Vinay Palathinkal: SE Asia Fintech, Last Mover Advantage & Compounding Relationships - E159

Vinay Palathinkal is Regional Head, Wise Platform at Wise. Formerly known as TransferWise, Wise is a leader in cross border money movement, processing nearly $100 billion every year and employing 2300 people across 14 global offices. Wise Platform is the third and newest pillar of Wise’s products, allowing platforms like Google Pay and banks like Monzo to integrate and benefit from Wise’s powerful global payments infrastructure.

Previously, Vinay was Director, USA, at Arcus, a Y Combinator and a16z backed payments fintech based in NYC, focused on lending and merchant payment processing across Latin America and USA. Vinay helped Arcus scale its processing volume to $1B annually, a 1000x year on year increase.

Vinay runs a SEA-focused angel investment syndicate, Fintech Angel Operators. He likes writing about fintech in SEA in his weekly newsletter called Island Fintech Weekly, and he writes long-form ‘think’ pieces on his personal website. Vinay studied at NUS and NYU, plays in a band on the weekends and is a cycling and fitness enthusiast.

Jeremy Au: (00:30)
Hi, Vinay, so excited to have you on the show.
 

Vinay Palanthinkal: (00:33)
Excited to be here, Jeremy.
 

Jeremy Au: (00:34)
We’ve known each other since before the pandemic. It’s been nice to see you make great leadership roles and be a content creator in fintech in the Southeast Asia space. It’s interesting to have you on stage.
 

Vinay Palanthinkal: (00:52)
Yeah, it’s been fun creating content, just like you. Think you inspired me, a little bit.
 

Jeremy Au: (00:56)
Ah. That’s so sweet of you. Vinay, for those who don’t know you yet, could you introduce yourself?
 

Vinay Palanthinkal: (01:02)
Sure. I’m currently Regional Head at Wise, heading up the infrastructure division. If you haven’t heard of Wise, it’s a leader in cross-border money movement. We process nearly 100 million every year and employ 2,200 people across 14 global offices. Wise’s platform that I work on daily is the newest of Wise’s products allowing Google Pay and banks to integrate and benefit from Wise’s powerful global payments infrastructure. Previously, I was director at a series B fintech based in New York, focusing on Latin America and the US. Fairly similar in terms of product. I was working on B2B software service, doing payments and debt consolidation, bill payments and merchant payments. What I think was cool was I helped to scale volume there which B2B fintechs tend to look at. I managed to scale the processing volume to 1 billion annually which was a thousand percent increase year on year. I’m excited to see similar metrics come up in Southeast Asia which is why I’m in this part of the world.
 

Jeremy Au: (02:41)
Amazing. How did the technology bug first bite you?
 

Vinay Palanthinkal: (02:47)
It’s a story of many accidents. I’ve always been interested in the confluence of traditional industries as well as tech. When I finished national service many moons ago, I was looking for a part time job to spend some time before joining university. An alumni network basically said that they were looking for someone to help out Singapore Law Society which was Singapore’s network for practicing lawyers. They had a new product for continuing professional education. They wanted me to come down and help market their tech product to lawyers. It was just a road show, I think I did a good job. Someone noticed me and asked me to join full time at Opus 2 which is a UK-based legal technology company doing paperless trials which is a new and fascinating concept here, but has been around for a couple of years by that point in the UK. Paperless trials take the manual processes involved in law and put it on the cloud, so, you can go into a court room without a piece of paper at all. The moment a piece of evidence is shared, the tribunal sees it, the solicitor sees it, and even the audience can see it. At that point of my life, I was an electronic presentation of evidence officer in court. I would basically help out the judges in terms of presenting evidence in court. What that showed me was that these grey haired folks are embracing tech and what made it interesting is that even software is eating the world of law. I fell in love with that approach at that point in time and have always been intrigued in how I can contribute and how I can further this interest and ended up in fintech by that curiosity. Another story to dive into, I landed in New York with a program called NUS Overseas Colleges. I was initially with a company that was pretty interesting as well, but what I really wanted do in New York was to be exposed and have challenges which the initial company did not provide. I quit that company which was a moment of bravery for me because I had a month to secure a new role and found 20 companies on the YC list for New York. I applied to all of them saying I’d love to be a part of their company. One of them reached back and that was Arcus. That’s how I started my journey into fintech and did whatever I needed to in order to learn about fintech.
 

Jeremy Au: (07:05)
Amazing. What is it about fintech that made you choose to deepen your focus on?
 

