By Hilary Schmidt, International Banker
Today, the technologies that fintech (financial technology) companies are rolling out are invariably in hot demand. Lending institutions seeking additional agility to deliver cutting-edge solutions are increasingly looking to new, nimble tech start-ups to advance their own business functionality, with innovative products and services such as digital-payment solutions, mobile banking, wealth management and insurance products among the most highly sought after. To date, however, the majority of consumers and businesses have been using financial services that are walled off from each other, with their own payment methods and commerce services. But thanks invariably to utilising a few lines of code through APIs (application programming interfaces), such applications can be brought together.
Indeed, fintechs now provide traditional financial institutions with a range of financial offerings, typically as software to be integrated into their systems through APIs, with the platforms able to seamlessly integrate with the banks’ back-offices. For non-banks, such services offer a way to deliver financial products and services efficiently and cost-effectively. This increasingly popular solution has come to be known as fintech-as-a-service (FaaS).
The idea behind FaaS, according to fintech payments and banking-services company Rapyd, is to be able to provide a full stack of integrated payments, commerce and financial services capabilities that can be embedded into any application. As such, the ability to collect and disburse funds in any local currency, issue cards, extend e-wallet functionality, manage KYC (know your customer) and compliance processes can be made significantly more convenient. Customers such as financial institutions and many other businesses can enjoy fully developed, cutting-edge processes created by technology specialists, which they can access through APIs in the form of FaaS.
The London-based Rapyd consolidates all the financial-management, payment and money-movement services that its business customers require to enable them to build effective applications through its single global and scalable API. “By providing a link between today’s thriving, tech-forward business community and the legacy financial systems that still drive the majority of global commerce, we hope to unlock a new playing field for financial innovators everywhere,” Rapyd stated in December 2019. “It’s an approach we are actively building, and it is called Fintech-as-a-Service, or FaaS. We’re confident that it will play a pivotal role in the next generation of disruptions to shape global markets.”
As such, FaaS allows companies to easily leverage fintech solutions to optimise their end-to-end processes, deliver the best experiences to their customers and provide commercial services to significantly higher standards than previously possible. Akurateco, for example, is a Netherlands-based white-label payment-software provider that offers a range of FaaS services, including white-label payment gateways, fraud-prevention and high-end-invoicing systems, and data-analysis and -management tools. The company recently announced that it had integrated with Mastercard’s global payment gateway services, one of the major gateway software providers for banks and merchants in the Middle East, Africa and Asia-Pacific regions. The integration will enable payment providers from those regions to start accepting payments in just a couple of clicks inside Akurateco’s admin panel.
What’s more, Akurateco provides a cashier platform as part of its FaaS offering, allowing merchants from different business niches to access multiple payment solutions with just one integration. According to the company, such offerings can yield a multitude of important benefits to customers:
- No maintenance fees: The burden of keeping the platform up to date is 100 percent on the technology vendor.
- Faster time to market: Using a third-party payment platform to set up payment flow and bring a product to market is much quicker than developing the whole system from scratch.
- Processing costs are significantly reduced: FaaS platforms enable merchants to route their transactions via multiple payment-services providers, meaning merchants can shop around and choose providers that offer the most beneficial conditions for each specific transaction.
- Fraud and chargeback prevention: Instead of merchants developing their own payment gateways and encountering much red tape, they can instead opt for a FaaS platform that is already compliant with the highest security standards, such as PCI DSS (Payment Card Industry Data Security Standard).
- Simple customization: FaaS platforms tend to be easily customizable and are developed and maintained by experienced professionals in most instances.
- Fully brandable design: Customers can customise and change the style of the platform and fine-tune it to their respective companies’ corporate styles, colours and logos (as is the case with Akurateco Cashier) without necessarily having their end-customers know that the service is being powered by an external FaaS provider.
Today, Rapyd stands among the global leaders in this exciting new FaaS space. It has approximately 5,000 customers ranging from labour and goods marketplaces to lending institutions to e-commerce businesses, all of which seek to integrate additional financial services into their platforms. Recently, it launched PromptPay—one of Thailand’s most commonly used payment methods—on the Google Play Store. The move will enable Thailand’s national payment method to support app downloads and in-app purchases for games, music, movies, video streaming, books, magazines and other content purchases from Google Play Store. Rapyd supports local payments for Google in Thailand through its collaboration with GB Prime Pay, a leading Thai payment-solution provider. PromptPay allows users to make real-time interbank mobile payments or transfer funds by linking their bank accounts to mobile numbers or national identifications. It is hugely popular in Thailand, with September 2020 figures showing 55.1 million registrants from a total population of 69 million, with 20 million transactions a day.
Rapyd has managed to attract considerable sums in its endeavours to build up its FaaS platform. It raised $300 million in January as part of a Series D funding round, which, according to its chief executive officer (CEO) and co-founder, Arik Shtilman, will be used to expand its team, build more technology—including expanded fraud-identification services and wider marketplaces—and make selected acquisitions. It then raised a further $300 million in early August’s Series E round, which came hot on the heels of its acquisition of Valitor, a European payments and card-issuing company, for $100 million and the launch of Rapyd Ventures, the company’s venture-capital arm. “There is currently an unprecedented need for a single partner serving as a bridge between a vast array of local payment services and merchants, providing them access to the flexible, fast-to-integrate, and scalable solutions they need to thrive,” said Mike Lobanov, general partner at Target Global, which led the most recent round of fundraising.
In mid-July, meanwhile, it was reported that another leading FaaS platform—API developer Railsbank—had raised $70 million to develop its platform internationally, with Anthos Capital leading the round. The UK-based company builds APIs for banking, payment cards and credit products for use by a variety of firms, thus giving them access to a number of financial offerings. “Our mission is to reinvent, unbundle and democratise access to the complex, opaque and byzantine 70-year-old credit card market, which is worth $4 trillion in the US alone,” Nigel Verdon, CEO and co-founder of Railsbank, told TechCrunch last year.
The latest round of funds, according to Verdon, will be used to create individual financial components for clients, which they can easily embed into their own customer experiences. “Too much of the current global financial services system is made up of aging legacy technology and operational processes, making it unnecessarily complicated, highly expensive and nearly impossible for innovators to create the ‘Spotify’ of financial services,” Verdon said following the fundraiser. “We are changing that at Railsbank by combining our ‘zero legacy’ platform with deconstructing financial services into individual digital components.”
Railsbank also recently joined forces with Visa to drive fintech enablement for its clients in Singapore, specifically by becoming a Visa Ready Banking Identification Number (BIN) sponsor, thus enabling all of its clients to gain access to the same global payment technology, expertise and revenue opportunities they would have had as direct card-issuers with Visa. As such, customers in Singapore can go directly to Railsbank to acquire the necessary speed and efficiency to develop.
“Our partnership with Visa gives us the opportunity to provide companies with a broad range of Visa payment solutions, such as Cards-as-a-Service, that meet the identified needs of their users,” Verdon said of the partnership. “Railsbank simplifies the process of embedding financial services into a customer journey and can therefore help any company—no matter what industry or sector they’re in—to become a fintech by adapting to the needs of their market and customers quickly and easily.” According to Kunal Chatterjee, Visa’s country manager for Singapore and Brunei, the collaboration with Railbank and the BIN sponsorship arrangement are beneficial for fintechs as they accelerate their onboarding journeys with Visa. “We are looking forward to seeing more fintechs benefit from this partnership with Railsbank as we continue to drive innovation and support the launch of products and solutions that transform the payment experiences of consumers in Singapore.”