‘Once you’re a pirate, serving in the navy is hard’: Dan Kimerling goes back to his VC roots

It seems like Dan Kimerling has done everything in fintech. After all, only a handful of people fit the startup founder-venture capitalist-banker profile.

And, he’s coming full circle. After founding Deciens Capital, an investment firm where he’s still a partner, he launched API banking startup Standard Treasury and sold it to Silicon Valley Bank. A little over a week ago, he left SVB, where he was head of API banking, open platform and R&D for two years. Now, he’s beginning a top-secret-for-now role in venture capital.

At 30, Kimerling says he’s living the dream. He likes working with startup founders, coaching and mentoring them. He made a contribution to SVB — to the whole banking industry, really — but he’s ready to be back in his element.

“Once you’re a pirate, serving in the navy is hard,” he said. “I’m a founder, I’m an entrepreneur; and while I’m very appreciative to Silicon Valley Bank for the acquisition — and I really enjoyed my two years there — that’s not how I roll.”

Kimerling is known for, among many things, his bluntness. He swears on stage and in interviews and likes to shock his audience. He likes to say what’s stopping banks from moving forward in innovation is “that they’re run by bankers” — that their issues are deeply cultural, not technical — it’s one of his favorites. He’s earned a reputation as being a truth teller in an industry that desperately needed a break from its traditionally guarded, protective, siloed way of doing things.

It’s an appropriate character sketch for someone who’s made such a big impact on open banking, which ultimately will allow customers and other businesses to access bank data in real-time using APIs.

But as banks are highly sensitive about the safety and security of customer data, the ongoing transition calls for banks to completely rethink their role in their customers’ lives, something Kimerling has undoubtedly helped move forward.

Banks have been using application programming interfaces, the connective tissue that allows companies to connect and share data more easily, for 20 years — mostly to make it easier internally for software programs to work together. Around the time Kimerling’s company moved into SVB, in August 2015 — between the rise of digital commerce, the mobile device as a new channel and the mission to automate customer banking needs with APIs — banks’ use of APIs began to involve outside financial apps more and more. The industry transitioned to a new, more open, world of banking.

“Insofar as it is my goal to help rethink what financial services is in the 21st century, I hope I’ve had some impact,” he said. “I just don’t want to work at a big company. I want to work with entrepreneurs and help them build great businesses. No amount of collaboration with other people at the bank is going to change that I have a real passion for working with early stage entrepreneurs.”

That passion goes back at least five years, he said. Kimerling has been an active investor in early stage startups since 2012, which is when he co-founded Deciens Capital, a micro venture capital firm that focuses on making angel and seed investments. He’s also been a 500 Startups mentor since January 2016. In his new role he’ll continue working for financial services, focusing exclusively on startups working “to mature financial institutions or help them transform themselves into being really digitally native companies,” he said.

Being at a bank is a completely different experience from the startup world (even at Silicon Valley Bank, the bank for Silicon Valley startups). Banks have to balance the needs of shareholders, regulators, employees and customers, Kimerling said. They’re all always under some tension and sometimes banks care about one or more of those constituencies to the detriment of others; the equilibrium between them invariably changes over time.

“Moments when I got frustrated at the bank were moments where I felt the balance between those constituencies wasn’t always aligned with what I thought it should be,” he said. “I think I brought the attitude that we need to be most focused on the need of our customers, I believe, to some success.”

To outsiders, the sight of banks trying to appear that their sole purpose is to improve customer experiences and relationships can seem a little kumbaya.

But that customer-first, customer-centric mentality is what drives banks today, although most struggle to live it, Kimerling says. He sounds patient and empathetic to that struggle. It’s difficult for banks when they have to balance three-, five- or even 10-year transformations with a culture that has sets a cadence of quarterly earnings. And it’s not unique to financial companies.

“I hope at the end of the day there’s a question of intent,” he said. “No one can be perfectly customer focused because no business, regulated or unregulated, lives in a bubble without other constituencies. If you have the intent to be customer focused — customer-obsessed even — then you can, over time, set that expectation to other constituencies and move toward it with greater and greater effect.”

