Ever dreamed about launching your own TransferWise or Revolut business? In this article we’re going to interview a CEO and co-founder of a very interesting Fintech called Railsbank. In short, Railsbank gives you all the tools and platform to quickly launch your own Fintech company. Let’s dive into the questions and answers.
Let’s start at the very beginning. Railsbank has a very different concept than many consumer-focused / known players like TransferWise or N26 have. How the concept was born and who are the people behind Railsbank?
Railsbank’s fundamental customer value is that we enable any bank, business, or brand to rapidly become a fintech. By rapid, I mean being able to prototype a live working app with real money in under a week and launch a product to market in under eight weeks.
Railsbank customers do not have to worry about building financial infrastructure. They do not need to encounter the problem of ‘infrastructure lift and shift’ when entering a new country. Our customers need only focus on their product, value proposition, marketing and clients. Railsbank looks after all the rest – we are basically the plumbing and infrastructure guys.
You mention Transferwise and N26. If they were to launch today, they would sit on top of Railsbank. And we know Transferwise super well, as I helped on putting Transferwise in business with the last company I founded, Currency Cloud. I remain friends with the founders of Transferwise and follow their progress.
Railsbank was founded by me and Clive Mitchell in 2016. We are both serial entrepreneurs and fintech veterans. We have known each since their early school days. Clive was Head of Business Development at my first successful start-up Evolution. I went on to build my second fintech Currency Cloud, and Clive joined me again to create Railsbank.
Clive and I realised there was a gap in the market for a common infrastructure which could be used to transform the global financial services industry. That vision has become the central ethos behind Railsbank.
Today we are live in the UK, Europe, the US and SE Asia, and our platform can launch a fintech faster than anyone else, and that’s a worldwide ability.
For example, LightningAId.org launched “from idea to apple app store,” a Neo Bank, in just eight days!
As it’s a regulated activity, what kind of licenses do you hold and in which jurisdictions?
Railsbank holds an E-money Institutions (EMI) license which is regulated by the UK’s Financial Conduct Authority (FCA). It is in the process of obtaining the same in Lithuania to ensure the continuous EEA operation post Brexit negotiations. We also hold licenses in Singapore and are applying for licenses in the Philippines and Australia.
Railsbank is also a principal card issuing license holder for Visa and Mastercard; a principal clearing member of UK Faster Payments and BACs; an indirect clearing license holder of SEPA; and, a bank grade SUPE member of SWIFT.
Let’s assume we are a team of people who want to start our own Fintech company (e-money institution). How does the on-boarding with Railsbank work, what are the requirements from your side and what kind of licenses we need to hold?
Let’s take the example of a UK digital bank that wishes to offer its customers a simple current account and a debit card.
Having used Railsbank’s API super easy sandbox (we call this PLAY), they decide that Railbank’s backend is the “plumbing” they need.
They present us their concept and a straight forward contract is drawn up and on-boarding starts, including the connection to the platform.
If they decide to obtain their own compliance regulation then nothing further needs to be done.
To accelerate a customer to market, and if they decide that they don’t want to go through the lengthy process of applying for their own EMI, Railsbank can offer them the option to become an agent of its EMI licence. This means that Railsbank takes care of the regulatory process and setup on their behalf.
Is it possible to give a range or a hint of required capital when someone wants to operate or on-board using Railsbank platform?
Whether they are a well established company, or only at the beginning with angel/seed funding, Railsbank has pricing and subscriptions to suit everyone to get them up and running without delay.
Railsbank is there for its customers: to support them on their journey of prototyping, launching and scaling their financial services product.
Visa recently invested in Railsbank. How do you plan to use that money?
The funding is being used to deliver Railsbank’s continued expansion throughout Europe and SE Asia, and to support Railsbank opening in the US (currently in Alpha).
In which markets do you see the biggest growth opportunities for open banking platform like Railsbank?
Railsbank is not an “open banking platform.” It is a Banking as a Service (BaaS) platform. Open Banking relates to two products: account aggregation and payment initiation.
Railsbank supports both of these open banking products (currently in alpha), but does a vast amount more than open banking. For example, issuing banking accounts, issuing IBANs, issuing debit cards, managing debit cards, on-boarding customers, converting money (FX), send money/receive money by bank transfer locally and internationally.
We have many more capabilities – please see guides.railsbank.com for the full set.
With regards to the opportunities for a BaaS platform like Railsbank, they are global as there is a structural shift in financial services to where any bank, brand, or business can become a fintech.
Railsbank is the only global BaaS platform that exists today, not because of our technology (tech is just the enabler), but because we have an amazing “open architecture” that allows us to light up a new country in under three months.
When different companies are operating on Railsbank platform, there’s a compliance risk for Railsbank as well. How do you mitigate that?
At Railsbank we believe that banking and compliance must go hand in hand. Compliance is at the core of Railsbank and what we do. We protect the whole infrastructure with our super safe compliance firewall product.
And Joanna Jenkins, Railsbank Global Compliance Director, and member of the original team behind the company, is one of the leading authorities on compliance.
She is on the Bank of England’s Fintech panel, Co-Chair for the board of directors of ACAMS UK and also a member of the UK Regtech council.
How do you see banking-as-a-service evolving in the next 5 years? Do you think it may become a normality that supermarkets or even large accounting firms are offering their own financial services to the client base?
Our vision is that any bank, brand, or business can become a fintech, and offer financial services products to their consumer and SME clients. We built Railsbank to support this.
Looking at this shift that would transform the banking industry, how do you see the incumbents responding to it?
We believe legacy banks have a massive advantage of trust and managing lending risk. I had great advice from the CEO of a global bank who told me that “…lending is easy, getting the money back again is hard!” Banks are very good at getting the money back. However the cost/income ratios of most banks are unmanageable and Gartner predicts that 80% of legacy financial services firms will not exist in 2030, unless they embrace new digital operating models (such as below).
Our advice to legacy banks is to embrace new deposit origination and product (for example loan) distribution models. This is because the underlying consumer/SME product (a current account) is totally un-differentiated and the eccomics do not work (CAC $350 and LTV £250).
Current accounts are only used by the banks to raise deposits and create an upsell opportunity to lend. This is why they tend to be so bank centric rather than customer centric.
Railsbank, through its open architecture, enables legacy banks to join its ecosystem and originate deposits and distribute loans at a price point they would never achieve using their existing model.
Do you see any untapped opportunities for the consumer-facing or B2B Fintechs?
SME and consumer facing financial services is a world opportunity for many use-cases, including form payments, savings and supply chain. This is because Railsbank opens up these opportunities to any bank, brand, or business at a price point and a speed to market previously unseen.
What’s next for Railsbank – are there any partnerships or milestones that you can highlight?
Railsbank is expanding throughout Europe, APAC and will soon be active in the US. It is the only truly global BaaP player and as such, has companies needing its services in a wide variety of markets and sectors. It continues to create key partnerships and drive sales as it grows.