#24 – RegTalks with Janos Barberis, CFTE + Founders Taboo

For this special episode of RegTalks, Claus Christensen sits down with serial entrepreneur and expert Janos Barberis to discuss the latest RegTech trends and the all-too-important topic of mental health in relation to the startup world.

Episode Notes

Join us for a very special episode of RegTalks where we sit down with Janos Barberis to discuss:

• Janos’s journey as one of the pioneers able to identify and analyse the unique elements of RegTech vs Fintech;
• The general understanding of the potential of RegTech among industry practitioners;
• Key advice for founders and team members of startups around mental well-being and operational risk management in relation to mental health.

Janos Barberis is an entrepreneur and expert with an established track record in the fintech industry and in academia. The 49 startups across his accelerator cohorts have raised over $500 million and are regularly listed as leading fintech companies globally. On a mission to raise market awareness on Fintech and RegTech, in the last four years, Janos trained over 100,000 individuals through online courses, books and academic papers. Janos was also on the Fintech board of both the World Economic Forum and BFSI.

Janos is the Founder of Founders Taboo, the world’s largest online course and community on the topic of mental health in the start-up ecosystem. You can learn more about Founders Taboo at https://www.linkedin.com/company/founders-taboo/

RegTalks is a podcast produced by Margherita Maspero for Know Your Customer.

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Episode Transcript

Claus: Welcome to RegTalks, a podcast dedicated to the latest trends from the world of RegTech, Fintech and financial regulations. My name is Claus Christensen and I’m the CEO and Co-Founder of RegTech provider Know Your Customer.

Today, it’s my absolute pleasure to welcome Janos Barberis as my guest. Janos is an entrepreneur and expert with an established track record in the fintech industry and in academia. The 49 startups across his accelerator cohorts have raised over $500 million and are regularly listed as leading Fintech companies globally. On a mission to raise market awareness on Fintech and RegTech, in the last four years Janos trained over 100,000 individuals through online courses, books and academic papers. Finally, Janos was also on the Fintech board of both the World Economic Forum and BFSI.

Janos, thank you so much for being here.

Janos: Thanks for having me with you today.

Claus: To start, I always like to ask how my guests have entered the magical world of RegTech. In your case, the question is particularly interesting as you have been one of the pioneers of the RegTech world. You have been one of the first experts to analyse the link that exists between the worlds of RegTech and Fintech and how the former powers the latter. Can you tell us a bit more about your personal journey in the field?

Janos: I guess my personal journey on the RegTech side comes from a life story and it comes from an academic ambition. The life story is I’m a kid that graduated during the financial crisis, which is really a failure of regulation.

I’ve seen the impact and the damage that poor financial regulation can have on people and therefore academically it’s something that I wanted to eventually change, and especially change in the context of new finance, which was Fintech. Fintech was new financial services and regulation didn’t catch up to it. And I thought that simply if finance can be reimagined, then the regulation should be also rethought. And that’s how, academically I teamed up with Douglas Arner and Ross Barkley. We started reconceptualising not just the financial services industry but also the regulatory framework and how technology could enable regulators to achieve their goals more efficiently because of their resource constraints, but also how they can uphold their mandate, which is financial stability, consumer protection, market competition, et cetera.

So that’s how we went into it. We just felt that there was a better way of doing it and we started writing about it. It’s quite straightforward and I don’t think we imagined the impact that we would have at the time, but it’s beautiful to see the impact that some of what we have written in academia is now used in the industry, both from the startup side, the corporate side, and also the regulatory side.

Claus: I remember the early days when RegTech wasn’t even a word and I think you helped at that point to make it so. Because before that it was all financial technology or Fintech; that changed over time to become the word for virtual banks and for the active participants, while RegTech is the technology that powers everything behind there.

Just a few weeks ago CFTE, the Centre for Finance Technology and Entrepreneurship, released a new specialisation course entirely dedicated to RegTech. I had the pleasure of contributing to it as a senior lecturer while you and Douglas Arner are the programme directors.

What gap in the market is the programme trying to fill? Or, to put it in another way, how would you rate the current understanding of RegTech and its potential within the industry?

Janos: The potential is infinite, I think. Regulations, both in financial services and outside, are still slightly in the past, but regulators are very forward-looking and anything from regulatory sandboxes to new standards and to the approach with innovation has shown that regulators want to do things better. And today being technology neutral as a regulator is not acceptable. Regarding the gap in the market that the course is trying to address… primarily the financial services industry represents the buyers of RegTech solutions; they have the cost pain point of it. A few years ago, for every dollar spent on compliance, banks would just spend $3 in fines. So clearly it didn’t work and there was a better way than throwing people at it. This is not to say that RegTech will replace people.  I think RegTech will enhance the role of compliance officers but also front office people to now be able to embed and make products compliant from day one.

