Railsbank CEO: Why we bought Wirecard UK
The bank's boss as a services company is very optimistic about 'embedded finance' and wants to bring fintech to a global audience of non-financial services brands as well as startups.
The fall of the global payments empire Wirecard has been likened to fintech's 'Enron moment'. Wirecard disbanded when it was unable to control its solvency, after some careful reports of the Financial Times, in a shortage of cash, mass fraud and a big criminal enterprise.
The voices, including a major disruption to hundreds of thousands of customers of fintech companies in the UK such as Curve, Anna, and Pockit, can hardly stop consumers and investors from using fintech in the long term. Its demise could also make a new step in the race to financial breakdown.
Railsbank, a new type of banking platform, bought Wirecard Card Solutions Limited's UK assets (not equity). It has great plans to extend the rear of the deal.
Nigel Verdon, Founder and CEO of Railsbank, who spoke to AltFi last week, said he bought the business to help expand the existing customer base as well as bring“ some very good” and some smart technology entered the market.
“People make everything happen in this fintech industry. It's not just technology. Wirecard UK has had some very good people. There is also some small technology in it. It has 12 years of experience in it. It has a lot of things that we will take a lot of hours to build." He hopes this process will" definitely be by the end of the year "to complete. Railsbank has about 140 odd employees and Wirecard has around 90 staff in the department that it bought.
“We are a growing, expanding business. The opportunity to buy what was once known as the card division of the Newcastle Construction Association [acquired by Wirecard nine years ago] is great. They bring all the card issuance experience of 12 years or more, which is great.” He said since Wirecard's main problems are in its card redemption business, transactions are relatively easy from the corner. compliance.
“That is 95% of their business. The card-issuing business is quite isolated from the main problems at Wirecard. I think most companies are quite separate from those problems because there are a few thousand people already working there. There are a lot of really good people."
“When solving this problem and finding out who was complicit and who is really just doing their normal job, I hope those who are doing a normal job, no one will start persecuting them because they work at Wirecard. Let the authorities categorize that.”
“Anyone the authorities don't lock up is a perfectly good person to hire and that's the bulk of the business. That's 99% of their business.” Verdon's vision is to be the largest global banking platform connecting fintech, banking and non-financial brands with its API and a marketplace. great financial services.
“We have two distinct segments. We have 26 active new banks, most of them newly established and expanded companies. And then, there are traditional brands that don't want the problem of building financial services tools and managing it and all the operational aspects: settlement, clearing, KYC regulation all that. that thing."
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This view of where fintech is going is increasingly known as 'embedded finance', i.e. companies embedding financial products offered by others into their current operations. Verdon says his goal is to allow any startup or any brand to launch financial products at low prices within six to eight weeks instead of taking a year and costing $3 million.
“We achieve that by being a super simple API. We have covered all the content of the industry in the backend. Licensed from programs like Visa and MasterCard, licensed from regulators, all parts to get connected directly to the UK faster payments.
“We bring all our infrastructure and licenses and everything like that, put it behind our technology and that allows customers to launch the new Monzo within six to eight weeks."
So far for Railsbank, this also includes a credit product as a service with insurance products that will launch next year alongside investment products such as stock deposit accounts.
“[We want] to do it globally to allow brands like Uber and others to do it globally. And we are currently the only global player. We're living in the UK, Europe, Singapore, going to live in Malaysia and the Philippines at any time and we've just launched in the US.”
"Our vision is that we will become the platform on which anyone embedding financial services in the customer experience sits on us," Verdon argues that credit cards have a number of ways to thrive in the fintech space, especially in the US, and is about to roll out a service that will allow startups to launch credit cards.
“A lot of fintechs are already at the forefront of the new banking sector and monetize exchanges. Now, the real place to go is credit, and especially in the US market.
An important event that has yet to come true in the fintech world is Big Tech's invasion of the financial sector. None of those who like Facebook, Google, and associates want to be involved in operating financial services, Verdon said. But they really do. This is evidenced by the partnership between Goldman and Apple.
“You can use a tech company's customer base, that's huge. They also receive trust with a lot of customers and loyalty."
“This helps to solve a fundamental problem with the bank. Usually, to get a deposit account from retail, the customer acquisition cost is $ 250 and the long-term value is around $ 250. So if you're losing a lot of money in every deposit, the less likely you are to get a loan."
“That has affected the cost-to-income ratio of all the banks and reduced equity value. Big technology needs platforms that connect to financial services, and that's where we see our platform. They can sit on our heads. But it wants a single API portal in its entirety. If a deposit account can be worth about $ 10 an account instead of $ 250, suddenly you've changed the overall economics of the retail bank."
Verdon says that these trends are perhaps more of a threat to the start-up fintech world, though they could be a good acquisition target for the products Big Tech wants to make. He argues that some of the fundamentals that power the financial systems like Visa and Mastercard, as well as SWIFT, are seeing their grip on how money is being transferred around the world loosen.
“We will see a restructuring of fintech. There's going to be wiring back and forth if you look below the footage,” he said.
“You can see they're building rails to move money anywhere via any device for any form factor securely. Suddenly, ownership of those payment rails disappears, and they become a utility that Visa or MasterCard puts first, and when you have the power that Visa and MasterCard have, they will listen,” He added.
Railsbank is a principal member of Visa and Mastercard, UK Faster Payments, BACS and a full member of SWIFT's Supervised Financial Institution (SUPE).