EXCLUSIVE: “Scaling fintech” – André Silva, Revolut and Aaron Holmes, Kani Payments in ‘The Fintech Magazine’
Revolut and Kani Payments are both UK-based fintechs with their sights set on expansion. Here, André Silva and Aaron Holmes discuss how the neobank and the PSP respectively are scaling up in an environment where trust and compliance can define your success
With over 25 million customers, a $33billion valuation that dwarfs that of its neobank rivals, and a strategy to become a superapp, Revolut is widely revered as a champion among challengers. That said, the London-headquartered company is still waiting to receive the UK banking licence it applied for in January 2020 and, although it has successfully replicated its business across the world, that’s likely to hold up some of its expansion plans as a fully fledged bank in other territories where regulators will see that licence as a testament to its dependability.
Kani Payments, meanwhile, is a fintech success story based in Newcastle, a city in the north of England identified in the Kalifa Review as an emerging hub for fintech. Its payments reconciliation and automation platform primarily helps other fintech companies grow. According to Kani’s founder and CEO Aaron Holmes, it has reconciled more than $20billion in payments and is live in five continents with clients such as Railsr, Sodexo and Paysafe using the platform. Founded within three years of each other (Revolut in 2015 and Kani in 2018), both companies were the product of a prevailing generous investment environment but they went down different funding routes.
Revolut chose very public crowdfunding campaigns, which piqued interest and loyalty to the brand, topped up with VC investment, while Kani has had one venture capital investor from the get go.
It went through the Tech Nation’s Fintech Growth Programme in 2019; the same year, Revolut (alongside Monzo bank) was selected to join Tech Nation’s Future Fifty programme for fast-growing companies, having already reached unicorn status. Both Kani and Revolut recently entered the States (see page 32). And yet as Kani would argue that a third-party payments solution is the best choice for an ambitious startup while Revolut was determined to build its own stack, they are in broad agreement that compliance and, by extension, the trust it earns a financial services provider – be it B2B or B2C – are fundamental to success.
“There’s quite a lot of overlap between regulators. We tend to find that a report generated for one regulator will have a lot of similarities with another”
A SUPER-APP FOR THE WORLD
André Silva, head of global expansion at Revolut, isn’t shy of the fintech’s ambition to be ‘a global financial super app’, which it came a step closer to achieving with the release of Revolut Pay in September 2022. A one-click payment feature to rival PayPal and Apple Pay, it can be used with other providers’ payment cards; Revolut Pay can already be spotted on major e-commerce checkouts. While the UK is still the bank’s biggest market, it has a significant presence in Europe, where it recently announced the addition of its one millionth customer in Portugal, and, according to Silva, it’s ‘making headway into Australia, Singapore, Japan, US, and we are very, very close to expanding into New Zealand, India, Brazil, and Mexico’. And while that means onboarding many more new customers in very different regulatory environments with very different consumer behaviours, in Revolut’s case it also means establishing an organisational presence in those places, which builds stronger relationships with regulators.
“We have over 90 nationalities working for us,” says Silva. “So not only are we targeting being a global financial super app, in the sense of offering services, but I think one of the main driving forces behind how successful we’ve been in our expansion is that we are very plural in how we see the world.”
At the moment, it’s able to offer most banking services across mainland Europe by operating on a licence issued in Lithuania, and elsewhere in the world on an e-money institution licence (such as it holds in the UK) or piggybacking on a fully licensed bank, which it does the US, under the Metropolitan Commercial Bank’s licence. The latter strategy can be both a restrictive and expensive way to operate and has forced other European neos to rethink their stateside business.
Founder Nik Storonsky said recently that a standalone US licence, which it applied for in 2021, is an integral part of its ambition to becoming a superapp.
“Financial services, being probably the most highly regulated industry in the world, doesn’t lend itself to rapid expansion,” observes Silva. “But speed is not our main concern; it’s about ensuring we build positive relationships with the regulators, ensuring we’re fully compliant, can build customer trust and ensure we set ourselves up for scale. If that means going straight into a bank licence, so we can provide services to consumers at the highest level, that’s what we would go towards.”
KANI’S PATH TO GROWTH
Kani has been following Revolut’s success closely.
“We met the team at Revolut early on in their journey, and it was obvious that they were something special,” recalls Holmes.
Like the neo, Kani seized its moment to disrupt the existing market – in its case in B2B payment services. Its SaaS platform automates reconciliation, reporting and data flows for fintechs that have disparate and varying data sets. It tends to work with companies that are looking to expand but don’t have the capacity, skills or finances to build a new payments tech stack. Instead, Kani streamlines the reconciliations and reporting for those challengers and payment service providers, and it’s doing that across five continents. Next year, it will be opening an office in Australia as well as the States. For Kani, operating across different regulatory jurisdictions primarily poses data storage challenges.
“Sometimes data needs to be geolocated in a particular region, or a particular country, to comply with local law,”says Holmes.
“If we’re working with a company in Australia, for example, they may want to geolocate that data in Australia. So, we use Cloud-based technologies to do that, which has allowed us to scale our product and roll it out across the world.
“There’s quite a lot of overlap between regulators. We tend to find that a report generated for one will have a lot of similarities with what’s required by another, so we’ve probably already done 80 per cent of the effort.”
THE IMPORTANCE OF TRUST
While not exactly cookie cutter, Revolut has a similar approach to geographical expansion, having refined a scalable process that it applies to every jurisdiction it enters. But it still faces challenges.
“Data localisation is obviously a big one for a Cloud-based bank,” says Silva. “As Aaron says, a lot of the markets have onshore data storage rules, which leads to a very significant endeavour in terms of localising the tech stack.
