• The world is changing, and the best manufacturers of great financial services products aren't necessarily banks anymore
• Regulation and compliance has to be at the core of every financial service provider
• Brad van Leeuwen of Railsbank describes the fintech’s journey, as well as their strategy in his interview with Emmanuel Daniel

Here is the transcript:

Emmanuel Daniel (ED):  I'm here London, talking to Brad van Leeuwen from Railsbank, so tell us a little bit about Railsbank Bank.

Brad van Leeuwen (BL): Yeah, sure. Railsbank solve problem of how product manager, innovators incorporate financial services in their APP business, so with us, with just five lines of code, they can get access to transactional banking services right around the world and produce those products for their customers.

ED:  Well, is – I noticed from your presentation that that you had, you know, a whole sheet of products, I mean credit cards, deposits, and so on. Is that – is that – would you consider it a banking as a service kind of thing, as a cloud-based platform for banking, or – or how...

BL:  Yeah – yeah, totally, so – so we believe that the – the world is changing, and the best manufacturers of – of great financial services products aren't necessarily banks. You know, they're very often innovators, entrepreneurs, founders. And so what we do is we take a bank's transactional products, or capabilities rather and expose them through our API, so others can take those pieces that they need to make a fantastic product that their customer loves.

ED:  Okay, so your clients don't need to be banks, but can put out a banking product so it's white labeling your platform, Railsbank platform, as a bank basically, so. Now, how does that work when your clients are from different countries where there may be banking regulation and stuff like that?

BL:  Right, and that's a great question because I think what every – every founder and every entrepreneur realizes is that regulation and compliance really has to be at the core of – of what they do and so right now Railsbank is an active, operational in 31 countries, so UK, across the – the Euro zone, across – across  and what we – as we add new countries – because – sorry, those markets have very favourable regulation, they have Emoney licenses and so on. The FCA and other regulators in the region want to encourage competition –

ED:  Okay.

BL:  And have made licences available, so as we go to other markets we – we totally see – the need to help people navigate that regulation –

ED:  So are you – are you in any country where the passporting rule doesn't apply yet, or...

BL:  Very soon, in fact. So – so within the next –

ED:  What would – yeah, which countries would – I mean like are likely to be countries that are outside your jurisdiction, but – but very interesting that, you know, that – that place, that market that  might – might – might – might have access to what you do.

BL:  I wish you were asking me this question in two months time. So – so we – I – I hope – and you'll have to watch this space, but in the next two months we hope to be live in the United States, which is a traditionally a – obviously a great market for fintech – big market, big opportunity, but with 50 States, or 50 plus States requiring 50 plus licenses traditionally it's been really hard to enter.

ED:  Okay.

BL:  And so we're going to make it way easier for –

ED:  So –

BL:  People.

ED:  The capital requirement and stuff like that, is that your – is that what you also provide, or is that something that your clients take, carry with them. I mean they – they have to have a banking licence themselves, so...

BL:  Well, right, so all our customers need to be properly licensed. So sometimes that could mean a banking licence, could mean an Emoney licence, a – a payments institution licence, MSP licence in the U.S. And of course if they are having their own licence they're still subject to the same regulation that exists. If you're a new entrepreneur we have a sister company called PayNet, which has its own licence, and that – we use that as a tool to aggregate smaller fintech, and help them navigate the complexity of – of getting a – getting a licensed.

ED: I – I was – when I – when I spoke to you just now I was thinking about, you know, core banking systems on the cloud, you know, companies like Mambu, actually I was – 

BL:  Right.

ED:  Thinking. Are you a Mambu, are you – are you a – you know, are you a – you know, a bank in a cloud basically, you know, and – and actually the business itself is really up to your clients?

BL:  Yeah, so in a way, yes, and in another way no. So – so Eugene (Danilkis – Mambu’s CEO) is actually on old friend at Mambu, he's built –

ED:  Okay.

BL:  A really fantastic business putting a – a core banking system in the cloud. I – I think what's important to say is that Railsbank is not a core banking system, so our customers that maybe regulated banks will still need a – a core banking system that's approved by their regulator, and Mambu, Mambu could be it. What Railsbank is are the transactional and account rails –

ED:  Okay.

BL:  That can exist, so we can integrate with Mambu, for example, for a new bank, and what that means is they don't have to build integrations with card processors and payments schemes and that and so...

ED:  So how many clients do you have at the moment? Like, and how many of them are traditional banks and how many of them are, you know, start-ups themselves?

BL:  So on – on the – on the partner side, right, so we have about six banks right now that are supplying transactional services to – to – to Railsbank's customers, and on the – the customer side, we have actually quite a big range, so we're increasingly talking to banks to also be customers of the Railsbank platform, but then others are perhaps, traditional financial services businesses that want to use Railsbank to automate a lot of their processes, but also, of course, fintech entrepreneurs  that are – that are bringing their product into existence.

ED:  Okay, but – so in – in that regard you already integrated the back end to – you know, to switch and all the – the payment networks in – in Europe – in the countries that you do business with, so that's – that's actually also what you provide in that your railswhich means that you – you have the back end integrated with whoever your bank – your clients have to work with. It's not just a software in that regard, is it?

BL:  Right, so – so – so with our API, the – our customers can focus all their energy, time and money on building a fantastic customer layer, so fantastic product, fantastic customer experience and get that right, we abstract away a lot of –

ED:  Okay.

BL:  Complexity on the back end.

ED:  Yeah, so now, I'm sure that in financial services a lot of your clients will – you know, ask for bespoke – bespoke – bespoke, like, you know, can we have something that's really us – really us, so you – you can't really white label in that regard, so you have a lot of, you know, customization to do. Is – is that something you – is that something that you work with? Is that proposition you provide, or – or, you know, it's like – it's really like take – take what is given, you standardize as far as possible?

BL:  So, exactly. So it's a – it's a really good question, and you're totally right. There's always – everyone has a slightly different use case and – and as a – as a fintech company it's very easy to be pulled in lots of different directions. We try to be a – very much a product company, and what that means is we standardise our capabilities, and for an API, which we are, it means abstracting those as much possible, so we try to keep it to the fundamentals, like issuing a card, doing a transaction, how our customers stitch those together into products we – we leave it up to them and we try to put at much power in their hands to do that as possible.

ED:  When – when you and you're looking at more and more transactions do you give that back to your clients in terms of compliance, risk, risk management, you know, understanding trends, stuff like that, or, or each client is different and each client is, like, you know, firewalled from the other...

BL:  Yeah, it's really important that each customer's data, especially in the world of GDPR, is kept for that customer and for their interest, so – so we do – we – we are very – very careful to – to segment that. Having said that your question about how we – how we provide compliance transaction, monitoring is – is clearly an important part of that and so what we do is between all of our customers in our banks we have what we call the Railsbank compliance firewall and that makes sure in real time only compliant things happen and gives our customers as well as our partner banks the tools to – to manage that.

ED:  All right, thank you very much. Very interesting proposition, sounds almost like a – you know, a bank in the cloud kind of, thing, but – but, I guess, as the licensing requirement becomes more ubiquitous, you know, you'll be everywhere.

BL: Thank you very much for your time. It's been a pleasure.