Vinay Palanthinkal: (07:14)
I think what I enjoy about fintech is that there’s so much nuance in everything. Payments seem straightforward, but when you zoom in a bit more, there’s a regulatory aspect to it, there’s the tech aspect to it, how do you get the right players to align and assign responsibilities. I found that rewarding especially when you get everything right. I also found it interesting how different things have worked across different industries. If you look at the US and compare that to LATAM, there’s so much variation. There’s a lot of learning, there’s a lot of room for optimisation and going back to a conversation I had with a friend in university was they studied biotech and I studied economics and I asked what keeps them interested in biotech? He said the fact that there’s always something new and the fact that it is at the periphery of what is known. While for economics, most things are already known, fintech isn’t quite as optimised yet, there’s a lot more we can do and we’re still understanding how all those pieces can work together and optimise the end user experience. That’s what’s kept me in and in the loop with fintech.
 

Jeremy Au: (09:17)
Fintech is interesting and also super hot right now. What do you think is driving that interest behind fintech?
 

Vinay Palanthinkal: (09:26)
If you look at Southeast Asia, the amount of fintech activity is just astounding. If look at Indonesia, it has a population of about 267 million, 92 million of those are unbanked, that’s like 34%. Look at Philippines, it’s about 107 million population, 51.2 million unbanked, close to 50%. There’s a lot of opportunity in terms of digital inclusion which also means financial inclusion. These countries also have the added advantage in that the initial mistakes and mis-steps have been done already by other parts of the world, these countries can now scale up and adopt best practices. Fintech is also one of those best practices that allows financial inclusion. There are also a few clear trends that drives interest in the region. First is open finance – the rising middle class wants access to financial products which has been pushing that along. Secondly, B2B has been enormously growing across Southeast Asia in terms of fintech. We’re seeing more B2B payments and cross border transactions, merchant financing and tonnes of other financial services. Finally, we’re seeing consumer purchasing and savings region wide. There’s basically a big acceleration in terms of consumer facing financial services which can be better served by the next generation of consumer facing financial products.
 

Jeremy Au: (12:03)
Makes a lot of sense. What are some of the myths or misconceptions of fintech?
 

Vinay Palanthinkal: (12:08)
The most common one would be that fintech involves some really deep tech which…it doesn’t. There are three things, like I said, there’s tech, there’s regulatory, and there’s operations. Those are the three main pillars around it. When you really think about it, the tech really needs to just address the compliance concerns of regulators and industry partners in a smart way. It does not require a lot of the buzz words like AI, ML, and things like that. In terms of what needs to be done, you need to work with the right experts in the space; how do you navigate through the compliance landscape? If you want to have an e-money license in Malaysia, how are you able to do that with the right bank, fulfil the KYC requirements for the user, on-board the right types of merchants to do that. It’s a lot of that which needs to be optimised for rather than how do you hire the best tech/engineers out there. It’s about understanding the nuances in the space and you can then go out and multiply.
 

Jeremy Au: (13:30)
Do you think fintech is overhyped or do you think there’s still room to grow?
 

Vinay Palanthinkal: (13:46)
I think there’s tonnes of room to grow. Recently, I started a fintech angel investing syndicate in Southeast Asia called Fintech Angel Operators. We’re the first fintech focused syndicate in Southeast Asia. What we’re trying to do is provide startups with unfair advantage because smart founders know that cherry picking the right investors will set them up with a competitive edge in the long run. Already, the level of investments we’re seeing in Q1, 2021, we have 22.8 billion dollars solely in fintech. Personally, I’m bullish on infrastructure just as a way to level the playing field and enable financial inclusion. My entire career is based around infrastructure and I believe APIs are a force multiplier for good. Say debt consolidation via API like I did at Arcus, we’re able to reduce burden for people. What I’m really keen on is how fintech can help democratize financial services with infrastructure and embedding it into services that customers already use, is the best way to get there.
 

Jeremy Au: (16:05)
What about the conservative argument that more fintech is bad news since we’re giving people credit who aren’t wise enough to use it. What do you think about that?
 

Vinay Palanthinkal: (16:26)
I think it’s a natural hazard. If you give a child a knife at an early age, it’s not ideal. Should you be giving a child a knife? If they’re in the jungle and need to defend themselves, probably, yes. Otherwise, probably not. For certain things like buy now pay later, you have the knife, the knife is made possible due to the payment’s infrastructure, due to the tech being there. Whether it should be made available to certain people is a question we haven’t quite answered yet and the regulation is just catching up with it because fintech has moved so quickly. I think we need to have, one, education where people are aware of what they’re consuming like companies actually disclosing and telling people what they’re doing, and regulatory parties making it not possible for 16 year olds to get on-board.
 

