As disruptive technology looks set to shake-up the banking industry, Nedbank has created a venture capital fund within the bank to leverage off such technology and better serve clients.
The fund falls under the banking group’s disruption channel, which sits alongside its managed evolution and digital fast lane channels. Through the three channels, the bank aims to advance its tech ecosystem, implement experimentation and commercialisation capabilities and plug into global venture capital deal flow, explained Stuart van der Veen, the disruption lead at Nedbank Corporate and Investment Banking.
Currently, the bank works to identify the top 100 disruptors globally – across tech hubs in San Francisco, London, Tel Aviv, Lagos, Nairobi, Cape Town and Johannesburg – within a six-month period.
Its tech ecosystem forum – comprising representations from each of the bank’s units – then identify 12 collaborative opportunities, of which six are taken through to experimentation and one to commercialisation.
On the venture capital side, the bank sees equity opportunities in disruptive companies and has allocated R100 million on its balance sheet for partnerships with companies in which it sees significant opportunity, he said. It tables 20 collaborative opportunities over a six-month period, of which six are presented to its pre-investment committee and three to its investment committee.
Speaking at Nedbank’s Banking on Disruption breakfast with Moneyweb, Van der Veen said one such company which ticked all the bank’s boxes was Cape Town-based Aerobotics, which specialises in data collection through automatic industrial drones.
The bank intends to have the drones fly around 100 metres above tree crops to gauge the health of individual trees through the use of water content and chlorophyll level indicators, among others. Such data forms part of the key precision tools for its farming clients.
“For us, tree height, canopy size and volume – another metric that they determine – gives us great yield estimates. Yield times (x) forward price gives us future cash flows and we’ve got an underlying biological asset valuation. We’re staring down the barrel of automated agri-finance at an individual farmer level and as this progresses at an aggregate level for corporates, which are large clients of the bank.”
He added that the information is important for credit and risk modelling, which would improve the efficiency and operation of the bank.
Globally, several banks are in the process of overhauling legacy systems and adopting new technology so as to improve operational efficiency.
According to Van der Veen, banking is ripe for disruption as around $17 billion was deployed across fintech in 2017, as regulators are opening up to and starting to embrace new technology and as younger generations are demanding more than just traditional banking.
Brought to you by Nedbank CIB.