COUNTRY FOCUS
Building an international footprint Infrastructure services are opening up a global playing field for platform banks. Sue Scott asks if they have the ambition to step onto it If you’re a financial service, with ambitions, perhaps, to become a unicorn, where in the world would you look to grow your business? When researchers asked that question of a range of providers based in the UK, France, Germany, Denmark and Benelux, most weren’t tempted to look beyond their own back yard. Eighty-four per cent of banks and paytechs questioned for Banking Circle’s white paper, Ready For The Re-build? Re-thinking The Value Of Digital Infrastructure, expected to find opportunities for growth over the next two years in Western European states, while just over half saw Eastern Europe and the Mediterranean as potential regions for expansion. Few want to follow in the footsteps of N26, Monzo and Revolut, which established in North America this year (just a quarter of respondents saw that as the promised land), much less would join the UK’s TransferWise in the United Arab Emirates (digital might be the new oil, but just 11 per cent smelled success in the Middle East and North Africa). For most, China, Sub-Saharan Africa, Russia, the Commonwealth of Independent States, and Central Asia were barely on the radar, while South Asia and the Association of Southeast Asian Nations, India and Latin America – all tipped to be digital honeypots owing to the density of population, smartphone penetration and large swathes of the population being under- or unbanked – appealed to between 18 and 31 per cent. This lack of global vision could be a symptom of uncertainty caused by the pandemic but, more likely, has to do with the difficulty in harmonising compliance, standards and protocols across www.bankingcircle.com
multiple and unfamiliar markets. Seventy-five per cent of those in Benelux, for example, cited that as the biggest challenge. That said, it’s something of a misnomer to think that building financial businesses in Europe is a synch. As Thibault de Barsy, vice-chairman and general manager of the Emerging Payments Association of the EU, based in Luxembourg, says: “The biggest problem for digital solutions in Europe is that it is not a truly unified market. It’s not even about cultural differences. We’re talking about basics, like regulation and tax.” Anders la Cour, CEO of Banking Circle, which delivers financial infrastructure to other banks and payments businesses, agrees. “Take the Single European Payments Area (SEPA),” he says. “[It’s] come into existence largely with the aim of removing complexity. Still, the complexity of clearing through SEPA is enormous. ISO standards have been implemented slightly differently in different geographies, each bank may interpret formats differently, different technology providers exist, and there are several settlement schemes.” He would argue that mission-critical infrastructure services for clearing, ID verification and fraud control, all of which extend beyond borders, remove the road
blocks to expansion, making access to distant markets easier and cheaper. The composable banking model is supremely flexible, ideal for replicating in different territories and adapting or replacing products and services according to local demand. Banking Circle itself is based on that model, supporting its own vision to expand beyond Europe. Already active in Asia, Alibaba’s financial arm is among its biggest clients. “Over the next couple of years, Asia will be a strong strategic focus, given the growth opportunities there,” says la Cour. “Our own architecture is decoupled into smaller components. We can replace or update individual pieces with limited impact on the rest and easily add more functionality. For example, direct clearing for new geographies, which may require new connectivity, formats, protocols and interaction with new clearing technology providers.” According to Findexable’s Global Fintech Rankings 2020, there are still growth pockets within Europe. But it is, by and large, a mature market where the competition in most areas of financial services is only likely to become more intense. Some of the most exciting opportunities lie on further shores: Findexable highlights India, Brazil, Mexico, UAE, South Africa and Argentina, where regulatory, innovation and ecosystem efforts are being focussed to build fintech success at scale. And there are plenty more bubbling up behind. Kicking the ball around the back yard might make you successful in the lower leagues, but there’s a global pitch to play on and, increasingly, infrastructure services that put the premiership within reach.
Asia will be a strong focus in our strategy, given the growth opportunities we have seen there
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