Start Path – Mastercard’s global start up program – has bolstered 230 fintechs around the world and helped them raise $2 billion in capital. The program boasts an Australian alumni of Airwallex, Money Tree and identitii, and has recently partnered with its first Australian fintech mx51. We chatted with Kallan Hogan, Head of Fintech Australasia at Mastercard, about Start Path, what makes it unique and the exciting plans it has with mx51.
What is Start Path?
The Start Path program was developed in 2013. It’s more targeted at late stage start ups in the tech space. We get around 1500 applications per annum and we choose around 30 to 40 fintechs globally. We look for quality fintechs who are in the same business as us, who are enhancing the eco system of connected commerce and all the services that wrap around that.
In those short years we’ve have 230 fintechs from around the world come through the program, and we’ve helped them raise over $2 billion in capital since coming into the program.
There’s some real household names in fintech, such as Revolut which has a market capitalisation of over $5.5 billion now. There’s obviously Mobeewave, which made the news last month as it was acquired by Apple. And domestically there’s Airwallex, which now has unicorn status, with a valuation over a billion. So mx51 is in really good company joining this program.
What makes Start Path different from other start up programs?
It was actually invented by entrepreneurs, for entrepreneurs. Our former chief innovation officer – he was a founder of a great fintech start up that Mastercard actually acquired back in 2009 and which our virtual card technology comes from – said to me that when he was a founder he didn’t have time and he didn’t have lawyers to go through a 200 page contract and was also quite suspicious of accelerator programs where equity was locked in as part of coming in under the program and there were controls as to how you could operate your company.
So Start Path was born from that genesis.
Its target demographic is not typically early stage start ups. This is a program that is more for start ups that have a product, who have technology. They’ve probably got series A or seed funding and have got a few customers, and they’re really at the stage where they want to scale.
And so our program, Start Path, is designed for that. They get access to all of Mastercard’s reach and network and client base as well as executives. When you come onto the program, you get an executive sponsor on Mastercard that helps open doors.
Start Path’s strategy is ‘scout, select, start, sponsor and scale’. Can you walk us through this and the criteria you use at each stage?
When you’ve got 1500 applicants globally, there has to be a criteria as to the 30 or 40 that make it through.
To step back first, this is run by Mastercard Labs and we’re lucky here in Australia to have a Mastercard Global Tech Hub. A lot of people probably don’t know this, but in Australia we have one of five global tech hubs right here in Sydney where we have 800 people on the ground who are developing code for payment processing, cyber security and other services. We also have our labs as a service based here that can do prototyping and usability testing and also is involved in software programming.
If my labs guys were here, they would say our criteria is desirability, feasibility, viability – but I actually look at four limbs.
The limbs that it needs to pass:
- Does it meet a customer need? Have they designed something that is meeting customer need in a new way, in a better way, in a more efficient way? Is it going after an under-served segment, an unmet segment?
- The second limb is around the technology. It’s not called fintech because it’s paper based. The tech has to be leading edge and it has to be scalable. This is a global program and we’re looking at taking tech outside Australia, into the US, Europe, etc. And so if your tech is cloud based and bank grade, that’s a big plus.
- The third one, once you’ve met the customer need, is how are you going to sell it? What’s the distribution? A great product with bad distribution is never going to make it. We want to see that the founders have thought about how they’re going to sell this product or service.
- The last one is do they have a pathway to profitability.
In the midst of the pandemic in May 2020, Start Path added 12 new start ups. How has the pandemic affected innovation and how is Start Path working around that?
Innovation, in some ways, has accelerated. If we think back to April when we were in lockdown in Sydney, we saw some major retailers growing their ecommerce by 250-300 per cent and that has stuck.
The pandemic has changed consumer behaviour. I don’t think there’ll be a snap back of people going in to stores to buy goods for everything as they used to do. I think you’ll see ecommerce continue to grow through the pandemic.
mx 51 is really important because if you’re a retailer and you’ve got a point of sale, brick and mortar store and you’re expanding into ecommerce, which most retailers are thinking about, you want to have one provider that can do multiple stores and ecommerce and can link into your transactional banking, lending and cashflow management. That’s really important.
But you don’t want to have multiple relationships with banking, lending and online gateways. If you can get the same value in an integrated solution, that is very attractive.
What distinguishes mx51 from other payments-as-a-service platforms?
As part of Start Path, we had our global tech team benchmark it across ten different criteria. mx51 scored really high in all categories, and against its peers it really stood out in architecture. It’s cloud-based, it’s bank-grade. It’s technology that can scale outside of Australia.
It’s nice to see that mx 51 had a customer base as well. You’ve seen their customer base with Nike, Mercedes Benz, Carla Zampatti and Salvation Army, and so this is tech that is out there and actually working in the market place.
You’ve got fintech that really wants to disrupt and stand on their own two feet. And then you’ve got fintech that wants to partner with incumbents. mx 51 has a partnership model where it wants to partner with large incumbents, such as Westpac in this instance, to provide an integrated solution for retailers.
mx51 works with Westpac and retailers like Lune Bakery. How is mx51 useful for small businesses, which are already struggling during a pandemic, and that may not have the capacity to install new technologies at this moment?
This is an omnichannel solution. So if you’re a retailer and you want to get online, this is one solution that is very easy to switch on. You can have the one relationship for all of your banking.
It makes businesses’ lives easier moving into an omnichannel environment.
RBA data showed that $10.6 bn of cash was withdrawn from Australian ATMs in December 2019. It fell to $6.5 bn in April 2020 but now has bounced back to $9.9 bn in July 2020. Why are you confident that mx51 and similar fintech companies are so promising at the moment?
I think it comes back to being an omnichannel solution. It’s hard to pay cash online. We’re seeing ecommerce increasing and there’s always a mix of how people want to pay.
We’re seeing cash come out of the system and a move to having an omnichannel solution. If you’ve got multiple stores and you’re growing online, then this is a great solution. You’ve got a technology provider and a service provider that’s high quality.
It’s important to look at cash Year on Year, not Month on Month. There is seasonality around tax time.
What does Australian fintech look like beyond the pandemic?
Mastercard is really investing throughout COVID-19 on innovation. We’re not slowing down.
If you look back at market displacement, such as through the GFC, there’s always new opportunities to invest in new solutions, and that’s exactly what we’re doing.
The global tech hub here is great for the Australian fintech scene. To have that resource, which is only one in five in the world, and with that amount of resource power and technology here locally, it’s great for the fintech scene.
Kallan Hogan, Head of Fintech Australasia, Mastercard