Frans Ekman's blog

Tech, business & crazy ideas


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It’s quite a while since I wrote a blog post. Life has been quite hectic and that will not change any time soon, so I might just as well give a quick update on what I have been doing lately.

At the time I wrote my last post, about one and a half years ago, I was still at Kiosked and as a side project looking into a few FinTech ideas. There were two ideas I considered very seriously and almost ended up founding a company for either one of them.

The first one I considered was an investment assistant app. Most people’s life savings are going to waste because of mutual fund fees and we wanted to help them. For those unaware of this fact, let me give quick explanation. I could easily write 20 pages about this topic, but I will summarize the key points:

  • The stock market is at least somewhat efficient (if not even fully efficient), so by randomly picking stocks you are likely going to do as well as most fund manager on average.
  • Very few funds can beat the market enough to justify their fees and you cannot know in advance which fund it will be, so throwing the dice and investing in random stocks is actually a much better alternative (or to invest in the index through ETFs for example).
  • The typical 1-2% fees don’t sound high, but the total loss over a 10-20 year period can be surprisingly high due to our world’s eighth wonder, which is compound interest. After 20 years, you may easily have 30% less wealth.

So we wanted to build a tool which serves as your investment assistant so anybody can do this themselves quickly at a reasonable fixed fee. The tool was going to help users choose a strategy and pick stocks fitting the criteria as well as help reduce risk. I won’t go into too much detail if we one day end up building this product ;)

Although most people we interviewed seemed to get the idea, it seemed as if it would be hard to sell to the masses through an online channel. Selling financial products is so much built on trust and a face to face meeting is needed to sell to the mainstream market. However, when meeting customers face to face, one would almost have to sell a product with a high fee just to break even.

Regulation in Finland is very strict compared to for example Sweden, which means that piloting a product like this would be an extremely expensive operation. Moreover, there were no easily accessible APIs to brokers in Finland (this is typical in FinTech anyway), so it is a long road ahead to negotiate API access (and possibly even development) with brokers or alternatively become a broker ourselves.

Piloting abroad was an option but not an easy one with our funding situation. The market is very small here in Finland. We looked at other companies who were doing something in this field or had been doing previously. We even met with a few of them to learn a bit more. Unfortunately it turns out that every one of these companies were extremely unprofitable or already bankrupt years ago. The only exception is brokers and companies selling mutual funds and various investment instruments with very high fees (exactly what we did not want to become).

Perhaps the last nail to the coffin for this idea was that my partner decided to drop out. This venture was not something I could pursue myself alone and the the initial funding was obviously lost when there was no team. I looked a bit for co-founders or ways this could be piloted with a reasonable investment, but then another idea seemed more lucrative.

Just like we lacked proper broker APIs and that was a problem for us, it seemed to be a problem for almost any FinTech company. Plenty of FinTech companies out there would like to access bank account data for various purposes, for example personal finance analysis, lender credit score evaluation, etc.

We all knew that the PSD-2 (EU directive) was going to force banks to open their APIs by January 2018 (this date has been pushed forward and is September 2019 at the time of writing this). Many FinTech companies were doing screen scraping to access this data and some lucky ones had special deals with the banks. We also knew that the date for PSD-2 would possibly be postponed, some banks would apply for extension and even after that there would be banks choosing to accept the fines just to avoid opening up their APIs. Finally, even if the new directive would help a lot, there would be fragmentation; many banks implementing their APIs their own way. No small FinTech startup would like to integrate with 5000 different banks and different APIs in EU.

I guess most of you can expect what we wanted to build. We wanted to build a so called “API Hub”, which is one standardized endpoint to all banks. We wanted to launch this pre-PSD-2 times, solve the bank integrations with screen scraping and try to get a big enough market share before PSD-2 comes.

Always with good ideas I do customer development, contact a lot of companies who I think could be potential customers and try to learn as much as possible. Many seemed to be interested in paying a decent price for this and there seemed to really be a market for this.

The biggest drawbacks were that there was competition, some companies had a head start already and had raised quite big rounds. Competition validates the market, however, in this type of business it is a bit tricky to differentiate from the competition. There were some options though but I suspect competition will push prices down and additionally FinTech companies will start implementing some integrations with common banks themselves to save on costs.

It was a tough decision to make. I wanted to do this so badly but I did not have a co-founder for this yet. I had two advisors and some developers who would be potentially interested in helping me out at a reasonable price.

As always, one adventure leads to another. I ended up dumping this idea for an even better opportunity. One of the companies I had met for customer development was Arkkeo. The founder, Tuomas Kohila, said he has been looking for a technical co-founder for his company. Arkkeo had been building a document bank for receipts, tickets and various documents one receives from companies. He had a new big vision and plenty of interesting ideas how we could take it forward. After some meetings, emails and phone calls, I ended up joining him instead.

So far it has been really exciting. We pivoted, launched a small pilot app in NYC to validate some key assumptions and have now landed back in the FinTech field. I will write more about this soon. In short, we are on a mission to create the standard how shops and restaurants can distribute appreciation and gratitude!

Also from a tech point of view this has been super fun. We modernized the tech stack and are using React Native for the app and React for the merchant dashboard. We also built validation as a key cornerstone in our agile development process, so that everything we build will result in learning and validation of hypotheses. I will write another post explaining this process, which I think is the best way for a startup to really make sure all development produces “validated learning”. We are going as “Lean Startup” as one possibly can in the field of FinTech.