But he says early stage startups are where he thinks he can add the most value to the industry.

“I built a great team and we were able to accomplish some things,” he said modestly when asked about his impact on the industry. “I hope that history will look back and say we were at the cusp of this great transformation and we did our small part to catalyze it.”

WTF is open banking?

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With the rapid proliferation of personal finance apps, developers are racing to meet demands from customers who want to view their banking information in ways beyond the traditional banking apps from their providers. For our favorite personal finance apps to sync with our bank accounts, it’s largely dependent on a concept that’s gained traction in the last couple of years: open banking.

OK, so what is open banking?
Open banking is the concept that allows banks to share customer data with third-party companies or apps securely and in real time, through the use of open application interface platforms. Making that data accessible to other parties allows them to build a better customer experience; by having different records of the same data updated at the same time, customers’ view of their finances is more accurate and they can compare, analyze and manage accounts more effectively or make more sound financial decisions.

Online banking before open banking, was rife with risks. “You as a customer would give your account login and password and the app has it stored somewhere — there is a security threat there,” said Ismail Chaib, chief operating officer at Berlin-based software company Tesobe which is behind the Open Bank Project, an international initiative to get financial institutions to freely share their data with third-party developers.

With open banking, according to Chaib, the third-party provider accesses a user’s bank information through a token, allowing the bank to be the gatekeeper of the information so that the app doesn’t need to store any of the information. It’s a process that’s intended to work seamlessly.

Open banking is dependent on banks sharing their APIs with third parties. At a broad level, APIs are what’s happening at the back end of one piece of software to allow it interact with another.

“It’s really a pipe which connects two software components and through it data is circulating,” said Chaib.

So, in an open banking environment, bank APIs are available to outside developers to allow the development of other apps, with the goal that the customer has as many resources as possible with which to view or understand their finances.

“Open banking is the idea that we have APIs freely or publicly accessible for anybody to review and there’s no paywall or documentation to sign,” said Dan Kimerling, head of API Banking at Silicon Valley Bank.

How is this secure?
Sharing account information through APIs is far more secure than the old method of entering account information manually, which is more vulnerable to hacks.

“It’s extremely secure the same way all encrypted internet traffic is,” said Kimerling, who stressed that current API standard embeds security, rights and permissions.

Nice. What effect would this have?
The ultimate objective is the creation of a universe of apps that use your bank account information to offer as broad a range of products as possible to suit a customer’s needs.

“We believe that the future of banking will be when banks give you not only one application but access to an ecosystem of apps out of which you, the customer can cherry-pick and download those that catch your particular need,” said Chaib.

Sounds important.
It is. As banking becomes more enmeshed in daily life, open banking becomes an important way to give developers the flexibility to develop products that serve customers’ needs.

“If you take a car-sharing service, there’s a payment with you and the driver that may involve financial services and the car driver may be financing the car through leasing or auto finance programs,” said Kimerling, adding that interoperability between banks and apps is a necessity to allow these transactions to take place.

Open banking is catching on quickly outside of the U.S. The European Union’s Payment Services Directive 2, which regulates payment services and payment service providers throughout the EU, includes provisions to allow banks to allow third-party API access. Earlier this month, the U.K.’s Competition and Markets Authority gave the country’s largest banks a year to develop an open banking API interface.

The U.S., by contrast, has been slower to move on open banking, note industry watchers.

“When you compare us to the U.K. that has an open banking standard, we are so far behind as the regulatory environment is not weighing in,” said Jean Donnelly, executive director of the Fintech Sandbox, a Boston-based nonprofit that advocates for open data to fuel innovation in financial technology. “It’s a battle between the banks and the banking data aggregators.”

What are U.S. banks doing on this?
Some major banks are taking steps towards open banking. For example, last November, Citibank launched an API developer hub, which expanded developer access to APIs across several usage categories. Wells Fargo also expanded access to APIs, although it’s invitation-only at this point in time. Banks are also showing more openness to share data with financial technology companies. Over the past two months, Intuit, which owns popular personal finance app Mint, entered into data-sharing agreements with Chase and Wells Fargo.