A Visit to an Islamic Fintech Venture Builder

It was the last day of a training program I participated in Istanbul recently. Among the many site visits scheduled that day, the one that left a lasting impression on me was the visit to the headquarters of the alBaraka Turk Participation Bank at Istanbul. Sitting inside the premises of alBaraka Garaj, it was fascinating to take note of the rapid strides this start-up incubator had taken during the two years of its existence. The introduction by my good friend Prof Ahmet Faruk Aysan from Istanbul Sehir University was short and interesting. Equally impressive was the presentation that followed by the alBaraka Garaj team. Here are some of the key points highlighted in the presentation.

This fintech incubator or accelerator was following a widely popular strategy in the field. Most successful technology companies and unicorns have sought to establish an ecosystem of their own (example: Google creating its ecosystem with YouTube, Nest, Android, Google Play; Amazon creating its own ecosystem comprising Kindle, Audible, Alexa and Amazon Web Services; Facebook creating its own with Instagram, Whatsapp, Messenger and Uber creating its own with Uber Eats, Freight, Uber Pool and Uber Pedal)

Albraka has been seeking to create its own ecosystem by combining the value-added services model with fintech-based innovation projects. Albaraka’s key mandate – provision of retail, corporate and international banking services – now includes the following:

1. Online Islamic bank – Insha
2. Digital banking services – Hupu, Save.Buy
3. Islamic banking services – Zakat Assistant
4. Communication services – Fenomenya, AlbarakaCell
5. Nich-market services – Startup banking, Accessible banking, Wunderlust banking
6. Payment services – Semosis, KolayPos, AidatOder
7. Platform services – SME Market, Event Hunter

Building an ecosystem should help Albaraka diversify its current revenues and create new revenue sources.

The innovation journey at Albaraka started in 2014 with an organization-wide idea competition called “Big Bang”. The passion for innovation continued in different forms – Albaraka Fintech Technology Transfer Program in 2017 and Albaraka Kesfet (trans. Explore) – an in-house entrepreneurship program in 2018. The Albaraka Garaj – a start-up acceleration center – took shape in 2018 and has so far led to the birth of 20-plus start-up companies in two yearly rounds of financing.

And then, to exploit the multitude of fintech opportunities Albaraka sought to build its own ecosystem by setting up the AlBaraka venture development and investment company.

AlBaraka venture development and investment company is a new affiliate that will explore potential business areas and develop new fintech initiatives. It sees three major roles for itself.

Idea leader: Knowledge creation, dissemination and solutions for fintech ecosystem in SE Asia

Venture development: Management of development and growth processes of fintech start-ups – from idea, implementation, to markets

Investments: Finding potential global and local fintech initiatives, the development of joint programs and the management of investment processes in case of investment.

There are four efficient options in the venture development process:

1. Build your own – Design, plan, develop, test and implement the venture within Albaraka’s own resources
2. Buy product and service – Buy basic functions from other fintechs and develop the venture
3. Partnering with fintechs – Develop partnerships with other fintechs and co-create the venture
4. Invest in fintech – Invest in a fintech which has the same solution

The new entity will focus on ventures totally new for global and local banking sector and participation banking. It will focus on the disruptive innovation projects.

It will seek to follow these global examples:

FinLeap: Europe’s no.1 fintech ecosystem, founded in Berlin in 2014 with 600 plus people, one international operating fintech ecosystem; has led to launching of 16 fintech ventures

Forum: Largest fintech venture builder in emerging Asia, founded in Singapore in 2015; with 600 employees in 18 countries, 5 fintech ventures and 4.3 million customers (CredoLab, Solarhome, AsiaKredit, homesters, AsiaCollect)

There are many of them and these are the catalysts of modern Western economies. A broad list will include:

LanCoNYC, finparx, Rheingau Founders, mantro, otto group digital solutions, Hitfox Group, WATTx, Team Europe, Founderslink, Next Big Thing; Finconomy; Locadi,EtVenture, Hanse Ventures, Bridgemaker, LemonBlood, CrossVentures

The following Business Model innovations are either already developed, or in advanced stage of development:

• insha – Europe’s first digital only Islamic bank
• alneo – a new generation digital payment platform consisting of mobile POS and customer wallets
• NakitBasit – digital cash platform of Turkey; an easy and fast way to access all financial services
• aidatimnet- a web-based collection platform which provides finance and accounting, property management, community management and payment services for professional residential and commercial property management companies
• Open Banking Integrations – alBaraka API (26 APIs in 6 categories that may be used to build products and services.
• Investments – alBaraka portfoy
• Agile Execution – Atak, Cevik
• Fresh deals and projects – alBaraka Garaj, Kesfet, Big Bang
• Process innovations – APA

AlBaraka feels that there are still too many customer needs to be addressed in the following areas:

• Payments processing and networks
• Mobile wallets and remittances
• Retail investing and secondary markets
• Financial services and automation
• Capital markets and institutional trading
• Core banking and infrastructure
• Wealth management
• Personal finance and savings
• Mortgage lending
• Real estate investing
• Regulatory and compliance
• Insurance
• Payroll and benefits
• Credit score and analytics
• General lending and market places
• Point-of-sale and personal lending
• Business lending and financing
• Accounting and finance

It was indeed a great experience listening to the presentation by the AlBaraka team. By the time we moved out the premises, many of us had developed a level of comfort with the new lingo of fintech. It was going to be familiar territory.