New rules of the game

Up a League:

Fintechs have moved on from being ‘one tricks’

Financial services were unbundled by the first fintechs, now they’re reassembling them. Currencycloud and Integrated Finance consider the fundamental problem that presents

In the world’s most popular video game, League of Legends, there’s a strategy called one-tricking: you basically choose a single champion and learn to play that character really well. It’s a good strategy for newbies, as you find your way around, deepen your knowledge of that character’s strengths and weaknesses, and improve your skillset. But it’s debatable whether it’s the best strategy if you’re serious about competitive play, especially in the international leagues.

Most of the fintechs that emerged after the financial crisis 15 years ago, were one-trickers. They focussed on a single financial service and/or niche market – often one that had been badly underserved by banks – and mastered it. They had strength in depth. But, as the game got more competitive, they realised that being a one-trick pony was unlikely to serve them well into the future.

And so, they looked to add other services to their bow, often by integrating with third-party providers that were equally good at the single thing they did. As a result, they began to spend more and more time and effort on integration, which took focus away from their core purpose: delivering superior experiences and products for their customers.

That was the problem that Integrated Finance was created to solve. The two-year-old startup does what it says on the tin: it works like a universal adapter plug for APIs, making sure the power flows from one platform to another without interruption and without either party having to worry about the ‘wiring’.

One of the integrations it is regularly asked for is with Currencycloud, a global platform that enables banks and fintechs to provide innovative foreign exchange solutions for cross-border payments.

“On my VC deck, you’d see we are described as a ‘software-as-a-service, banking-as-a-service orchestration layer’, which doesn’t really mean anything to anyone outside of the ecosystem!” laughs co-founder Daniel Cronin.

“To boil it down, we give people access to the products and services they want, without having to technically integrate all of them. It’s a single interface, a single API, and it can consume the best features that you need of a provider like Currencycloud.

“Imagine you’re a young fintech entrepreneur. You want to do crossborder payments and you say ‘I’m going to use Currencycloud. It probably wants to know that I’m checking who I’m giving these payment services to. So, I’d better find a digital onboarding solution. And that I’m monitoring the behaviour of users. So, I need transaction monitoring’.

“That’s three integrations right there, and you’re not going to have the bandwidth to do those in sync,” says Cronin. “They’re going to be consequential and sequential. Let’s say they take four months’ integration each. That’s 12 months before you’ve gone live and your burn rate is astronomical, because you’ve spent all that time on stuff that isn’t your core focus; but you need to get it done to satisfy quite an intense regulatory environment.

“Integrated Finance aggregates those vendors into a single API or interface for you, so that you can worry about going live with your actual product.”

There’s an incentive in using such an approach for vendors, too, given that none of them will probably see a return from your partnership until you start generating API calls. Telescoping the time to launch from years to weeks benefits all parties.

It’s a strategy that suits Currencycloud well. Launched in 2012 and fully Cloud-based on AWS, it has 85 different APIs across four modules – collect, convert, pay and manage – that cover

the workflow in B2B payments. Regulated in Europe, Australlia, the US and Canada, it has processed more than $100billion to more than 180 countries and was among the first to identify the trend towards rebundling financial services, building its strategy around it and publishing its APIs publicly.

“Architecturally, we’re very open,” says Richard Stockley, who is responsible for commercial partnerships at Currencycloud. “Anyone can go in and have a play with our APIs to see what they do.

“Clients can consume our solutions directly, or work with our partners – such as Integrated Finance – to build a more complete solution, that has other parts that we don’t specialise in or provide.

“Being all things to all men is certainly a difficult ask,” he continues. “As different organisations that specialise in different areas realise that they are not the whole solution, collaboration with adjacent parts is absolutely essential.”

How partners go about things is as important as what they do, adds Stockley.