Jeremy Au: (18:23)
You mentioned regulators. It feels like Southeast Asian governments are really biased towards having people save and against too much credit being lent out towards consumers. You also have the banks saying they’re already complying with all these laws and so want these fintech startups to be subject to the same level of regulatory scrutiny as they are. What are your thoughts about that?
 

Vinay Palanthinkal: (19:19)
I think yes. I think that if there’s some harm that can be done to others or to yourself, I think we should be taking that same approach. Now, when you on-board a fintech, you can on-board a lot more quickly which is more convenient. It’s different when you look at the US who says that there are laws and statues, but how you go about getting there, they don’t specify. In Europe, they have a minimum requirement and once you’ve executed that, you’re good to go. I think both approaches are valuable. The US approach allows companies to get out there and build more quickly whereas the EU has a longer laundry list of hoops to jump through. I think in Asia, we need to find a balance of those two approaches. How do we keep fraud risk low while allowing innovation and allowing things to grow organically? I think we have the last move advantage in that we see how things are being done now puts us at an advantage of how to do things.
 

Jeremy Au: (22:00)
You’ve been on both sides of it in the US and now back in Asia. What’s your point of view on last move advantage?
 

Vinay Palanthinkal: (22:16)
I think it’s a perspective where we can see what has been done, especially in fintech where we are orchestrating multiple things together. Say you’re working on a buy now pay later model, you have to work with a lender who is able to provide you with that wholesale line of credit, you then have to work with a merchant or someone who can provide that service, you also have to work with the consumer, the regulator, and ancillary providers if you want to provide a debit card, you’d have to have an issuer, you’d have to have a bank that’s underwriting that as well. All those pieces working together can give you a picture of how financial products are built. When we’re able to see all that and what the EU and US have done, we are better informed on what steps to take. Another advantage from a last mover perspective is that we are able to see what consumers want as well and localise it to their preference.
 

Jeremy Au: (24:36)
You’ve had some interesting trade offs between working in the US and in Asia. How’d that work out for you?
 

Vinay Palanthinkal: (24:44)
If you’re talking about leaving New York City and moving to Singapore, it was a big change from what I was experienced with in New York. I decided to move back permanently because I wasn’t sure how New York’s public health infrastructure would handle the pandemic. In terms of trade offs, what I’m missing in my life right now is the Katz Deli pastrami.
 

Jeremy Au: (26:43)
So, Vinay, one of the things I remember while we were hanging out in New York, we were discussing when the best time to return to Southeast Asia would be. We’ve done all that. How should someone, now, in our shoes from several years ago be thinking about that?
 

Vinay Palanthinkal: (27:09)
I’m going to ask you that same question in a minute, but I guess how I thought about it at the time was how am I feeling with my current job and have I reached a certain understanding about this particular area or this particular niche and am I looking for something beyond this. I was pretty happy with the way things were and felt that I needed additional challenge to grow. Here in Singapore, I saw an exciting opportunity to move back to rather than pattering along in New York and I think the more you come back, the more you think this place is actually pretty awesome. What about you? How did you think about this?
 

Jeremy Au: (29:16)
I think how I thought about it then versus now is very different. Back then was just “am I liking what I’m doing right now”…in the job versus what the potential future is going to be. Looking back on it now, I think I’d ask which country do you want to retire in. If you don’t love that country, you wouldn’t want to retire in that country and that places a clock on how much time you’re going to spend in that country. What that means is that you can’t build long term relationships with the people in that country. The best working relationships are, at the core of it, those built on infinite time.
 

Vinay Palanthinkal: (31:22)
That’s super true. I think the thing about New York is that there is a certain transience about the city. People go there at a certain stage of their life, they go do the thing they want to do and then they leave. For myself, I didn’t see myself being there forever…you know how that city is. It drives you crazy after a certain point of time. To your point of infinite time, I could only experience that here where it’s home to me and by virtue of the fact that I see myself staying around.
 

Jeremy Au: (32:12)
Yeah, because we now have so many years of history and we can trust each other and because we live in the same place, we’re bound to run into each other over and over again, that’s a transactional way of looking at it. The relational point of view is that I get to know you for the next 50/60 years, any time spent with each other is worthwhile.
 

Vinay Palanthinkal: (32:56)
Are you actually thinking of this from a game tree perspective? I read about spice merchants who would trade with locals in some land and they had two choices – they could trade the bad spices and they would never come back again or you could sell them good spices and they would come back again. If you go with option 1, you might be able to make money for one game, but for the second one, you could have repeated transactions and build on that trust.
 