Why would your sales team need to talk to the back office to make sure that something is compliant when down the line the bank has the data about the specific customer if it’s a mis-sell or sell across border on a financial product? So making the bank aware that the compliance and legal function can be enhanced is important. Step 2 is how can you enhance it? Should you build in-house or should you partner? And then step 3 is everyone should be compliant from day one, and compliance should not be a bad element.

In a funny way, when I was 26, 27, I was super excited about RegTech and I’m still excited about RegTech today. And it’s weird to be excited about regulation when you have so many other shiny things around you. Because I think it just removes a very boring pain point. Of course, the bigger opportunity, regulation technology, and that kind of was the insight that Douglas and Ross and myself brought in is that regulated technology is not limited to financial services. A lot of industries need compliance, a lot of industries need to automate and make that more proportionate to their end goals.

And KYC, KYB is an example that applies to financial services, of course, but also applies to e-commerce. It also applies to travelling. So that was really the insight that we brought and that is what brought on the excitement for RegTech. Yes, financial services are almost the R&D powerhouse as they are going to be financing that whole wave of innovation. But for the next 50 years, until any compliance process in the world cross-industry is not eaten by technology, RegTech will not have finished its mission.

I certainly agree that we are only at the beginning and I also agree on the point that technology does not replace staff. It frees staff really to do their actual job. Counterintuitively, technology does not make the interaction for the end user, for the customer, more technical, more robotic. Since it does free up both sides from all those manual tasks, it can make the interaction between the financial institution, or whoever is the RegTech user, and the customer being onboarded, for example, more personal because now the staff can actually interact in their full human capacity.

And thanks again for including me as a lecturer in the CFTE course. The experience of preparing for this course was one of condensing a lot of what my team and I have learned over the past years into a coherent structure. And that turns out to be a really great way to consolidate your own learnings, I’ve found.

People say this, you know: you only know something that you can teach. And it’s a very powerful element, I think… being able to condense, being able to summarise, being able to remove the abstraction and make it practical.

And thanks also to you for taking part in the course, because I think that course has been designed by academics, but also by practitioners and by consumers. Consumers of the solution, practitioners in the field like yourself, then academics that have conceptualised it. It’s rare to have such a condensed understanding of a topic delivered that clearly.

Claus: Just a few days ago, during a dedicated webinar by CFTE, you and I and other experts tried to identify the upcoming big trends in RegTech. We talked about the consolidation in the RegTech industry as a whole and the maturing of AI use.

Janos: First is the increased usage of AI within regulations and RegTech. I tend to say that it was very practical seven years ago, it’s very practical now. Until you have a lot of users and a lot of data, AI means nothing. Today RegTech is being used more and more at scale and therefore AI can start to kick in and create value. You don’t need AI for 1,000 users. You need AI for a million interactions. And I think we are passing that threshold of what we can see in terms of patterns, how we can improve that. So that’s one reason why it was interesting.

I think consolidation of the RegTech market, absolutely. But why? Big picture… Because it’s an amazing sticky revenue, once you are a RegTech provider. We’re talking about inflation right now. You want to make money and make sure that you have sticky revenue above inflation that will keep on coming… Invest in a RegTech solution. Actually, as a matter of fact, even when there was no inflation and returns and yields were almost negative, what keeps on growing? Compliance costs, whether you want it or not.

So it’s a great investment opportunity, I think the reason why it’s consolidating is because people are realising that it’s a great revenue, you want to tap that revenue, you want to secure that revenue and this is why you want to invest in or buy some of those RegTech companies which are now consolidating into one giant element.

Claus: This is actually a very special episode of RegTalks as we release this on World Mental Health Day.

Founders Taboo, which you have founded, is an organisation that wants to bring to the fore the topic of mental health in relation to the startup world. Would you mind telling us a little more about the organisation and its objectives?

Janos: Absolutely. Founders Taboo is a marketplace for founders’ well-being and mental health. The marketplace is founded by a community of founders and changemakers, whether they are academics, coaches, psychologists, service providers, that believe that better founders create a better world.

Now, talking about the world and talking about the fact that you’re releasing this podcast on the World Mental Health Day…. Well, thank you. Thank you for allowing us to have that platform and that moment. We know that some of your listeners are founders, so if you are a founder and you are listening in, please reach out to either Founders Taboo or myself directly. And also I think if you are a  financial institution or anyone that has been working in any shape or form with start-ups, be mindful of the fact that the entrepreneurial journey is difficult. It’s not that it’s different from any other job, and I think there’s a unique set of pressure that founders cannot talk about.

