News

HOW BANKING AS A SERVICE IS SHAPING CUSTOMER EXPERIENCES IN FINANCIAL SERVICES

By Leonard Coen, Head of Sales Financial Institutions & Fintech Europe at Wirecard

With Uber, Alibaba, Tencent, Apple, Amazon and Google launching financial products, we have seen an increasing push of non-bank players moving into financial services, a market that for centuries was reserved for banks. However, big tech companies with endless resources aren’t the only ones entering this space. Banking as a Service (BaaS) democratizes financial services and facilitates these to nearly any business, allowing companies of all sizes to extend their offering accordingly.

Why has it become so attractive for businesses to offer financial services?

Firstly, consumer expectations are rapidly evolving. Easy to use and fairly priced financial services via digital interfaces are becoming the new norm. Secondly, by adding financial services to their offering, businesses can create additional revenue streams, accelerating the path to customer profitability. Thirdly, financial products are extremely sticky. If successful, they do not only bring in revenue but also increase retention and brand loyalty. Finally, financial products unlock rich data about customer behaviors, which can be leveraged in many different ways.

I believe that startups, SMEs and large companies should be able to quickly launch financial products and at a reasonable cost without having to become a bank nor having to build prohibitively expensive financial technology in-house. While new entrants capture new revenue streams with financial services, consumers benefit from more choice, better products, and lower prices.

The key is Banking-as-a-Service (BaaS), a trend enabled by a new breed of providers such as Wirecard, which enable businesses of all industries and sizes to move into financial services quickly and affordably.

What does “as a Service” mean?

The “as a Service” trend is nothing new. Around the globe, it has been sweeping across various industries and radically changing many of them by creating new opportunities and innovation. For instance, the whole era of Digitalization would probably not have happened without the emergence of “Software as a Service”. Launching a software company was once upon a time prohibitively difficult: entrepreneurs had to buy physical servers, source expensive software licenses and then code databases before being in a position to build a new product. Today, a single developer can go from initial idea to deployment in days, thanks to providers such as Amazon Web Services or Google Cloud that offer the above mentioned infrastructure “as a service”, thereby tearing down some major entry barriers.

And what about “Banking as a Service”?

Traditionally, innovation pace in financial services was quite slow. On one side, large banks and financial institutions are fighting against legacy IT systems, costly brick and mortar footprints, and a strong culture of risk aversion. On the other, startups are constrained by the huge upfront costs and regulation linked to the launch of a financial product.

How challenging it is for non-bank players to offer banking services? Firstly, you need a banking or similar financial license. These are not only expensive, but more importantly require compliance with strict regulation on money laundering, banking secrecy, deposit protection as well as IT security, to name only a few. Due to the critical importance of financial institutions in the economy, these licenses are very difficult and time-costly to obtain.

In addition, some kind of technology core i.e. a core banking system is required. This software is responsible for opening and maintaining user accounts, and logging where the customers’ money is and how it is moving around. The core banking system would need to integrate with a series of payment systems so customers can send and receive money using SEPA or SWIFT rails. To issue payment cards, you need to become a principal member of either the Visa or Mastercard network.

Data is also critical when it comes to issuing loans. To issue loans you need to build up intelligence about the credit history of the target group via credit scoring agencies or alternative means. Regulations also play a key role, including Anti-Money Laundering and Know Your Customer. Last but not least, the company wishing to build a financial product would need to implement fraud prevention systems, which requires yet again more software and systems. Clearly, it is a challenge to build a financial product as a non-bank player.

What if we brought the entire stack described above to the financial services industry “as a Service”? Similar to the change that cloud providers brought to the computing and storage space, the entry barriers would be dramatically reduced and various players could offer financial services, thereby driving innovation and new revenue streams. That is exactly what BaaS providers such as Wirecard are doing.

