Exclusive: ‘Solving the cross-border payments puzzle’ – Accuity and Apply Financial in “The Paytech Magazine”

As the payments industry learned of financial data giant Accuity’s acquisition of payment validation specialist Apply Financial, we sat down with the architects of the deal – fellow entrepreneurs David White and Mark Bradbury – to explore how it came about and the benefits that will follow for their combined global customer base.

In March 2020, it was  announced that financial data giant Accuity had acquired Apply Financial, a specialist provider of automated payment validation solutions and one of the UK’s leading fintechs. 

While the amount paid and other terms of the deal have not been shared publicly, Accuity’s management team has said that the strategic purchase is part of the company’s goal to develop its own account validation software for traditional financial institutions and fintech firms.

The big news was the latest in of a wave of bullish acquisitions sweeping across the worldwide financial technology sector, despite – or perhaps because of – a global shut down. Companies certainly haven’t been put off by the volatile business climate, which was dominated by Brexit until its eclipse by the COVID-19 outbreak.

2019 had already been a record year for fintech deals and mergers and acquisitions (M&A), with companies in the sector raising more than $44billion in funding and a record $234billion in M&A volume, according to recently released research by Financial Technology Partners.

This year, the momentum has continued to build with a spike of interesting deals, including Visa’s acquisition of Plaid for $5.3billion. In April, it was also announced that US consumer financial services platform SoFi is acquiring payments and bank account infrastructure company Galileo for $1.2billion in total cash and stock.

Building further on an impressive legacy

Accuity, which offers a suite of innovative solutions for financial institutions, is well known and well respected across the industry. The company says that its mission is to ‘protect the reputations of payments and compliance professionals with a portfolio of regtech products – from data and software that control risk and compliance, to accurate and flexible tools that optimise payment processes’. 

Now part of the international RELX Group, Accuity’s history dates back to the 1800s. Established in 1845, Accuity has grown massively, both organically and through careful acquisition. The current payments revolution is not the first it’s experienced, but it is different in its scale, scope and speed.

“In the last five or so years, we’ve seen the start of a generational transformation,” says David White, Accuity’s EVP of global payments & KYC and one of the architects of the Apply Financial deal. “All the basics of what we know about crossborder payments and the SWIFT network are changing, questioned by the likes of Ripple and SWIFT’s own global payment initiative (SWIFT gpi) response. We are seeing a proliferation of faster payment providers emerge to meet raised customer expectations. The industry is edging towards global faster payments, with crossborder likely to soon be measured in hours rather than days.” 

The Apply Financial acquisition supports Accuity’s strategy of providing banks, corporates, non-banking financial institutions (NBFIs) and fintechs with global and domestic payment and account validation solutions that reduce payment processing costs while increasing the speed of transactions. 

David was discussing the deal exclusively with The Paytech Magazine in The Fintech Finance Virtual Arena – a new, live online forum.He was joined by Apply Financial’s founder and CEO Mark Bradbury, who knows David well as a fellow serial entrepreneur. Bradbury says the two companies’ products have always been complementary rather than competitive and the ‘good marriage’ negotiated between them matches the deep knowledge that Accuity has on the payment data side with Apply Financial’s ability to reduce errors earlier in the validation process.

“Accuity has always been known for its excellent, world-class data and it operates in a different area of an institution to us,” says Bradbury. “This deal will provide our clients with access to a more comprehensive set of data at the front end that helps people entering a payment detail get it right first time and maintain beneficiary details throughout the life of the relationship in real time.” 

Accuity has traditionally dealt with payments after they have entered the system, providing a file of data to be plugged into a bank’s master data record. The tie-up will ensure that more payments make it through to that stage, error free.

“In the near-term, Apply Financial’s advanced technology will enable us to offer clients a Cloud-based, real-time payments and account validation solution to dramatically increase customer straight-through-processing (STP) rates and provide payments certainty,” adds White. “In the longer-term, the technology will fuel our innovation and enable us to deliver the next generation of payments intelligence solutions to meet our customers’ evolving requirements.”

A good cultural fit

By joining forces, Accuity and Apply Financial can share their considerable industry expertise, deploy their innovative technology to a much broader audience and collaborate on forward-looking solutions that will support the payments industry as it navigates unprecedented times.

Of course, all of this only holds true if the cultural fit is right. Organisations of all sizes must be mindful of the leading role company culture plays in merger and acquisition activity; any acquisition’s success is ultimately rooted in how the two get along.