“Foreign ownership requirements – especially in the Asia region – are big blockers to our expansion, too. We like to have control of our own operations, but in a lot of markets, that is not possible, because financial services are highly protected. A lot of times that leads us to having to form local joint ventures.
“The third challenge is about building the right team in the market. As we expand, we’re kind of building standalone entities, and we have to have the right teams to take those forward. That is not something we can do quickly; we spend significant time building robust teams.”
“Revolut has a strategy of establishing regional product hubs close to its target markets ‘that allow us to be a lot more nimble’, says Silva. “So not only do we have a central platform that’s scalable and modularised, but we also have regional product hubs that are ready to deploy this and know the systems that are close to them, for example, Pix in Brazil.
“Last but not least is the challenge of capital requirements. Expanding a financial services company is not a cheap endeavour, we have to lock in significant amounts of capital in each jurisdiction, obviously depending on which licence we decide to go with. And that’s quite contrary to how a lot of tech companies who are not within the fintech space approach their expansion, which is in a very capital-light way.
“Three things – standardisation, scalability, and being humble enough to build regional product, and understanding that, from a central perspective, we don’t know everything – have been key for us to really work with regulators worldwide, and successfully expand by gaining customer traction in lots of markets.”
“With reconciliation, we were quite pedantic about building our tech stack in house, so we can reach our desired speed of expansion”
Known as the ‘fintech of fintechs’, one of Kani Payments’ key features is that it can offer compliance straight out of the box to ambitious neos like Revolut.
“All a client who wants to become regulated in Europe, for instance, has to do is plug in their data and they’re fully documented, with procedures that they can lift and put straight into their policies,” says Holmes.
This is particularly necessary considering how instantaneous payment mechanisms have become.
“For example, statements from the UK regulator say that in no circumstances would it be acceptable for reconciliation to be carried out less than once per day. And, once you move to a real-time settlement model, once per day is not enough. So, these intraday reconciliations become critical,” Holmes adds
REVOLUT’S APPROACH TO TECH
Revolut deliberately decided not to outsource that element of its payments stack. “When we get into a new jurisdiction, it’s about striking a balance between what we want to outsource – that’s usually vanilla solutions, that work very well already, that we can just plug into – and what we want to bring in house and keep full control over,” says Silva. “With reconciliation, we were quite pedantic about building our tech stack in house, so we can reach our desired speed of expansion. We spent a lot of time building things to a level where we are sure there won’t be any reconciliation breaks, and that when they launch, things will run smoothly, and in a scalable fashion, as well, because, if we’re going to launch in a market, we want to see volumes ramp up quite quickly.”
That said, he fully endorses the third-party approach for others; in fact, Silva believes such partnerships are critical to accelerating fintech expansion.
“Companies like Kani enable a lot of players to provide services, without massive investment, and the massive tech deployment that we at Revolut had in the past. It fosters innovation, competition, and financial inclusion.”
Which just goes to show – given that Revolut went into profit for the first time last year – there’s no right or wrong solution, just the most appropriate one for a particular business strategy. As Holmes points out, not all fintechs are aiming to expand as rapidly as Revolut.
“Although, for clients that are using our platform, that is often what they want – to be able to scale their operations into other countries without going through the headache and major IT build of a new tech stack to deal with the new local requirements, especially regulatory requirements and standards.
“One of the big advantages of this wave of fintech that’s come through is this modular, almost microservice type approach,” he adds, “where you can select the best-in-class reconciliation provider, or the best-in-class identity provider, to make sure that your products, and the underlying operations behind it, are the best that they can possibly be.”
I like to be in America!
Cracking the US is a goal for most fintechs. As Revolut’s André Silva says ’it’s the biggest market in the world’. Most businesses would want a slice of the $72.6trillion payments market and $2trillion in personal savings? But it can take a long time to penetrate and success hinges significantly on meeting regulation, which can differ from state to state, essentially creating multiple markets. Both Revolut and Kani have been able to make some headway in the US, something not all European fintechs have been able to achieve. The US was part of Revolut’s initial expansion phase in 2019 and it applied for a licence there in 2021. Kani is about to cement its presence in the US to serve existing clients and onboard more. Here’s what both speakers had to say about scaling in the US market.
ANDRÉ SILVA, REVOLUT
“In a lot of markets, our key competitive advantage is in travel, because we have a multicurrency solution that enables you to spend like a local, which caters to people that travel quite a bit, and in remittances. What we often see is people wanting to put their savings in US dollars, and remit back to US, but that’s not as much the case in the opposite direction. So our core user propositions didn’t strike quite as much in the US, which made it challenging, because we had to reinvent ourselves slightly.
“But, at the same time, the potential of the market is huge. One good audience example is non-resident aliens. People like university professors who would only lecture for a semester, so they’re not eligible for a Green Card, but they still want to have a bank account in the US and make payments and so on. So, we still see a key audience there for our product, amongst others.
“We’re really playing the long game here. It’s still early days in our US expansion, but we’re committed to successfully making our way into the market, and we have seen early signs of strong growth.”
AARON HOLMES, KANI PAYMENTS
“In our experience, the key to unlocking growth in the US is not to try to do it ourselves. It’s a highly competitive landscape and it’s far easier to scale with a local partner on the ground that really understands the market and can walk you through that complex ecosystem.
“But I’d also argue the States is lagging behind Europe in fintech growth. Look at the rollout of chip and PIN in Europe. That was very well established, prior to being considered in the United States. A lot of innovation has come from Europe, and I think that positions European fintech companies very well to transition to the States. We’ve been talking to a US financial institution with $4.5billion in assets but doesn’t offer online banking. Which is an indication that sometimes things that are routine in Europe, aren’t fully rolled out in North America.”
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