Ned Phillips, CEO and founder of Bambu, a B2B robo-advisory technology provider, discusses the growth trend in automated wealth management, how the company differentiates its technology as well as its recent business growth
Bambu is a business-to-business (B2B) fintech that offers digital wealth solution to financial institutions and consumer businesses. Ned Phillips, its CEO and founder, has been active in fintech in Asia since 1999 with two decades of experience in digital investments and technology, and was previously the managing director in Asia for E*Trade, an early online trading platform.
Phillips started Bambu in 2016 when he saw an opportunity of rampant technology gap among institutions in providing automated and digital wealth services to their customers. Traditionally, wealth management entailed challenges of being manual, high priced and lacking digital interaction. The industry was transformed rapidly with several niche players like Wealthfront, Betterment, Scalable and others leading the disruption with automated investment offers using algorithms. This forced financial institutions to rethink their digital wealth management proposition. Targeting this market opportunity, Bambu offers building blocks to institutions to design and build their own robo-advisory applications.
Bambu launched Singapore’s first robo-advisor and has now expanded across USA, Europe, Middle East and Asia serving 20 financial institutions, including Standard Chartered and HSBC. The company raised $15 million funding, including $10 million in 2020, with Franklin Templeton and PEAK6 as its key investors. With accelerated focus on digitisation during the COVID-19 pandemic, Phillips expects the company to double its revenue in 2020 and break even in 2021.
Full transcript of the interview:
Financial institutions struggle to keep up with the disruptors in wealth management
Neeti Aggarwal (NA): What is the growth trend that you are seeing in robo-advisory?
Ned Phillips (NP): If there are 10 steps to having everybody use digital wealth, then we feel the market as a whole is at step one, maybe step two at the most.
We design and build savings and investment applications. Being B2B, our customers are asset managers, banks and insurance companies who are offering investment to their customers. The problem they have is that wealth is manual, high priced and more person to person. It is financial advisor-based. But increasingly, from first-time investors to high net worth, they want to have a digital interaction, whether for their business-to-consumer (B2C) app or for high net worth for their advisor type digital tools.
When we started at Bambu in 2016, we were pitching digital wealth, where everyone said it was coming later. In 2017 and 2018, we felt that the market needed to be digital. In 2019, we saw an increase. In the unfortunate world that we are in today, with COVID and where digital is front and centre, we have seen a tripling of the inquiries coming to us.
Today, we have built for over 20 financial institutions, some of the largest include Standard Chartered, HSBC and Franklin Templeton as an investor. What we are seeing today is a clear movement of assets to digital, but it is not a zero-sum game. It doesn't mean there'll be no humans left. It means that digital will be an increasingly important part of wealth.
NA: What are the biggest challenges you are seeing in the acceptance of robo-advisory?
NP: Robo-advisory, unfortunately, is a misnomer. It creates this impression of an algorithm or a robot that can beat human and the market. But that's not the reality. Almost all robo-advisors have humans behind them, doing classical investment, more equities for risk and more bonds for less risk. They have displayed that information in a digital format, with a much better customer journey, more data points being taken and more intuitive.
The great challenge is to have both the customers and financial institutions understand that robo-advisory isn't this black box scary thing. It is the digitisation of how you interact with your savings and investment. That is one of the biggest challenges. In the last six months, these challenges have disappeared. We have customers in the US, Europe, Middle East, Asia and across the globe now. The movement to digital wealth is increasing at a very rapid pace.
There are plenty of challenges, but this is not a black box algorithm. This is more about how we ensure our customers have access to wealth, and digital is the best way to access savings and investment.
NA: What is your unique value proposition and what differentiates you from other players in the market?
NP: One of the main differentials is that we are a technology company first and foremost. The problem we are trying to solve is: “Can we create a digital journey for your customer or advisor?” If you have a financial advisor, that means you can onboard customers, provide better service and get customers invested cheaper, simpler and faster. A few of our competitors are focused on trying to find a new portfolio, be that thematic or how to beat the market.
We have a portfolio tool that can do modern portfolio theory, matching the right assets in the right risk buckets to the right customers.
The biggest problem statement today is that financial institutions truly struggle to keep up with disruptors. What do I mean by disruptors? In America, Betterment and Wealthfront, the original robo advisors. In the UK, Nutmeg. In Europe, Scalable. And, in Singapore, StashAway. When you look at those, they're not product pushing platforms. They are platforms whose single goal is to enable the customers to achieve their financial goals. But when the banks look at that, they are not set up that way. They are set up to sell products.
When they look at companies like us, they ask, “Can you help us solve the technology problems by building the right application to ensure that our customers could buy the right product from us and achieve their financial goals?” We have been focused on solving that technology problem, first and foremost, together with the investment solution.
We find that tier one companies want custom build. They have big budgets, large teams and large number of customers, so they are specific on what they want to build. We then design and build specific savings and investment applications, given the target, whether it's mass retail, mass affluent, private bank, location or products.
In the US, we have our product, Bambu Go, which is our ready-to-go solution. This is the problem statement we found: tier II and tier III smaller financial institutions have three big problems in digital wealth. They have no budget, no tech team and no time. That's what we heard again and again.
What we built was Bambu Go, where it's pay as you go, no upfront. We can deploy in weeks, not months or years, and we will build all the technology, deploy and host. Since we launched Bambu Go in America, we have onboarded a number of clients.
When it comes to the smaller financial institutions, you have to tackle the real problem. Their customers are saying, “Please let us interact digitally with you and not just on a website. We need to buy, sell and plan our goals.” So, we are offering a ready-to-go solution. Currently, it’s just in the US, but we are starting to bring it internationally. The tier ones want it fully customised, so we use our planning, portfolio, integration and risk tools to build them a more complete solution.
