Ali Niknam started coding at the age of eight, began investing in the stock market at 12 and launched his first company when he was just 16. By the age of 30, he had accumulated enough money never to work again. Instead, in the teeth of the financial crisis, as banks veered between calamity and chaos, he decided to launch his very own challenger bank. A decade – and €100 million of his own funds – later, his bank, bunq, is active in 30 markets, has more than €1 billion in deposits, and has just closed a funding round that values the business at €1.6 billion.

And yet, as Nicknam arrives for this week’s podcast with The Currency, he is self-deprecating, unpretentious, likeable. Wearing a black t-shirt and jeans, he looks more like the techie that he still claims to be rather than what he currently is – the CEO of a fast-growing, yet profitable, financial institution.  “Don’t call me a banker,” he smiles. “I am not a banker.”

In truth, as his explains over the course of our interview, his foray into banking was a reaction to what he believed to be an antiquated industry failing from collective uniformity – uniformity of thought, uniformity of people, uniformity of ideas.

Niknam had come to Ireland to meet the team of Capitalflow, the Irish alternative lender that it acquired last month. The deal was part of a larger transaction whereby Pollen Street Capital, the major shareholder in Capitalflow, took a 10 per cent stake in Bunq for €193 million. The acquisition valued Capitalflow, founded by Ronan Horgan in 2015, at €141 million.

For Niknam, the chance to acquire Capitalflow was a key driver in the wider Pollen Street transaction. With interest rates low and with a deposit base of more than €1 billion, Bunq was looking for shrewd options to deploy capital. The Irish lender, which has advanced €650 million to SMEs and business owners since it was established, fitted the bill.

“When you look at Capitalflow, you can see that it is a great business, run by fantastic people, but their growth could be accelerated if they would partner up with a bank,” Niknam told me.

“At the same time, it’s no secret that central banks are having a negative interest regime. So, for us, to be able to put those deposits at work was a win for us as well. So, we created a win-win situation with a company that shared the same values. And for us, that was a no brainer.

“Like with the investor, we always look at our partners, to make sure that we share the same values. And what unites I think Capitalflow with bunq is our laser focus on our users.”

Ali Niknam with Ronan Horgan of Capitalflow.

Capitalflow plans to triple its loan book size to €1 billion by 2024, something that will put it increasingly in competition with the mainstream Irish banks. This, according to Niknam, is a battle he is very much looking forward to.

“If I look back at what Bunq has done in the Dutch market, where we originally were founded and started, is that we have brought so much innovation and so much benefit to our users, both directly as well as indirectly – because of our presence, the big banks got a wakeup call,” he says, when I mention the duopoly of AIB and bank of Ireland.

“And many of the features, not all, but many of the features that we introduced five years ago, have now been copied by the big banks, much to the benefit of all. So going back to the ideology upon which bunq was founded, that is a great accomplishment. And now that we are turning profitable, we are here to stay and looking very much forward to all of the benefits that we can bring.”

Bunq already operates in Ireland, but Niknam says the Capitalflow acquisition will be a springboard for further growth, potentially in other areas of the banking market. “I do think the Irish market is still so big and their expertise is in the Irish market. It will be likely for Bunq to enter the Irish market using their expertise,” he says.

One issue stifling his broader ambitions plans – in Ireland and elsewhere – is regulation and what he perceives to be an inequality around European IBANs. “From a technology point of view, there is no reason not to be active here. One of the challenges as a bank is all the regulatory stuff you have to deal with,” he says.

It is a theme he returns to later when I ask whether challenger banks will eventually outflank mainstream banks like Bank of Ireland and AIB, many of whom are struggling with high legacy cost bases and obsolete technology platforms.

“I think if this market wasn’t so heavily regulated, or was regulated differently, so that the market could do its thing, the big banks wouldn’t exist anymore today,” he says.

“And I think we’ve seen this in other markets, in mobile phone markets, in internet access markets, where the normal flow of market dynamics empowering users to choose whatever they feel is best for them has led to a healthy environment, where the companies that are most in tune with the users wants and needs became successful. That is not the case with banking.

“And instead of rethinking the way we regulate banks – because obviously money is important, and it needs regulation, so I’m not opposed to regulation in any way – but instead of thinking about the way we should regulate banks, we keep adding more and more rules implicitly benefiting the incumbents.”