Practically there is a schizophrenia of how successful a founder needs to appear and how internally lost they can be. It’s a journey that I had. I think you’ve seen me in 2016 and obviously you joined the programme in 2018 in Hong Kong. Solo founder, excited, empowered, high on the growth and the traction of the company but totally lost personally, and at one point that divergence between my professional growth and my personal destruction was so high that it snapped. And it snapped in an ugly fashion. So there was more than a burnout, there was a hospitalisation. There was a physical recovery, which thankfully has been short, two years, but mentally it’s still ongoing. As I wanted to solve that pain point for myself I said let’s scale that and let’s create Founders Taboo. So today Founders Taboo is a great team. There is Annabelle, whom you will meet; there is Dani, that you will meet; there is Danny, that you’ll meet. I’m saying this because we’re doing a Founders’ retreat soon.

We are growing, we opened actually our platform a few weeks back. We have 500 founders on the waitlist. And what we want for founders is to smoothen the emotional rollercoaster that the entrepreneurial journey is… smoothen it either by providing content and resources or by creating third-party capabilities. So we’re very thankful for everyone that has given us their time, for all the coaches, VCs, and academics.

But, you know, we talk about why we want to do this. Well, we’re talking about the amazing market opportunity that RegTech is.

As of my last count, there are 500 RegTech companies globally, maybe 1000, let’s say 1000 for the sake of it. Out of almost one thousand companies, 70 will fail because of founder burnout.

Now, we mentioned that RegTech will improve financial stability, it will improve consumer protection, it will improve user experience. But if 70 companies fail for only the reason that those founders didn’t take care of their mental health, maybe there will be a regulator that will miss a risk because a company has not been able to identify risk because it has closed due to founder burnout.

So, in a way, if you are regulating about risk management, investing in your health as a founder is also risk management of yourself. Mental health is a risk if not taken care of. Founders don’t listen to risk, because otherwise we wouldn’t do what we’re doing. But I guess for all the founders listening and for all the people… there’s an opportunity for you to take care of yourself. If you take care of yourself, in the same way that you’ll do a 10X return on your investment, you’ll do a 10X return on your personal growth.

And as much as people talk about this, until you are serious B&C company, you are founder-led. And if you, as a Founder, collapse, the company collapses. It doesn’t matter how much processes you put in place.

Claus: Very, very true. Apart from it being absolutely exciting and a very privileged experience, and apart from the sheer workload, that goes without saying, founding a startup is at times like coupling your own internal mental world to the ups and downs of your business. And by definition startups are extremely volatile constructs, so these wild swings are so common in the early phase, and they all focus and impact most on the founder and CEO. So that can be a lonely position, and it’s certainly not a great starting point for relaxed mental well-being. Based on your experience, what is some advice that you could share with both founders and team members of startups when it comes to mental well-being?

Janos: I think, first of all, you’re talking of loneliness as a founder and I think it’s both a consequence of entrepreneurship, but it is also a reason for success. Then let me maybe talk about the reason for success first, because in venture capital you cannot make money, or you cannot make a disproportionate amount of money, if everyone is doing what you do. So, by definition, you need to be lonely in your approach to the market in order to generate that. And that’s not just in venture capital, it’s in financial markets, market efficiency, right? The moment information is public, that information has lost value. So what does venture capital do? Venture capital invests and trades into private information. And private information in the context of startups is unique ideas that go counter market and approach a problem in a unique way. And because of the uniqueness, you are by yourself, or you have 10 people in the world doing it. But the point is that uniqueness is the reason why you’re so valuable, because if you weren’t, you wouldn’t get invested in. So let’s make the fact that loneliness is expected for high-potential founders as a starting point.

Now, given that this is the case, what can you do from there? Well, first, there are different stages.

There is awareness, there is access and then there is action. So awareness is knowing what you don’t know. 50% of people listening will go: “Yes, I want to be better, and I want to improve my mental health”, and 50% will go: “I don’t understand what’s happening. No, I’m very happy”. But everyone at one point will have it. The second one is access, but what kind of access? First access other founders because while you are unique in your loneliness, [that loneliness] is shared across founders and that’s a universal feeling. Your individual situation is unique, but your status as a founder is universal across and so just talk and you’d be surprised to see how many founders connect with you on this. Therefore accessing a community of founders I think it’s very valuable.

But I think then even better it’s acting. And acting by getting a coach, getting a psychologist, or, going to the gym and allowing it to yourself. But act on it. Because it’s very hard to be able to effectively recover once you pass the line of no return.