Licensed financial institutions with a strong tech DNA such as Wirecard enable non-bank players to launch financial products by giving them access to proprietary financial infrastructure as a service. The BaaS provider stays mostly invisible to the end customer and serves as an infrastructure supplier. Any business can embed financial services into their product offering, such as mobile bank accounts, debit or credit cards, loans and payment services, without obtaining their own banking license and banking technology.

Let’s take a look at two concrete examples of BaaS embedded into non-bank product offerings:

Xolo

Xolo is an online platform for launching and running micro-businesses anywhere in the world. In 2020, Xolo decided to launch a digital banking offering for micro-businesses to complement their service portfolio. By leveraging on Wirecard’s one-stop shop BaaS offering, Xolo users can now virtually open a business bank account within 48 hours, receive a corporate debit card, and be able to effectively manage their banking, tax and compliance activity via a unified dashboard.

Payhawk

Payhawk aims to fully automate and simplify corporate expenses, offering an all-in-one corporate expense and spend management service for small and medium sized companies.

With the support of Wirecard, Payhawk launched a corporate expense card for its corporate clients, who will in turn provide it to their employees to use for business expenses. The corporate card has an app and web interface to give corporate clients a comprehensive dashboard for complete control and transparency over employees’ spending, travel expenses and other payments.

BaaS will further accelerate the trend of businesses all over the world moving into financial services thanks to drastically reduced entry barriers. The surge of creative and ambitious entrants will not only lead to a tremendous amount of innovation but also to a significantly enhanced customer experience.

News

HOW THE UK METALS INDUSTRY CAN RECOVER FROM THE IMPACT OF COVID-19

The Coronavirus outbreak and subsequent lockdown has created an unprecedented challenge for the UK metals industry, which comprises of 11,100 companies employing around 230,000 people^[1], and directly contributes £10.7bn to the UK economy each year.

However, despite the inevitable challenges and slowdown to come, the industry can recover by using this time to adapt and strengthen for the future.

To help companies rebuild in the aftermath of the situation, the UK’s leading metals supplier, metals4U, has outlined key lessons from the crisis and offers advice to those in the industry:

1. Focus on the domestic market

Due to the pandemic, the UK and many other countries around the world look set to be heading into a recession. Because of this, it’s a good idea for metals manufacturers to focus on rebuilding their domestic market before looking further afield.

This means that businesses can strengthen ties with their domestic customers, as well as helping to strengthen the UK economy as a whole. A strong economy keeps businesses and employees in work and helps to future-proof against any further disruption.

This is particularly salient due to the still-unresolved nature of the UK’s exit from the EU and the possibility of further Coronavirus outbreaks.

2. Strengthen your balance sheet

It’s inevitable that businesses will have been impacted financially, so the best thing they can do now is to strengthen their balance sheet and ensure they are financially sound and capable of riding out any future losses of income.

Obviously this is easier said than done, but by keeping dividends within the company instead of hastily paying to shareholders, being cautious with growth and expansion and building in emergency cost-cutting space, businesses can ensure that they are prepared for future epidemics, pandemics, or force majeure.

3. Adapt to the new regulations

As it rebuilds from the lockdown, one of the biggest challenges the industry faces is adapting to the new regulations and restrictions which have been implemented by the government.

These include social distancing measures, as well as remote working for those able to do their job at home.

However, whilst adapting to the ‘new normal’ will create initial hurdles which may take time to overcome, businesses should look to implement these measures and incorporate them into protocol going forward.

4. Reflect on lessons learned

One of the main reasons why Covid-19 has had such a huge impact is that most businesses, and indeed most governments, were completely unprepared for such a situation.

The scale and nature of the crisis were unprecedented, but learning from the experiences faced so far in 2020 can fortify the industry and prepare it for any similar situations in the future.

In addition to implementing social distancing procedures in the workplace, think about whether meetings can be done virtually instead of in person, saving on travel expenses or can you implement flexible working arrangements to allow employees to work from home? Review any changes you’ve made during the lockdown and look at any that can become mainstays in your business to improve efficiencies.