“I spend a lot of my time understanding what our clients’ needs are, and what the ecosystem adjacencies are that make the

Interoperability across different platforms is a key consideration and I think one of the challenges in the coming years

Richard Stockley, Currencycloud

most sense for us and for them. One of the things you consider, obviously, is their capabilities. Do they fulfil a need that is adjacent to us, one where there’s not a great degree of overlap, and that, if we put the two together, creates something that’s incrementally valuable for our client?

“But second, is the cultural element,” says Stockley, “in terms of how can the working relationship between our two organisations provide an edge? That’s a softer, less measurable thing: it doesn’t come out in the specifications of what each player does, but that working relationship, and the pattern of working, is really important, in terms of getting stuff done.

“What we are building at Currencycloud is a whole series of partnerships, ones where we can, with a very high degree of confidence, say ‘dear client, you can rely on these partners; we’ve worked with them before and this is the success rate’.”

Cronin agrees that how you go about identifying partners is important.

“There is an industry-agnostic graveyard of failed partnerships, where maybe the executive team got together and went ‘this sounds like a good idea’, and just assumed it would happen because of that,” he says.

“What I’ve often found is that partnerships work best from the ground up, rather than top down, because it builds organic value that way. Let me give you an example. If a sales guy at Integrated Finance is contributing to a deal, and they know that there are other components that the entrepreneur or founder needs to deliver this, that person is incentivised to find those solutions for them – to find out who can help with this problem. That way, you build organic relationships.

“What I really value from Currencycloud is there’s a lot of active energy across that business, but especially, the sales guys don’t send stuff to us that they know we can’t help with. It’s going to make them look bad, it’s going to make us look bad, and it’s going to frustrate the mutual client. And vice versa. Whilst we’re not a regulated entity, our founders previously ran a regulated entity, and we know what to look for in another partner.

“Once you’ve built up that rapport at the ground level, you generally see partnerships thrive much more from there on in. If I was a founder, I’d want to know that there was a rapport, too, between the partners, because that way I’m not going to get stonewalled, with people passing blame; everyone’s going to contribute, to try and deliver, to solve the problem I have when I’m launching my startup.”

Despite at least 10 years of digital transformation across the industry, Cronin still sees a lot of mismatched technology; developers tortured by complicated coding and working to different standards, which ultimately denies the customer what they really want. His ‘long-term future perfect’ would be for banks to smoothly co-operate with each other.

“The short and medium-term mechanism for that to have happened is banking-as-aservice aggregation,” he says. “Barclays, for instance, has a fantastic correspondent network. So, how is it that Currencycloud, which is a technical abstraction from Barclays, can remit those funds faster, possibly to some of Barclays’ own correspondents? The bank gets a huge advantage through having its customer base potentially aggregated, all of the technical headache aggregated, and still money is moved faster through a participant on its network than it could have done itself.

“So, it makes total sense to me that this starts happening at the BaaS level. But the thing that both Integrated Finance and Currencycloud needs to wrestle with, is that we’re disintermediating very successful protocols. Currencycloud, for example, is a participant of SWIFT gpi, but a lot of what it is doing is in parallel to SWIFT. So, I haven’t worked out yet whether fintech is going to embrace and empower SWIFT, or SWIFT will empower fintech, or whether the emergent BaaS layers are going to create

There is an industry-agnostic graveyard of failed partnerships, where maybe the executive team got together and went ‘this sounds like a good idea’

Daniel Cronin, Integrated Finance

a sub-strata under SWIFT with its own messaging system.

“Currently, that messaging system is getting more and more disparate because, as more BaaS players, more fintechs emerge, they’re building the very best API they can, but they’re generally only considering one use case, their own customers.

“So, if you get 10 hyper-successful BaaS players, and a fintech that wants to use all of them, there needs to be some sort of protocol for that. That’s a non-subtle plan of what Integrated Finance is trying to build; we’re trying to build a protocol to make it easier to talk to all of these BaaS players.”

Stockley fully endorses that grand plan.

“Certainly, interoperability across different platforms is a key consideration for me, going forward, and one of the challenges in the coming years,” he says. “It’s the raison d'être of Integrated Finance, and one of the reasons we love working with them.”