“We looked at what was going on in the marketplace and how we wanted to evolve our own proposition,” explains White. “The number one question for us in terms of a potential partner is whether they see the market in the same way we do, so that we can work together to better service customer demand. My excitement about bringing Mark and the Apply Financial team into the Accuity family is that we knew early on it was going to work from a cultural view. The acquisition is going to significantly strengthen both of our propositions.

“Accuity’s existing customer base will fundamentally benefit from us bringing Apply’s technology in, and making it available with our wider set of insights. Not allowing bad data to enter the system in the first place is a huge win.” 

Applying world-class payment validation solutions

Apply Financial is perhaps the only platform in the world that offers such a comprehensive set of validations through a single application programming interface (API), enabling its 700-or-so clients – including banks such as HSBC and Barclays and corporates including Ineos and Eversheds – to dramatically lower the cost of payment processing by improving STP straight-through processing rates. Its flagship solution, Validate, uses proven Cloud and API technology to help firms submit the correct bank account and payment details when processing a payment, increasing efficiency and reducing the risk of a transaction failing. 

With the proliferation of faster payment schemes around the world and escalating consumer and business expectations, STP is no longer just an efficiency issue but rather a crucial competitive differentiator for firms. Apply Financial has helped to process a trillion dollars of payments in the 10 years of its existence, and now Accuity’s diverse client base will also feel these benefits. 

Ahead of the Accuity deal, Apply Financial signed partnership agreements with fellow fintechs Currencycloud and Checkout.com, thus meeting the needs of foreign currency exchanges and combining Cloud-based payment solutions to improve the efficiency of international payments.

Bradbury and his team have developed a range of new tools and services, including a ‘build-it-yourself’ facility that allows companies to construct their own payment information capture form; and a way to automatically present clients with the most suitable correspondent bank to handle a crossborder transfer, based on that client’s priorities for the transaction – be it speed, cost or another factor. 

“Based on extensive feedback from our clients, we’ve launched a new part to our API that allows our customers to build, in the browser, a complete set of fields for their beneficiaries without doing any coding at all,” Bradbury explains. “It’s fully compliant and has the right amount of fields by country. We also now encompass holiday data. Many countries have lots of national, religious and bank holidays, of course, which we’ve got in the database. If you’re sending a payment to a country and you want it to get there on time, for example, you might have to do a quicker international payment to make sure you bypass the disruptive effect of these holidays.”

Apply Financial is currently working with the UK’s Financial Conduct Authority (FCA) to become a fully regulated entity, which will give partners and customers further confidence in the company’s proposition.

“We’re just finalising our FCA regulation so that, when we’re in sandboxes in different countries, everybody feels comfortable with us,” says Bradbury. “I don’t believe we have to be regulated, but we’re because we’re very belt and braces.” 

Under Bradbury, the company has increasingly been working with alternative payment rails.  

“We have clients now in blockchain and also e-commerce providers because people are starting to move away from the card rails,” he says. “On the other side of the coin, we still work very closely with the SWIFT gpi initiative, supporting correspondent banking and helping to facilitate the cheapest and best routes.”

Operating in an open market

The rise of open banking is firmly on the radar for Accuity and Apply Financial. Recent Experian research in the UK has highlighted a marked increase in people using open banking services in the last 12 months. In January 2020, there were 321 million data sharing requests, over 10 times more than the 23.1 million by January 2019. Given the nature of open banking and open data, Bradbury views it as another good reason to become FCA-regulated.

As many commentators have been quick to point out, fraud around open banking is still a big issue and one that’s on the rise. A particularly concerning statistic from UK Finance’s annual fraud report, Fraud: The Facts 2019, is that fraud associated with authorised push payments (whereby third parties are authorised by customers to access their accounts and initiate credit transfers) was up by 44 per cent last year. 

The good news is that Bank of Scotland customers have recently become the first in the UK to benefit from a new name-checking service designed to prevent the spread of unauthorised push payment scams. The Confirmation of Payee service, which will imminently be adopted across the entire industry, adds an additional layer of validation to sort code and account number by ensuring that the name on the account being paid is the same as the name that has been provided. If it isn’t, customers will be sent an alert. It’s an indication of how ‘frictionless, straight-through processing’ is likely to be met by challenges that Apply Financial and Accuity are ideally placed to help organisations meet. 

The world will look forward to watching it play out in real time.

This article was published in The Paytech Magazine: Issue #05, Pages 16-18.