EXCLUSIVE: “One For All” – Anders la Cour, Banking Circle Group and Mikkel Velin, YouLend in ‘Discover Money20/20’

Banking Circle Group CEO Anders la Cour believes that 2022 will be ‘the year of the ecosystem strategy’ – a strategy that’s seen the Group expand to include a range of complementary providers, including Mikkel Velin’s embedded finance platform YouLend

In the wake of the 2008 financial crisis, and with the advent of the revised Payments Services Directive (PSD2), fintech businesses focussed on tackling a single part of the value chain, asking ‘what one problem can we fix by doing things differently from how the incumbents have always done it?’.

More than a decade later – and following unprecedented COVID-driven digital acceleration – what we’re now seeing is businesses recognising the value of delivering not one, but multiple solutions over a single online platform. By expanding their proposition, fintech’s can address several problems for their clients, enabling those clients to better serve their end customers.

For fintech’s, a multi-solution platform is great for giving their clients ‘customer stickiness’, by addressing the complete lifecycle of financial services that an individual or business might need. However, to achieve that, fintech’s need to offer a range of financial services their clients’ customers want – as well as those they may not yet realise they need – without dissipating their brand values or service mission. Re-bundling of financial services achieves this, not only delivering competitive advantage but elevating fintech’s value as a whole.

Recent research from McKinsey found that capital markets are anticipating a ‘great divergence’, in which the gap between the valuations of the banking industry’s leaders and followers widens significantly in the next two to three years. According to its Global Banking Annual Review 2021: The Great Divergence report, fintech’s are pivoting their value propositions and staying on the right side of the divergence by either doubling down on key value propositions and core markets or diversifying and collaborating to build a platform of curated, re-bundled services, generally working with a licensed partner who can deliver the regulated financial products.

This is true for players of all sizes – re-bundling financial services, creating platform businesses with a wide range of curated services for growth through services rather than products, enabling them to expand into emerging and untapped industries. And, according to law firm Hogan Lovells, consolidation of financial services will likely increase further in the coming months as businesses seek to deliver a wider range of solutions to an ever-growing customer base.

A number of high-profile acquisitions underlines the value that re-bundling is expected to deliver. For example, Visa has made a number of acquisitions in the last 12 months, including Tink, the open banking platform that enables financial institutions, fintechs and merchants to build financial products and services and move money; Earthport to expand its real-time payments network; and CurrencyCloud to provide foreign exchange solutions for cross-border payments.

Buy now, pay later giant, Klarna, bought German payments fintech Stocard, enabling it to add the app for bundling multiple bank cards as well as deliver discount deals from a network of merchants. Rapyd acquired Icelandic payments solution company Valitor to extend its in-store and online payments acceptance solutions as well as card issuing for merchants.

In November 2021, UK-based Paysafe, the leading specialised payments platform, acquired German fintech, viafintech, to add digital banking apps that enable consumers to make deposits or withdraw cash from their digital bank accounts at a nearby retail store using a barcode.

2021 was the year for alternative providers to make their mark, disintermediating the incumbents where slow, complex and expensive processes had been the status quo. Now that culture of collaboration is inspiring and giving birth to a new ecosystem approach to deliver financial services that are fit for purpose for a marketplace that can’t afford for slow or high-cost processes to hold them back.

EVOLVING THE ECOSYSTEM STRATEGY

No business that wants to stake a claim in the e-commerce marketplace can afford to allow legacy systems to undermine ambition. As a result, we expect the ecosystem strategy to really come into its own in 2022. Financial services will be

re-bundled to deliver full-solution stacks that are not limited to the provision of one solution, but a whole suite of them, built in a collaborative ecosystem. And the key is to create a technology-agnostic platform that is the basis of the ecosystem and underpinned by an account infrastructure from which all services can be delivered.

That’s where Banking Circle comes in. As a next-generation financial technology platform for global commerce, we can enable payment companies, banks, global marketplaces and online merchants to accelerate the digitisation of their customer and supply-chain interactions, with modern financial solutions.

At the centre of the Banking Circle ecosystem sits licensed bank, Banking Circle S.A., offering cross-border payments, accounts and liquidity management through a global hub for real-time clearing and settlement with direct API access.

Launched in 2016 to address the time and cost challenges of B2B cross-border payments, Banking Circle has grown rapidly, committing significant investment to the integration of a vast network of local clearing and payments schemes to build a unique super-correspondent banking network. This allows it to do the ‘heavy lifting’ for its 250-plus clients.

A rich set of complementary e-commerce solutions surround the bank in the ecosystem, including embedded finance from YouLend, business payments and card issuing with B4BPayments, B2B buy now, pay later services from Biller, and account-to-account payment methods through SEPAexpress. Each innovative, rapid-growth businesses, becoming part of the Banking Circle ecosystem enables them to offer their clients access to the total ‘bundle’ through one interface.

The benefits for those clients are considerable. By accessing multiple solutions from a single ecosystem, they will not only be able to respond more rapidly to market opportunities, gaining a ‘first-to-market’ position, but they will see significant cost savings as well as that all-crucial ‘stickiness’.

All part of the journey

Mikkel Velin, Founder and Co-CEO of YouLend explains why re-bundling through the Banking Circle ecosystem makes sense for his clients

At YouLend, we enable our clients, such as e-commerce providers, payment service providers (PSPs), tech companies, banks, and other marketplaces, to extend their core service to SMEs by embedding flexible financing options into their existing product suite. This helps the underlying SMEs who have been shown to grow 25-36 per cent more in the six months after they obtain financing. It also creates a ‘stickier’ product experience: SMEs who are offered embedded finance are less than half as likely to switch to other providers.

In the Banking Circle ecosystem, YouLend’s solutions greatly complement the payments offering of Banking Circle S.A., allowing our clients to quickly and easily offer their SMEs tailored financial products across several jurisdictions, including all of Europe. Our clients can immediately create value for their SMEs, without having to navigate the usual regulatory and technical hurdles in each individual country.

This article was published in Discover Money20/20, Page 4-6