NA: What is your main target market?
NP: Too many startups spend a lot of their time trying to work out their target market. We go to the market and see what fits right. Currently, 19 of our companies are financial institutions. We do have one customer today, Kevin O'Leary from Shark Tank. We designed and built a fintech savings and investment application for him.
We have pitched all of the different super apps. It is no secret that super apps, particularly in Asia, Alibaba, Tencent, Grab, Gojek and PolicyBazaar are all part of wealth now. They offer savings and investment. We're targeting those with our application programming interfaces (APIs), very much hoping to win one.
We can see that super apps will fundamentally change wealth. That's the reason that institutions also come to companies like us, because we're trying to say, “Don't just digitise your current product selling platform. You got to think about what does digital wealth mean, who are your competitors and how are they thinking about that customer. Let us and our APIs help you with goal-based planning.” Our target market includes fintechs, super apps and disruptors. We already got one customer and hoping to win more.
Bambu uses AI for goal-based planning and has over 200 APIs for integration
NA: How have you refined your technology over the last few years?
NP: It took us four years to work it out. Building robo-advisory is hard. It gets really difficult. When we started the company, we thought we could put up 20 APIs. Pretty simple – invest in this, connect to this and send your money here. Today, we have over 200 APIs. Because we have interacted with a lot of the biggest financial institutions, we have learned that there is a huge number of different APIs. The obvious ones are portfolio management and integration to payment platforms. What we started to realise was that you need financial planning APIs that do everything from goal-based planning and financial health check to see if you are on target for your goal. We have a tool called People Like Me.
When we first got robo-advisory, the question was, “How much do you need to save for retirement?”
We use a lot of artificial intelligence (AI) to say, “You are 30, you live in this area, you have one kid and people like you are saving this much for retirement. Let us get you started.” That is what we found when building intuitive saving platforms, you have to think.
What’s different is being multi goal. Nobody has one financial goal, you want to buy a house and retire, but different products have different risks. If you do that and take one portfolio, you have to split the order into different buckets. Then we had to build a whole range of technology called order splitter.
What changes us is the modern technology. Our team is very young. We run an API infrastructure on microservices, up at Amazon Web Services (AWS), which we use as a partner. What we have built today is not yet complete, but I'm very confident today that if we put our individual components to design and build robo-advisory, from AI learning, financial planning, automated modern portfolio theory and efficient frontier, we can design and build portfolios in real time.
All the connections to payments, know your customer (KYC) and transaction custodian, it used to take us over a year for a customer who wanted to design, build and deploy a robo. Today, we can do it in weeks. Hopefully, early 2021, we'll be able to design, build and deploy a robo-advisor for a financial institution in real time. And that’s what differentiates us. We have tech people solving tech problems in an investment world.
The company has raised $15 million in funding and hopes to break even in 2021
NA: Tell us about your business growth and the key performance indicators (KPIs) that you are tracking.
NP: As a technology company, we make money by selling software. We help a number of users. It is a rather cliché world in startups. What is our ‘North Star’? What is our KPI that we are heading towards? It is the number of end users. We are designing savings and investment platforms for banks, asset managers and insurance companies, who then get end users to invest.
We started in 2016. We had one client then. Today, we have 20 financial institutions. In 2016, we had hundreds of users. Today, we have tens of thousands of users.
In 2016, we had a hundred thousand of revenue. Now, we have millions of dollars of revenue. We have clients in America, Europe, Middle East and Asia. We also have staff in the US, Europe, Africa and Asia. Our technology – the amount of API calls and users – is growing year on year.
What we've found is that our number one metric that we judge, such as users, is continually increasing. Something else we're passionate about is that we're not just solving an investment problem for one niche set of the market, like retail investors in Thailand. We have also built for high net worth in Hong Kong and mass retail in the US, we are working with a customer in the UAE for mass affluent and we built Singapore's first robo. Our metrics is increased revenue, users and staff.
We raised our first funding round in 2016, with $400,000. Now, we have raised $15 million. We got Franklin Templeton on board, which for a company in the investment world was a huge achievement. Our end goal is to have millions of end users and to be the global leader in what is now called wealth as a service.
NA: What is your current revenue and how is it growing year on year?
NP: We will have low millions of revenue this year. Our goal would be, either in 2021 or 2022 like for all software companies, to reach the magical figure of $10 million of recurring revenue in the next one to two years. We will definitely see growth this year. We hope to be able to double this year again, at least.
NA: How close are you to achieving financial sustainability?
NP: We believe we will be able to break even cash flow at some point in 2021, probably in the third quarter (Q3) or fourth quarter (Q4). We are in a lucky position. We raised $10 million in funding in July 2019. It is a difficult time for a lot of people right now, but our business has been increasing. We have a good cash flow and good revenue.
NA: Bambu received $10 million funding last year. How are you utilising these funds and what is your future plan?
NP: We are a people business. When we raise money, it is for the people. We obviously get revenue from clients, but we are still a four-year-old company. Robo-advisory is very new. We have to invest a lot in building new feature sets.
We truly want to be global, we are, and we have clients all over the world. Bambu Go that is in America today will be launched globally, so that would be a “ready-to-go robo-advisory” for any financial institution, anywhere in the world. This takes technology and people to achieve.
We are also launching a multi-tenant version of what we do, which means a much quicker deployment. We are being careful with cash now because it's a changed environment, but we feel good with our cash position, we are investing in people to build new products and we are launching new products globally. Will we raise new money? I have learned as a startup, “You never say never”.