Scott Davies, CEO of Torca, met Katia Lang and Charley Brooke Barnett of TFT to discuss his career experience and Torca’s full-service account for managing and securely storing digitised assets.
TFT: How did you get into Fintech?
Scott: My finance background has been in retail banking, predominantly working with leaders within tech segments.
My father owned his own business and instilled the importance of hard work in me; so, quite early on in my career, I had outstripped my competitors and very soon I had the ear of the Board.
Opportunities began to open up for me and I was headhunted to work at a RegTech business. The aim was to build and manage a layer of technology over a retail finance business – a very simple idea, but one that was ahead of its time. Ultimately, we didn’t end up working together, but I started my own business to create exactly that. I’m ruthless about automation and measuring metrics, so I grew a really successful business on a few small heads. What you measure, you can manage, and feel I was on point with my unit economics. The business and the technology grew and grew and I sold it to a group PLC in the North West.
After that, I founded a second FinTech which, due to having a young family, I exited early out of personal choice. I moved to the South of France in 2008 when the economy was going south to take a lifestyle break. When my children were older, I was offered an opportunity to work for a Google-backed FinTech venture in London. Around the same time, the Chairman of Torca, who knew of my providence in FinTech, told me about what Torca were doing and introduced me. The prospect of working in this space was extremely exciting to me, so I turned those guys down and here I am
TFT: Tell us how Torca came about?
Scott: I was brought into the company about a year ago, which was right at the beginning of its life. We were exploring a range of ideas in the digital asset sector, including an exchange or an investment syndicator. We soon identified a gap in the blockchain market for RegTech services and saw a viable and valuable opportunity for us there. Now, operating as a regulated business, we are building a full-service account for digitised assets.
TFT: What problems are Torca solving?
Scott: We uncovered three major pain points in this space: regulatory onboarding (RegTech), custody and payments services. At the moment, high-tech businesses operating within the Decentralised Ledger Technology (DLT) space need a regulated, high-tech partner to fulfil their onboarding, KYC, AML and fund-collecting needs and that’s where we come in. We are also exploring the tokenisation of assets and we’re currently working with a DLT platform to look at tokenising property. Beyond that, we’re seeking regulatory clearance for the tokenisation of a company shareholder register, which is really exciting. Beyond the service problems that Torca solves, we’re aiming to solve the numerous problems that businesses and individuals both face with usability and customer service in financial services.
We uncovered three major pain points in this space: regulatory onboarding (RegTech), custody and payments services.
TFT: What’s the business model?
Scott: We’re building a home for digitised assets. The whole ecosystem revolves around the three pain points mentioned earlier – onboarding, custody and payments. For businesses and individuals in this ecosystem, they need first to be legally identified (KYC/AML); second to be able to hold their digital assets, digital currency and fiat currency in a safe, secure place and third, to be able to efficiently monetise those digital assets, digital currencies and fiat currencies. All of these require a regulated counterparty to facilitate them.
Currently, we tackle onboarding extremely effectively ourselves. We deliver custody and payments solutions with best-in-class partners, but we’re quickly developing our regulatory profile and our proprietary technology to bring them in-house in due course.
TFT: Who are you selling to?
Scott: At the moment, we’re technically not selling to anybody. We’ve got a healthy pipeline of business clients despite not having done any selling or marketing – customers are finding us, having a great experience and then making recommendations. We’re ahead of the curve with a niche product and businesses operating with a DLT-based model are responding positively to that, which is great. I was speaking with a potential client recently who is experienced in renewable energy resources. He’s Swiss-Canadian, so we spoke a bit of French with each other. It was great – I didn’t have to do any pitching or selling. He wanted KYC, AML, custody and settlement services and he already understood that we can do all of this in one end-to-end solution, all under one roof. It just seems like we’re really well placed, at a really great time. We watched the market carefully and we’re developing an excellent product that has broad potential applications in the future.
I’ve also never worked in a business with a revenue generative cost of acquisition – ever. By offering regulatory onboarding services to businesses that are undergoing a fundraise, we are onboarding investors who we can then resell to as our products and services develop. So that’s our sales model and roll out for our business plan. It’s not my first startup – I know how easy it would be to go out there with a big plan, get a load of money in and then spend it all, but we’re building up steadily.
Our doors are open for business and anybody that’s looking for that safety net of having a regulated settlement agent for their token issuance, they should be speaking to us.
TFT: What are the main issues surrounding KYC and AML? What is Torca’s approach to addressing these?