Paul McFadyen, Managing Director of metals4U, said: “Without a doubt, the Coronavirus pandemic has created a generational challenge for which the manufacturing industry, as well as others, was wholly unprepared for.

“But despite the inevitable impact on the industry, which will be felt for a while, there is the potential for growth, and more importantly, the development of procedures that will enable the sector to strengthen for the future.”

News

ARDENT FINANCIAL LAUNCHES AS A NEW GLOBAL SECURITIES DEALER

New global securities dealer launches today to actively trade corporate and financial credit and reorganised equities in markets across Europe, the U.S. and select Emerging Markets

Capitalised with institutional-quality permanent equity capital allowing it to provide firm markets and liquidity with its own balance sheet
Highly experienced board of directors and senior management team with significant and relevant capital markets expertise

Ardent Financial Limited, (“Ardent”), has today launched as a new global Securities Dealer to provide discrete and efficient execution and liquidity to the institutional market.

The London-based firm trades bonds and reorganised equities in credit markets across Europe, the U.S. and select Emerging Markets, including Latin America. It provides clients with two-way markets in event-driven corporate and financial credits and has already onboarded a number of European and U.S. institutional clients.

In contrast to many traditional brokers, Ardent is capitalised with institutional-quality permanent equity, allowing it to provide firm markets and liquidity with its proprietary balance sheet to a broad base of global credit investors.

Ardent has a highly experienced board of directors and senior management team, with an average of over twenty years’ experience each in global credit markets. The firm’s philosophy and process has been developed and refined over several credit cycles, with an emphasis on identifying investment situations that may be exceptionally mispriced.

Alongside the systematic identification of event-driven credits across a range of performing, stressed and distressed situations is active fundamental monitoring and dynamic secondary trading. Ardent’s disciplined approach is supported by a strong focus on a core list of credits where the firm performs comprehensive analysis.

Explaining why he felt now was the right time to launch a new securities dealer, Ardent’s CEO, Peter Chung said: “The continuing decline of well-resourced and seasoned dealers over the past decade has opened up a unique opportunity for us to enter and serve our clients in the global markets. Credit markets have historically been exposed to volatility in other asset classes. This volatility continues today, especially following the explosive growth in investment grade and high yield bond issuance and related indenture deterioration. This has led to many heavily leveraged corporate balance sheets, with unsustainable capital structures.”

Commenting on the launch, a U.S. Buy-Side Head said “Peter has built an incredible reputation over the years with buy-side clients that recognize his ability to add value and differentiate himself from others. He has created a unique franchise whose success is primarily driven by focus on credit selection, liquidity, knowledge of credits, discretion and loyalty, among others. I have no doubt in Peter’s ability to hit the ground running and succeed with his new firm, and anxiously look forward to having a veteran like him back in the market again.”

A European Buy-Side Head Trader added “For the past 5 years, Peter has been an invaluable business partner. Not only does he display a unique ability to identify interesting investment opportunities, but he is an extremely trusted and reliable source of liquidity, enabling the entry and exit of positions on a large scale in the most discreet and efficient manner. I am very excited for Peter’s return to the marketplace.”

Senior Management Team

Peter Chung, CEO

20+ years’ experience in trading debt and equity instruments. Senior Trader at SC Lowy’s European, US and EM event driven/special situations business. Head of European Distressed, HY & Loan trading at Nomura. Portfolio Manager at Verition Fund Management and Highland Capital Management. A.B. in Economics from Princeton University.

Aidan Brady, COO

25+ years of experience in operations. Previously, CEO of the UK Municipal Bonds Agency Plc. COO of Deutsche Bank UK and CEO of DB UK Bank Plc. Chartered Accountant, with a B. Comm from University College Dublin.

Timothy Alexander, Head of Strategy

20+ years of event driven experience. Partner/European Head of Sound Point Capital Management. Built UBS’s European loans and distressed trading business. Graduate from Tulane University’s AB Freeman School of Business.