03 Jan KlickEx and APFII plan SEC Sponsorship for an SPAC IPO.
“The world needs better financial services – and the incumbents are not doing well. You have HSBC, recently the largest bank in the world, languishing at 30% of its former size and client base. Deutsche Bank, the former stalwart of institutional foreign exchange – down about 90% in value. A total of nearly half a trillion dollars in losses from institutions that were once thought of as mighty and prestigious”, he says.
This month APFII intends to file at the SEC for an interim SPAC with capacity for a little under USD 300m in external investments.
“The reality is – we expect to do a lot better. We have capacity that extends considerably higher than this amount – however it is prudent to take smaller steps. Over the past few years, we have met with many capital-ready investors that are interested in resolving global problems caused or unresolved by financial institutions; commitments of various sorts over this time, have exceed US $2b so far – and we know demand for real solutions, that create real value, is much much higher than this, and the benefits are in the order of 100x and more.
“Now is the moment to validate this support, and put in place a framework to expand our know-how into other regions. It is about catalysing a tactical renaissance and a catch-up for the incumbent financial sector, to get financial institutions to where they should already be, by delivering what should already be in place, with special regard to ethical and effective financial infrastructure”, Bell says. “The confronting thing is – a great number of people in the industry won’t realise what any of this means – and therein lies the need for renewal, to capture a part of the overdue new wave.”
The past 15-20 years have been sluggish for established Financial Institutions. Having employed C-suite people from brands such as Microsoft, IBM, Nomura, Credit Suisse, ICAP, HSBC and others, the APFII chairman feels that it isn’t rocket science to see why.
“APFII has been building banking services for Central Banks, where it has built and installed from scratch, National Payment Infrastructure, FX, Bond, Cross border real time Cheque imaging, and Collateral Management Systems, international card system platforms, Pension, SME, retail and universal compliance systems, plus of course, the near ubiquitous international mobile money services that date back to 2010.
“When we saw that HSBC’s share price had fallen to just GBP 58b – we decided that enough was enough. Of course, I was very familiar with HSBC – and had assertively proposed to them a different path from one that they took. I recall the conversations with Sir John Bond, Stephen Green, and Mike Geoghegan in 2006, and then went off to do something about it by proposing a flanker brand to teach the organisation how to bank very low-income low-margin countries/sectors – so that we could take those learnings back to our prime markets. But the bank was slow – there were major distractions, and the rest has been history – as they say”, Bell recalls.
“Our target is not HSBC – we have not identified any target(s) yet – as per SPAC rules – but it is an opportune time to re-engage larger parts of the global economy via businesses that are already established. Our discussions have given us very clear guidance from potential investors: The market seeks high long-term returns, excellent cash flow, strong strategic advantage, and ethical, socially responsible growth. Which is a familiar story to our own. This is not an IPO of any of the APFII or related businesses – these services that own the Central Banking code (for example) will not become Public or for sale – but we are ready to invest alongside our partners to form broader base of resources that benefit from our know-how, their existing scale – and our direction and mission”, says Bell.
Robert is no stranger to a worthy challenge. In 2005, he set out to build a bank within HSBC to reach unreached markets, and to introduce private wealth and UHNW banking practices to low income populations (rather than the standard late-fee current account + a credit card strategy of the time), and ended up building payment systems central banks and FX markets for ultra-volatile currencies – culminating in Aspire Bank, KlickEx, AusPay, the Pacific Development Foundation, and APFII, all without external capital. Along the way – they have picked up quite a string of collateral successes, as Bell calls them.
“After a three year stand down from HSBC, we set up the largest mobile money cross border hub in the world” he says, “and won SWIFT’s global innovation award in 2013. We also took in significant funding from the United Nations, and did about $1 billion in sales volume in the first few years of doing business; a number that is now almost $1.5b – with just nine full time staff.”
Talking to Rob is a bit like speaking to the J.A.V.I.S. character from Marvel: ask him for population and banking statistics on the Pacific or further afield – and he’ll probably complete the question for you – answer it – and volunteer a handful of other related statistics that give reassuring depth and perspective to the original query.
“These days, we spend most of our time building national payment systems, and increasing access to financial services and income stability at a national level” he says. “It has been a great set of problems to solve. We get to see a lot of things that just about no other team in the world gets to see – Tonga has been the latest to roll out world class systems usually unavailable to countries of its size. We are kind of a quasi NGO in many ways, and it is rewarding work. I know the World Bank have dedicated teams doing the same things we are doing, spending millions of dollars working on building or delivering similar systems beginning years before we stepped up. But now that we have, one by one – the Central Banks and Commercial Banks are choosing us, which is gratifying. And it is certainly unusual for a business that is possibly, technically, still a Fintech Startup, to hit these kinds of scale”, says Bell. “We were the first in the world to do many things – even if under a well worn umbrella of services – and our results – and our impact – speak volumes to what can be done.
“And that is the very important thing to remember – that scale – and unit-efficiency, is what keeps costs low – and the scalability, high. The countries we build for, have fewer people in them, than most donor countries have employees in their space programs; or where they have less adults per country, than all olympic medalists, Nobel laureates, and all past and present US Senators or Congressmen, combined (about 25,000).
“Add in to that the difficulties and scaling-factors of purchasing power parity in these economies – and you realise that GDP per capita can be as low as $1500 per year where we have forged our platforms; so when we say we have reached these populations with 90% efficiency – and have processed more than 100% of their GDP levels – it can be taken as a more difficult task than capturing values that exceed GDP for operators in the US, or EU, for example – should we have been operating in those markets; i.e. approximately double comparative value and up-take rates, of all the world’s card schemes, combined. And that is a big responsibility”, Bell acknowledges.
It is a theme that resonates through every conversation with Robert – that in a world where the various quantums of capital are often revered as deities, used as a singular appropriate measure of virtue – he is always bringing the numbers back to earth, and putting them in context for what they mean for families. And in a world of increasing political strain, and deeply felt civic agitation around run-away social and financial inequality – a bit of socially minded financial inclusion, is something that the market – and the populations they rely upon, could take to the bank.
The APFII SPAC, known as Hudson 800 Acquisitions Inc, will be available for retail subscription in late Q1 2021, pending regulatory approval.