Building the bank of the future – Our investment in Constantinople
Macgregor and Dianne are on a mission to radically simplify how banks run and operate.

We’re incredibly excited to announce our participation in the first funding round for Sydney-based Constantinople, who are building a complete software and operational platform for banks.

From benches to bits

Banking has come a long way since the days of the ‘banchieri’ (Italian root of the modern ‘banker’) sitting on ‘banci' (benches), in the public squares of renaissance Florence, using pen and paper to exchange currency and finance merchant voyages.

Banks of today are beginning to look more like software companies. Indeed, the best-in-class fintech challengers of the last decade (Starling, Revolut, Wise) were purpose-built from the ground up using software to let you store, transfer, and borrow funds. And all with no branches (or benches!).

But every incumbent bank in the world struggles with digital innovation and inflated operational costs, largely because of a spaghetti-mess of legacy systems and processes. For example, the big four banks in Australia still spend more than half of their operational costs on people, which is two or three times more than what they spend on technology. A good portion of these operational costs go towards activities that software can now do quicker and more reliably, like approving loan applications and meeting compliance obligations.

It’s especially hard for the smaller, second-tier banks to grapple with the shift to digital. You can see this in their increasing cost-to-income ratios, which are a full 20-30 percentage points higher than the big four. These second-tier banks spend four times the amount on people costs vs technology.

A good portion of technology and people costs at banks go into building and maintaining largely undifferentiated offerings — payments, card issuance, compliance — many of which are becoming commoditised thanks to emerging fintech players like Marqeta and FrankieOne.

The global market opportunity for a company that can bundle these commoditised offerings, automate operational processes, and help banks navigate this transition is huge.

Constantinople and the fully-managed banking platform

Many players have emerged over the last decade looking to bundle these commoditised financial services offerings into packaged APIs for consumer brands and fintechs to offer to their customers. We have even seen neobanks like Starling move towards packaging their consumer banking offerings into bank-as-a-service solutions.

But the biggest challenge in banking technology is not building the front-end software that customers interact with, nor is it building the back-end ledger software or APIs used to connect it all up. These challenges have largely been solved. The biggest challenge by far is automating the huge amount of operational work required around these pieces of software. Even banks that have moved their operations to the cloud are still spending the vast majority of their OPEX (in most cases hundreds of millions of dollars) on manual processes like customer onboarding, fraud and financial crime prevention, lending decisioning, and especially compliance.

This is where Constantinople comes in. They’re tackling the hardest of hard problems in global banking. They’re building a fully-managed digital banking service, ready to be rolled out directly to your customers. No upfront capex. No deep integrations. No additional OPEX to pay for a team to run it. Constantinople provides a vertically-integrated bank-in-a-box, with automation built in all the way down the stack. Constantinople frees banks from their operational complexity and allows banks to focus on their customers and the business of banking.

Constantinople’s vision is bold, ambitious and very, very complex. But in that complexity lies both the value proposition and the competitive moat. Banks and other consumer brands who want to add banking features to their products only need to white-label Constantinople’s platform and they will have a fully operational bank, at a fraction of the cost of doing it themselves. And they’ve already made incredible progress, having recently signed a five-year deal with their first customer - Great Southern Bank - worth tens of millions in ARR.

Hard earned lessons and founder-market fit

The chief reason we’re excited to partner with Constantinople is the exceptional founding team. It’s rare to meet founding teams with the level of founder-market fit as Constantinople’s two co-founders and co-CEOs, Di and Mac. They are a rare breed of bankers who have deep knowledge and expertise across digital banking and fintech. Together they bring decades of banking experience from the world’s leading financial institutions, including JP Morgan Chase, Citibank, Goldman Sachs and Westpac. On top of that, they’ve managed to attract a team of world-class technology, banking, and financial services experts to join them on their mission.

Constantinople is growing fast and, if you’re as excited as we are about building the next great global fintech, they’re hiring!

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