Why build a bank?

Born in Canada to Iranian parents, Niknam moved with his family to Holland at the age of seven. By 16, he had founded his first business, and at 21 had set up TransIP, an independent domain name, hosting and virtual private server provider. In 2019 Niknam merged this business with Belgium-based Combell, giving the combined business a valuation of $1 billion.

Even ten years ago, at the height of the last crisis, he had enough wealth to bootstrap Bunq and expand it into 30 markets. But the bigger question remains: Why would a technology entrepreneur with no experience of banking want to open a bank at all?

“I guess this goes back to my personal motives. And I’ve always been very much fond of creating new things. I love creating products that people love to use. And this had brought me to a point where I could weigh my options, I had the luxury of doing whatever I liked, for which I’m very grateful. And I realised that what I really like doing is creating those products that people love to use, and also help the world become a better place,” he says.

He looked at the financial crisis and saw too many people looking for someone to blame and not enough people looking to come up with a long-term solution. He looked at his fellow entrepreneurs, many of whom had to mothball or shutter their businesses due to lack of finance. And he looked deeply at a sector that had failed miserably to both anticipate and react to digital transformation.

Ali Niknam: “Sometimes people bring in capital too early.”

“When we go back to the true cause, in our opinion, of the financial crisis, it is that there was too much uniformity – uniformity in business models, uniformity in people working in the sector, uniformity in thought. I thought diversity was very important to get the sector in a healthy place, diversity in products, diversity in business models, diversity in people working there,” he says.

“With my own background of being a techie, we techies approach problems, often through a different angle. We look at things through the eyes of our users, and then we figure out what would make them happy. How can we make something that they really love to use? And I think that has always been a starting point for Bunq and I think that has brought us where we are today.

“If we look at it through our users’ eyes, which I like to do, we’re not trying to be another bank, we’re not trying to be a cheaper, faster RBS, ING. what we’re trying to do is we’re saying the banks are the banks, we will make your life easy. We focus on what people like to do on their day-to-day and, whatever it is you’d like to do, it often involves money. And then we tried to come up with tools that make your life easy and achieving your goals and your dreams, and whatever it is you want to do.”

Unlike other challenger banks such as Revolut and N26, Bunq charges. Does this take away Niknam’s competitive advantage? “I don’t see Revolut and N26 as my competitors, because I can see that they’re doing their best efforts as well. They’re trying to be different in their own way. But truth be told, we all know that 99.9 per cent of all people still bank with the old guys. So those are my competition,” he says.

Taking on finance to fuel expansion

The Pollen Street/Capitalflow deal marked the first occasion that Bunq had taken in external funding, having been previously financed exclusively by Niknam.

So, why now? “Bunq is not my first company. In fact, it’s my third successful bigger company. And I’ve noticed throughout the years that sometimes people bring in capital too late. And sometimes people bring in capital too early,” he says.

“Now we were in the fortunate position that we had the luxury to choose our moment in time. And so what we really wanted to achieve was that laser focus on our users, and to have that ingrained in our DNA and not be distracted by any other thing, like having to do capital raises, because those are very labour-intensive.

“And so, now that we had gotten very far in, it was time to go wide, to start conquering other countries, to start conquering other territories, aka scaling up. And because of the change in stage of the company, it did make sense to find a capital supplier or investor.

“But us being us, we always said we didn’t want to have an investor with just a bag of money, because there’s plenty of money to go around thanks to all the central banks that are printing all that money. We wanted an investor to share the same values as we did, because that’s very important to us. And we wanted an investor that brought something extra to the table. And in the case of Pollen Capital, it was Capitalflow.”

Ali Nicknam on his business philosophy

“I’ve always been curious about how things work, and why things work the way they do. So when I look at the world, today I don’t take for granted all the things that are around us, I start to think about them. And I see a world that has never been as good as it has been today. Despite what sometimes people might think. I mean, nothing was better, 10 years ago, and even less was better 20 years ago. Today is probably the best day we have ever had. But then I look at the world and I see so many things that could be even better. So many things we could improve so many, you know, and then I get excited about it. And then once I get excited about it, I just throw myself at it.”

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