Scott: The biggest issue for me is that there are cutting-edge businesses operating in the DLT space that need regulated services and are struggling to access them. The DLT space is deemed risky and few regulated businesses are willing to – or have the infrastructure to – undertake that service. We set out from the beginning to tackle these challenges and, as a regulated firm that is fully insured, we are truly breaking the mold. Firms can onboard through our platform and everything we do is user journey and design led. ICOs (Initial Coin Offerings) provided a good proof of concept for blockchain fundraising and investing, but the vast majority didn’t adhere to global KYC regulations. According to a study, over 80% of ICOs conducted in 2017 were fraudulent, which evidences the need for regulatory compliance and for security tokens as a more advanced solution.
TFT: If 2017 was the year of the Cryptocurrency, is 2019 the year of the Security Token?
Scott: Security tokens aren’t going anywhere. This is not the Wild West any more – no revving Lambos outside hotels like we saw with crypto in 2017. There is much more of a sensible and measured approach to security tokens, as there has to be.
For us, facilitating asset tokenisation will probably come in 2020. For 2019, we’re offering regulated services to businesses that issue security tokens to investors and we’re helping them, through our technology and our partners, to securely hold and to use the money they raise.
These companies are cutting-edge and they struggle more than most businesses to access banking services due to the perceived risk. We’re not a bank and we’re not going to be, but we experience the same issues ourselves, so we’re our own first customer.
We believe in the massive potential of security tokens and DLT and in my opinion, this technology will become – in the not too distant future – the basis of the world’s economy.
Firms can onboard through our platform and everything we do is user journey and design led
TFT: What’s your favourite thing about Torca?
Scott: Any CEOs key priorities should be people, culture and strategy and I really enjoy working with my team to build a great culture and a great product. One of the reasons I exited my second Fintech early was because of a slight crisis of morality. Wonga was in the news and we were getting tarred with the same brush. On top of that, my son was at the age where he was asking me: ‘Dad, what do you work as?’ I realised quite quickly that I didn’t want that to be my legacy – I had bigger aspirations than that.
What I really enjoy about Torca is that we are creating a financial ecosystem that is much more open, much more serviceable and much more accessible than that which currently exists. That really excites me. Opening up new opportunities, creating jobs and stimulating the economy. That’s a great legacy to leave and that’s what I’m here for. This is probably going to be my last rodeo and that’s why I chose this over the other business that I mentioned. I could have had a semi-exit there by now and this is harder work, but we’re doing something here at Torca that I truly believe in.
TFT: As a CEO, what would be your advice to not mess up?
Scott: You’ve got to get your culture right, treat your staff well and employ the right people at the right time. Mistreating your staff is the easiest thing you can mess up. Treat them well, and you can sleep at night knowing you’ve got a great business that is in safe hands. My job is to empower and motivate the team to make good decisions, so surround yourself with successful people and bask in their glory – I’m very much a believer in that. A lot of people that I work with have become my life-long friends. My CTO and I have a very strong bond and he’s been with me for the past 8 eight years.
The second thing you can mess up is managing your resources; the worst thing you can do when you have a great business is run out of cash. People mismanaging money and misspending cannot happen, especially at a startup. Get your numbers right, get your economics right and you’re away.
You’ve got to get your culture right, treat your staff well and employ the right people at the right time.
TFT: What are your future plans?
Scott: We’re coming out of stealth now. It took a long time to get to a place where Torca was within a regulated entity, which is a huge step in our journey. That took nine months of my career here and I’m only now getting on with my day job.
Now, we’re now onboarding customers and we’ve just engaged with an amazing project. Our doors are open for business and anybody that’s looking for that safety net of having a regulated settlement agent for their token issuance, they should be speaking to us. We’re the best show in town.
TFT: What changes do you expect to make in light of Brexit?
Scott: Nothing. The thing that I would say business leaders need to be careful of is talking themselves down through Brexit. We’re still a very strong nation. I wouldn’t have voted for it – I was living in the South of France at the time. I lived there for eight years, my kids grew up there. Rather than trying to talk yourself out of what Brexit can do you out of, it’s about embracing the opportunity. It’s shouting about the best things that you can make out of it. For us, it’s being FCA-regulated in London, which will always be a globally credible jurisdiction. It’s like buying a tailored suit from Saville Row; London financial services will always be perceived in that manner. We’re great at knocking ourselves, it’s a very British trait. We’re the world’s best! The Americans are great at blowing their own trumpets and we need to take a leaf out of their book.
TFT: What about your global ambitions?
Scott: At a pivotal time in Britain’s political and social history, we’re focused on a space which is inherently borderless and we’re working with companies from all over the world. We’re a UK-regulated business, but we’ve got clients with US businesses as well as other clients in Italy, Malta and in Switzerland. Our customers are truly global and they come to us because of the weight London holds as a financial epicentre.