostly to stay on top of the latest technology. In the end, programming is just a means to an end, my interest lies in using technology to solve real-world problems, which is exactly what we hope to achieve at 4xLabs.