August 26, 2015
A couple of weeks ago, we got to know that Silicon Valley Bank (SVB) acquihired Standard Treasury, a Y Combinator-backed API banking startup to build API banking services for their clients. After that, we got an opportunity to interview Mr. Bruce Wallace, Chief Operations Officer at Silicon Valley Bank, about SVB’s recent acquihire. Bruce has worked for more than 20 years with Wells Fargo and he has been working with SVB for more than seven years now. He shared valuable information with our readers.
LTP: Why did you acquihire Standard Treasury’s team?
Bruce: We acquihired the team, but we offered to do an asset purchase. In terms of the intellectual property (IP) that Standard Treasury developed, we also acquired that as a part of the transaction. It was an asset purchase agreement where we acquired the code and the IP they had developed along with hiring the team. Five out of six ST employees joined SVB. There was one employee who left several weeks before we did the acquihire.
LTP: Since SVB is an international bank, would you launch the API services internationally?
Bruce: We will offer the API services to our clients outside the United States. When we do our initial data release of the first API services, it might be for our US accounts only but the final idea is building robust API services for our clients domestically and internationally.
LTP: Would SVB be making their API services available exclusively to their existing clients?
Bruce: We are only planning on offering this to SVB clients. We don’t have any plans of selling this as a service to anybody outside SVB’s portfolio.
LTP: Would you be making these APIs available for free or will you bill your clients separately for using the API services?
Bruce: We are still in the assessment phase of that because what we are offering is still nascent not only to SVB but also to the financial services industry. In the initial pilot, we are not charging our clients and there is no setup fee too. We would like to get experience in offering these services to clients before we finalize any decision related to pricing.
LTP: What about the launch? Will the pilot be launched this year?
Bruce: It will be happening this year. We are targeting sometime in early to mid-fourth quarter. It will depend on how many different APIs we want to offer in the initial pilot release. The team has already built some of the APIs because we have been working on this with them for few months before the acquihire. Additionally, they have been working on this for a long period of time. So, we will definitely do something in 2015, and the exact date will depend on the number of APIs we will release during the pilot.
LTP: Standard Treasury founders Daniel Kimerling and Zachary Townsend wanted to create an API-first bank. Would SVB continue with that goal of Standard Treasury?
Bruce: The way we look at what we want to build with the Standard Treasury team is that we want to create APIs that our clients can use an additional channel for them to interface with SVB as opposed to our clients viewing it as the only way they can interface with us. Our clients want to work with us via multiple channels like online banking services, mobile app services or direct transmission services. The way we look at APIs is that it is a creative channel and a way for our clients to be able to connect with us to either facilitate large transactions processing or information processing and build that directly into their platform or into their back office system. If we were to go down the path and say that all we want to do is offer APIs, not all our clients would necessarily want APIs to be the exclusive way to interface with us.
LTP: Companies like Dwolla and Yodlee are innovating by offering similar financial API services. How would the API services offered by SVB differentiate from them?
Bruce: It isn’t about us to compete with any of those financial service disruptors or innovators. For us, it is more about what we have consistently heard from our clients over the past few years; they view us as being able to offer API interfaces as a more effective and efficient way for them to be able to transmit data to us, or more importantly, be able to integrate directly into their platform to automate and streamline a lot of their processes whether it is around transaction processing or whether it is around automated reconciliation of receivables. I can give you a list of a multitude of different things that the clients feel that if they had a way to actually just call and get the data via an API or send it to us via an API—which they could then develop directly into their platform or the back office system—it would be a far more efficient for them to transact with us. So again, for us, it is probably less around us trying to figure about what is everyone else doing and how we are going to compete with them. With us, it is far more about how we can make the new value-added services more frictionless and seamless for our clients to work with us.
LTP: What we take away from this is that SVB really values its clients and this is not a strategy for competitive positioning, but it is something you want your clients to benefit from.
Bruce: Yes, but I will make a comment from a competitive perspective too. I do think that SVB feels very strongly that most of the tech-savvy clients (who form a large percentage of our portfolio) will want this kind of channel to interface with their financial services providers in the future. We do view it from a competitive perspective; we feel it is critical for us to offer these services. If we don't offer them, other financial institutions will. That could be a competitive advantage for them. We are starting with a client-centric view of trying to provide new services, which our clients think will be valuable for us. With an understanding of the analogy of banks offering a mobile app, a bank is competitively disadvantaged if they don’t offer a mobile app today. Mobile apps were a nice-to-have service seven years ago but today it is a must-have service for banks. I strongly believe that APIs will be like the mobile apps of retail banking in the future of commercial banking. Financial institutions will be expected to offer these services as a way for a client to interface with the financial institution.
LTP: Why didn't you acquire Standard Treasure?
Bruce: There are three primary factors in why we took the approach that we did. The Standard Treasury has focused on this for two years, and there is a lot of learning and mindshare that they have around how to build APIs for legacy bank infrastructure. We did a proof-of-concept with them a year ago and they also did a lot of work with some other financial institutions in terms of assessing, R&D and evaluation on how to do this. So, they are bringing a lot of knowledge to SVB on how to build APIs for legacy bank infrastructure.
Secondly, there's a lot of value in getting a team that has already been working together since a long time as opposed to going out and hiring individuals and putting a team together.
The last thing is that the client base that we will predominantly be offering this to consists of the development community for our venture-backed tech companies and individuals who come from that community. Hence, it was important that the team was actually a client of SVB. Standard Treasury was SVB’s client. The founders and other team member have worked with startups and as developers for many tech companies. So the idea turned out to be having some people who understand the requirement on the client side from a developer’s perspective. There is a lot of value in having individuals with that background to help build this with us.
LTP: If you had to describe this new offering from SVB in one line for our readers, how would you phrase it?
Bruce: SVB’s objective is to build out a world-class set of API services to make it easier for our clients to interface and transact with us.
LTP: Do you think API is the next big thing in banking and financial industry or is SVB working on any other services while taking steps ahead in innovation?
Bruce: We are working on a lot of different things here at SVB but all of them fall under one objective: making things easier for our clients so that they can focus on building their companies and innovating. Whatever banking services clients consume from financial institutions, our overarching goal is to find a way to make it as frictionless and as simple as possible to get those services and work with us.
About Bruce Wallace, COO, Silicon Valley Bank:
Previously, Wallace headed SVB’s global services group since 2008. In this role, he was responsible for operations, product management, global transaction banking, and service delivery across all of SVB’s platforms and supported SVB clients worldwide.
Prior to joining SVB, Wallace spent more than 20 years in a variety of management positions with Wells Fargo & Company. Most recently, Wallace was a senior vice president and manager of Wells Fargo’s treasury management operations. He also held prior senior management positions in Retail Banking, Risk and Fraud Operations, ATM Banking, Payment Services, Card Services, and Commercial Banking Operations.