Exclusive: ‘A year of challenge, a year of change’ – Anders la Cour, Banking Circle in “The Fintech Magazine”

Now more than ever, a financial utility is needed that provides banks and others with a ready-made way to offer real-time settlement for businesses, says Banking Circle CEO Anders la Cour.

Six months in and 2020 has proved just how unpredictable life, business and banking can be.

How can a business of any size plan and prepare for the realities of a pandemic, with little to no warning and lingering uncertainty regarding the resumption of any kind of ‘normal’?

The global restrictions imposed on most businesses brought to light the fragility of many firms, and the lack of provision available through traditional channels to help them through difficult times. Even in a ‘typical’ year, without a pandemic, smaller businesses and startups are often at risk of collapse if payments are delayed, or they are unable to access loans quickly enough to continue trading as normal in the event of equipment failure, for example. Banking Circle has reported in the past on research that revealed around a quarter of online SME merchants would have to let employees go if they could not access additional funding, and a similar number feared their business might fail as a result.

Revolut Business also commissioned a study in late 2019 that  investigated the challenges SMEs face in accessing credit, getting paid and finding suitable financial partners. Its findings very much support our own SME research, published in 2018, 2019 and 2020.

In March 2020, Revolut Business published a detailed white paper entitled 2020 Vision: Taking A Closer Look At Antiquated Banking Practices. Looking back 10 years, it highlights the significant and rapid change that has occurred since. For example: “The global financial crisis was still just unfolding… fewer than one in five people (19 per cent) had access to a 3G smartphone, just one in 10 (10 per cent) of European SMEs had taken an order online. It was an economy dominated by cash and cheques.”

For small businesses, standard practices and routines have gone through enormous change and streamlining in the past decade. Revolut highlights just some of the ways in which we used to conduct business, which now seem unbelievably inefficient and slow: “It was common to prepare accounts on paper and go to meet accountants weighed down with hard copies of invoices, receipts and statements. [SMEs] met with lawyers to draw up contracts and planned their work in team meetings and with paper diaries and planners.”

All of this was our normal then; it is impossible to accurately predict what will change in the next 10 years. But one thing we can say for certain is that payments have not kept pace with this change, and by then will be even more out of date and inefficient, excluding more businesses than ever. Something needs to change, and it needs to change quickly.

The importance of payments

The difficulties around borrowing are well-known, but what is often forgotten is the impact payment systems can have on a smaller business. The ability to process payments quickly and at low cost is vital for any business in this fast-paced digital landscape, and the ability to do that across borders is becoming more important every day.

Everything is faster today. Society is more connected. Digitisation allows consumers to purchase goods from sellers anywhere in the world, without a second thought for details like foreign currency exchange rates. While this is great for international trade, boosting the global economy and helping to break down borders, it requires a lot from the underlying provider and, eventually, the SME seller takes the hit – in transfer fees or slow settlement cycles stalling cashflow.

Some still believe instant payments and settlement are a luxury businesses simply do not need. After all, payments have always taken days or weeks in the past. But if an SME wants to keep up with the rest of the market, it needs the ability to restock rapidly, to expand to new markets and territories. That requires working capital, which in-turn requires faster payment processing. To deliver that, financial services providers need to start working together more closely. We must collaborate to deliver solutions which help rather than hinder SME growth. Real-time or instant payments, as well as reduced settlement times, are essential to allow SMEs to keep up the pace.

The Banking Circle solution

Fully licensed but free of legacy systems, Banking Circle delivers financial infrastructure for payments businesses and banks at low cost but without compromising on compliance or security. We also provide access to the payments SMEs need, regardless of borders and size of operator. We have the benefits of being both a bank and a fintech – and pass those benefits on to our partners.

Working with a third-party financial infrastructure provider like Banking Circle, banks and other financial institutions can increase financial inclusion by offering their customers faster, cheaper banking solutions such as multi-currency banking accounts, local clearing, crossborder payments and flexible business lending – without the need to build their own infrastructure and correspondent banking partner network.

We enable financial services businesses to do what they’re really good at – serving the end client successfully and efficiently. As a business, we have always been committed to improving financial inclusion by building dedicated new tech, rather than tailoring or tweaking existing solutions. As a result, we now offer bespoke, flexible, scalable and future-proof solutions.