I’ll be very practical for the people listening in. My fintech Supercharger journey, or career, or startup, whatever you want to call it… it was three years and a half, four years. Amazing, right? I crashed and it’s been six years, actually seven years, and I’m still not recovered. If you do something for three years, but for every year you invest in the company, it takes you two years to invest in yourself to recover, forget it, right? You would never do that trade, you would never do that deal, you would never do that investment. So don’t do it. Do it proactively.

Claus: I found connecting with other founders helps a lot already. Even in 2018, I had a regular dinner sequence set up with other founders and that helped a lot in the early days. We all went through two and a half years of COVID and isolation there, and these things are also not quite the same online, but thankfully we’re meeting again now.

Janos: The world is going to be more and more unstable. It doesn’t mean that the world is going to be worse, but there’s gonna be more instability. Instability means uncertainty. Uncertainty means decision-making difficulties. Decision-making difficulty means not a lot of mental wellness and focus. So for everyone out there, whether you’re a founder or not, do that favour to yourself and invest in you because you will need it. And if there’s one constant is that making an investment in you will make you more resilient. And resilience is perhaps the keyword when people say: “What do you think of entrepreneurship?”. That’s something that won’t change. A little bit like Jeff Bezos who says: “I don’t know what the future is, but people want always cheaper products”. I don’t know what the future is, but resilience is needed, especially when you’re in the business of dealing with uncertainty, which is entrepreneurship.

Claus: I absolutely agree. Entrepreneurship is so much uncertainty in itself. I think founders are some of the best-prepared people for a more uncertain world.

In any case, Janos, thanks so much for creating this new organisation, helping founders. I think this is something really important for society at large. Because society needs those founders, needs the people to go out and go after new ideas and bring new products to the market. And without the founders, or with struggling founders, that’s just so much harder.

Janos: It doesn’t matter how we’re looking at it. The current debt problem that we have in front of us, that should be solved by innovation. Therefore, entrepreneurship needs to be there. Climate change and then world changing topics also need to be solved by entrepreneurial spirit.

The reason why I’m saying this is, if you accept as a starting point that the world needs more innovation to keep on moving forward, we need to make sure that there are as many minds as possible that can actually go and tackle those big problems. And the less minds are able to properly focus on this, the worse off we would be as a society and therefore it’s important that everyone that wants to think about it has the right support around them to be peaceful, at ease, and don’t have hardship or don’t have the maddening experience of entrepreneurship.

Claus: All right Janos, we have one last question, one that I asked all my guests and that is… if tomorrow you woke up and somehow you had become the global regulator, what would be the first thing you would do and why?

Janos: So you know what… I’ll take that challenge and I’ll try to make it about RegTech and mental health. So here goes nothing. At Founders Taboo we do generally believe that founders’ mental health should be embedded in corporate governance. If it’s not, it will destroy founders, shareholder value, teams and users.

Two examples: Adam Neumann from WeWork. I cannot presuppose that he had any mental health condition, but clearly there was a maddening moment in his journey that has destroyed 40 billion of shareholder value overnight. Travis [Kalanick], the founder of Uber, I cannot presuppose he had a condition, but he also has destroyed billions of shareholder value. Elon Musk, who has disclosed that he has a mental health issue, has, in his bursts of wonderfulness and craziness, destroyed market integrity but also harmed consumers by going on rants around cryptocurrency or making a proposal for the purchase of Twitter. So that impulsivity that made him who he is has also affected a lot of people.

I guess where I’m trying to get at is reporting to your board that you are actually doing something about your wellness should be a standard, just like ESG is a standard. You don’t need to say what you have because that’s private, but you should be telling your board what you’re doing to take care of yourself. And I think a board not asking this from a founder should be responsible if not even liable for any loss a founder would generate that can be directly linked to the fact that they didn’t take care of their mental health. It’s unacceptable that venture capitalists and investors don’t ask a founder: “How is your personal runway? How is your personal family situation to build your company?”. It’s reckless. And while entrepreneurs are risk-takers, they’re not reckless.

I think, from an investment standard, and from a regulatory obligation, that would be a beautiful regulatory obligation where RegTech would meet founders’ mental health also.

So here’s my attempt at articulating an answer bridging RegTalks and Founders Taboo.

Claus: That’s excellent, Janos, I love that. Thank you so much for this. This was one of the very, very special episodes. Thanks for your time.

Thank you for listening to this episode of RegTalks. My name is Claus Christensen and I’m the CEO and Co-founder of award-winning RegTech provider Know Your Customer.

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