Jesudason, who invested in Block.One’s seed round with about 15 other early backers, joined as the company’s chief operating officer and group president.
But, just over a year in the role, he’s moving on from Block.One and has plans to start a tech fund, though he remains as Block.One “senior adviser”.
‘‘I learnt a couple of things. One is this: it is extremely fulfilling to work in a very entrepreneurial company that is growing. But one of the other things is you are either the founder or you’re not,’’ he says.
What Jesudason means is that once a company has scaled to a certain point, it’s the same working as an executive in a large quickly growing new company as it is in a big bank.
‘‘In a job like mine, you have to start managing the bureaucracy,’’ he says.
During Jesudason’s time as a Block.One executive, the group’s employees grew to more than 300 people, and in September, it opened an office in Washington DC that many expect will eventually result in Block.One leaving its Hong Kong base.
It has a venture capital division and has even flagged plans to roll out a social media challenger to Facebook, called Voice.
The value of Jesudason’s original investment has also ballooned.
In May, Bloomberg reported that Block.One was conducting a buy-back at a price that would mean its earliest investors would have made as much as a 6,567 per cent in less than three years. That means someone who invested $US100,000 would have their holding valued at $US6.6 million.
Jesudason, who didn’t say how much he originally invested, has sold part of his original holding, but retains some shares.
So does he think blockchain will change financial services? Will it kill the banks?
Jesudason says the blockchain is still in the very early stages.
‘‘Blockchain and other technologies are coming together to cause a threat for financial services and the interesting thing is this has been quite a slow evolution,’’ he says.
He calls the next phase Web 3.0, and says we’re just entering it.
“We’re getting new technologies like blockchain that provide two things: one immutable system of record, and a secure data transfer. Plus technologies like machine learning and AI, and the combination of all those technologies together. actually pose the ultimate threat.”
Within that space, there is a systems race under way – and Block.One is a participant in that.
The system that emerges as the winner – though Jesudason says it’s not a winner-takes-all space – will have won on transactions per second, the cost and finally, response time for customers.
‘‘We’re ending phase one on blockchain. But we have got a long way to go,’’ he says, adding that digital currencies – relying on blockchain to transfer money – are now definitely coming. In August, the Bank of England’s Mark Carney suggested a digital currency could in time replace the US dollar as the world’s reserve currency.
As technologies improve and ‘‘Web 3.0’’ looms, Jesudason sees his next opportunity in technology investing. He is planning to launch a fund early next year. It will invest in technology in Africa and the Asia-Pacific region.
To date, fintechs have largely failed as challengers to traditional banks, he says.
‘‘The first era of fintech has largely failed.’’ That’s mainly because it hasn’t really found a new solution, he says. Take neo-banks. They basically offer the same service as a bank – lending – with a similar customer experience. The differentiator is their willingness to lend, and how much they charge to do so.
Jesudason, who is a director and investor in South Africa’s digital retail bank Tyme, says he expects the big banks to survive the transition to blockchain and the changes that come with it.
‘‘I think the reality is, if you take the top 30, 40 biggest banks in the world, they’ll be OK,’’ he says. ‘‘If they struggle with the transition, they’ll still exist but they’ll just make a lot less money.
“But what people forget is the 50,000 other banks.”
He’s interested in emerging markets because he says there is faster adoption and a greater need for digital banks.
Take Tyme, which is run by former CBA executive Coen Jonker, who joined after CBA sold its stake in November 2018. Jesudason says the group, which launched TymeBank in February, expects to have 1 million customers by the end of this month and has an enterprise value of $500 million.
When CBA sold its 90 per cent stake to African Rainbow Capital, it said the deal resulted in a post-tax loss of $113 million.
Jesudason says it’s important to remember that a strong economy requires a strong and profitable banking sector. But he believes the banks could have passed on the full interest rate cut the last time around.
‘‘It’s hard to justify not passing on rate cuts, particularly in a world where interest rates are falling … and the cost of funding is also falling. And the Australian dollar is also falling, so the offshore wholesaling funding cost has gone down.’’
“The banks are still hugely profitable.”