EXCLUSIVE: “Easy Banking For Happy Spending” – Ignacio Santos, Fazil in ‘The Fintech Magazine’

Fazil is the Spanish challenger chasing a 500-million-person prize. It’s got a way to go, but it’s not lacking ambition. We met the man with a vision, CEO Ignacio Santos 

In Spain, mobile payments belong to the young. That’s according to the third annual joint survey by payments platform Pecunpay and Visa, which showed 91 per cent of people aged 18 to 29 will tap on glass rather than fumble in their wallet for a card.

For them, it’s digital all the way – even if their daily average spend is small, not more than €25 a week. It’s these consumers that challenger bank Fazil has its sights set on with a marketplace-inspired, rewards-based, free account for ‘happy spending’ (daily discretionary expenses), and an interface that’s defined by its simplicity.

It even communicates with customers in the emoji-led language of a digitally native generation. Fazil’s onboarding can be completed within four minutes of learning of the bank’s existence, requiring just a selfie and an ID photo – the process powered by AI and optical character recognition (OCR).

“That is the first touch that the user has within our experience, and it’s one of the most important, in our view’, says Ignacio Santos, CEO of Fazil. “We have dedicated the same resources to the onboarding process as to the entire app.”

The challenger is defined by its name – Fazil means ‘easy’ in Spanish. Launched in 2021, it has leaned into the qualities that have made neos so compelling in other regions. It’s even described itself as aspiring to be ‘The Spanish Revolut’. Fazil is on a mission to (in no particular order) become the country’s first challenger unicorn, the pre-eminent digital-only contender in Southern Europe and, ultimately, nab a substantial share of Europe’s 500-million-strong banking population.

It might have some competition for the second of those in particular. Although there is currently a war for customer loyalty going on among Spain’s biggest banks, the country is crowded with neos, including many homegrown as well as outsiders like N26, Curve, Wise… and Revolut itself.

“The most relevant key point here is to build a brand that our users love, and then be top of mind whenever they want to open an account”

Santos isn’t fazed by that.

In fact, he says it points to there being no clear digital-only contender to banks in Southern Europe. And he’s probably right. But unless one emerges soon, the market might fracture further and there will be no clear winner – although there’s likely a deal of consolidation to come further down the line.

There’s already been some evidence of that happening. In July, Turkish fintech Papara bought popular Spain-based neo Rebellion, and it’s not stopping there. Papara’s CEO Emre Kenci has confirmed he’s aiming to buy two companies in Europe in 2023. Meanwhile, N26, which is now focussed on Europe, having expanded into and withdrawn from both the US and UK, announced in December that it had integrated Spain’s hugely popular mobile payments platform Bizum.

This gives N26 customers with a Spanish IBAN the ability to send, receive and request money through the solution and allows them to pay with Bizum at partner merchants.

SPREADING THE WORD

Fazil is undeniably fun, familiar and energetic. Its digital-native-led approach expands beyond the product, with marketing and promotional campaigns that it’s hard to imagine established banking players being able to pull off. For instance, it sponsors the five-time Premier League-winning footballer Aymeric Laporte’s Adidas-toting e-sports team, AYM – another clear gauge of Fazil’s innovative, digital-centric approach to customer acquisition.

“The most relevant key point here is to build a brand that our users love, and then be top of mind whenever they want to open an account,” says Santos.

There’s no doubt that its strategy as an e-money-licensed player, built on a partnership with whitelabel card issuer Pecunpay, depends on fast customer growth. And it saw a 20 per cent monthly increase during 2022, although by the year end, numbers were still small at 5,500. Nevertheless, they spent more than €12million between them with cash-back Visa debit cards, from which Fazil negotiates three to 15 per cent from merchants for each transaction.

“We are creating an income stream from cashback,” says Santos. “Cashback is something that is not just a benefit for the user. It’s something that generates word of mouth, so that brings acquisition to us, it’s retention, because whenever you see that the card pays you back whenever you spend money, you try to do it more often. And it’s a revenue stream. Say we come to an agreement of 10 per cent with the merchant, we then provide eight per cent to our user, so there’s two per cent for us. And that’s two per cent of every single transaction, of every single user.. Having a beer with a friend, going for a dinner, having a brunch – these kinds of expenses are the ones that we are targeting.”

But Fazil is now expanding its product offer beyond this ‘happy spending’ to the bigger things in life. Working the third party providers, it’s gearing up to include mortgages with the innovative lendtech Colibid; it already offers energy price comparisons and virtual health consultations; and it has a partnership with the merchant POS provider Square, too.

It’s looking to issue co-branded cards with a B2B2C proposition that will create another revenue stream through a set-up charge and monthly fees. E-money institutions (EMIs) have to work hard at success, given they are prohibited from accessing customers‘ funds and investing them in profit-making ventures as a conventional bank would.

For Santos, this is both good and bad: “Good, because we are, I always say, probably more secure than a bank, because, even if we fail, our client funds are safe. We cannot touch them. On the other hand, it’s bad, because we cannot touch them – we cannot make revenue from those funds.”

Fazil’s pitchdeck for its most recent Crowdcube funding as part of a €500k seedround, set out its ambition to acquire 50,000 users (10x growth) over the next 12 months, positioning it for a €2.5million Series A raise in 2024.

It’s observed the change in focus at European neobanks.

“If you see the pitches of the founders of the main neobanks in Northern Europe, at the beginning, they were positioned as ‘we are more efficient than the banks, we do not have the infrastructure that they do’,” says Santos. “But the reason people acquired their services was to use them as a secondary account, mostly for their daily expenses – what we prefer to call ‘happy spending’. And, in our opinion, this was driven by COVID – they were no longer going to an ATM. Instead, they opened secondary accounts and used them like ATMs – to pay for going for dinner, or going out at night.”

There is no consensus on how EMIs can most effectively accrue revenue, so a variety of diverse methods have been adopted across the industry, including bolting on cryptocurrency services. Fazil already has its sights set on that space, a path well trodden by industry stablemates such as Revolut, who have taken existing cryptocurrency options and peppered them with innovative user features such as currency returns.

Conscious that its demographic will not be forever young, Fazil is also looking to introduce Fazil Junior for parents and kids. Research by Pecunpay suggests that the time is perfect for a pre-eminent Spanish neobank to emerge in a post-COVID economy that has embraced a cashless approach to business, and has an increasing appetite for digital payments.

Thirty-seven per cent of respondents in one survey cited ‘ease of use’ as the biggest factor influencing their choice of provider.

In which case Fazil is set to reach its goals, because, as Santos says: “It is just stupidly easy.”

This article was published in The Fintech Magazine Issue 29, Page 76-77