Jeremy Au: (33:51)
Talking about spice trade just reminds me of Dune – the spice must flow. I think that fundamentally is true across all the different countries in Southeast Asia. So, Vinay, could you tell us about a time that you had been brave?
 

Vinay Palanthinkal: (34:27)
Absolutely. I think that one of the things that I’ve decided to do…that I really wanted to do for a long time is to create content. Being able to create content requires you to put yourself out there and also feel like you have something to contribute, which for the longest time, I felt like I didn’t really have the conviction to say that my voice necessarily is that unique in a space where I think there are a lot of voices. What I did recently is I started a weekly newsletter called Island Fintech Weekly and what it is, really, is kind of inspired by a lot of the Fintech newsletters in the US, but what this has been, Jeremy, has been homework for me. Moving back to Singapore, moving back to Southeast Asia, I needed to educate myself about the Fintech landscape here. Like I said, there’s the operational, there’s the regulation, and there’s a tech. All of those pieces, I just kind of wanted to get a better understanding of and what better way to do that then kind of follow the local news, follow the trends, follow the fundraisers, follow the changes in regulation. I started writing notes on this and on a weekly basis, and I realized that these notes could potentially be helpful to a broader audience. I decided to kind of publish that. I do basically two segments. I have a tropical theme to it, it’s called Island Fintech Weekly. I go into the initial part, which is like a dip. It’s called dips, where you go into a broad segment about what is the news like in this week. The second piece is called dives where you kind of go into a bit more depth in terms of what are some perspectives around Fintech. What are some perspectives around maybe changes in regulation or a new fund raise or a new kind of startup that's come up. I had to basically kind of get over the fact that people may not like it or people may not find it useful or valuable and just get to the perspective that this might help a few people or might be useful. I’ve been doing that for about four months now, and I can honestly say it’s been one of the best decisions I’ve made in terms of being able to say that I have a story and ark that I’ve created around what I feel are my views on Fintech and just being able to kind of put that down, pen to paper and then in terms of building a certain community and building a sort of network of people that read this and find it valuable and also kind of feedback to me what they think. That two way process has been really, really interesting. It’s also allowed me to have a lot more kind of visibility and exposure and it’s kind of led me to other opportunities. For example, starting in fintech, Angel operators has been a kind of byproduct of the fact that this has been around, it’s been read and it’s been shared. It’s been a great kind of journey, it took a little bit of me sitting down and saying is this any good? Should I be publishing this? But having done it, I think the first time I published it, I really didn’t want to. I was not sure of it. Then kind of putting it out there on my LinkedIn or my Instagram or wherever I could end up sharing it, was not something I felt naturally happy about initially, but kind of right now, I feel like it’s something that I’ve kind of almost imbibed as part of the process in terms of doing something that kind of requires you to put yourself out there. Now, whenever I kind of publish it and whenever I hear people say…for example, recently, I’ve been really happy to hear that one of my friends in Canada has been writing his own kind of Island Fintech Weekly for Canada. He works in fintech as well, and he’s been doing this for 10 weeks and he sent it over to me saying that he’s been inspired by Island Fintech Weekly and that is so wonderful to see.
 

Jeremy Au: (38:35)
Amazing. Thank you so much, Vinay, for sharing. I’ll love to paraphrase the three big themes that I heard from you. The first is definitely about how you chose and entered technology, but also how you focus on financial technology and the huge upside and opportunity you see. The second, of course, is the deeper dive and from a specialist perspective on the opportunities, but also the regulatory dynamics about what a fair playing field looks like, what is last mover advantage is and the different dynamics of it. And lastly, thank you so much for sharing about the different tradeoffs and how to think about what is it like to focus on Southeast Asia, return from the US. The comparison in not just the startups, but also the culture and conditions, and we talked about some of it. Some of the compounding advantages in terms of relationship, but also, I think some of the depth of relationships that are being built as well. As well as what you’ve been doing in terms of relearning the region in terms of fintech news and your amazing publication. For those who don’t know how to find you, where can they find you?
 

Vinay Palanthinkal: (39:38)
I have my newsletter – Island Fintech Weekly. I would love for you to read it and let me know what you think. You can find it on islandfintechweekly.substack.com and I have my personal website where I write longer form think pieces which is www.palathink.com
 

Jeremy Au: (40:06)
Awesome. Thank you so much, Vinay.
 

Vinay Palanthinkal: (40:07)
Thanks for having me, Jeremy.