Banking Circle Co-Founder and CEO Anders la Cour explains how the ‘silent infrastructure behind the curtain’ enables banks to offer global, streamlined and faster services to their SME clients.
In September 2019, PayExpo recognised the individuals who had made the most significant contributions to the payments industry over the preceding 12 months. For the second year running, Banking Circle’s Anders la Cour took his place on the shortlist.
As head of the expanding financial infrastructure provider – or ‘super correspondent’ as la Cour describes it since it gained its full banking licence at the end of last year – his influence is likely to be felt even more keenly over the next few months and far beyond Banking Circle’s western European base.
Banking Circle is a new type of bank, exclusively for banks and other financial services companies, which allows them to make the most of the opportunities available in a global digital economy for their customers.
“We started the preparations to become a bank a couple of years ago. We could see the trajectory of our growth, and the pace we anticipated meant that we had to convert into a bank at some point,” says la Cour of its recent transition. “We are now a fully-fledged bank in Luxembourg, and we’ll embark on a journey to broaden the services we can provide. Up until now, we have mainly focussed on Europe, because that’s where we had our payment institution licence. But we’ll be exploring global growth in the next couple of years.”
Offering a full spectrum of services – from accounts and lending, to international payments and foreign exchange (FX) – users can gain the geographic reach and access to markets in which their customers want to trade through Banking Circle. The financial utility enables worldwide payments and settlements through a global account infrastructure, a global FX capability and a secure and compliant banking platform.
“Everything you need to do as a financial institution, outside of your domestic core, is cumbersome and can be really quite expensive,” says la Cour. “We had the vision to create a super correspondent, where you can plug into one infrastructure that can then give you access to a range of countries and processing methods.
“We have positioned ourselves as a financial infrastructure platform, meaning that we enable financial institutions – be they banks, payments businesses or fintechs – to do what they’re best at; engaging and dealing with their end clients. They can then use us to deal with payments, FX and other core banking services outside of their domestic area. So no one really sees us, but we are there – the silent infrastructure behind the curtain. We act as a neutral layer between the central banks and the banks that are dealing with the end clients.”
Supporting the world’s economic backbone
In just four years, annual transactions going across the Banking Circle platform have risen to nearly $150billion.
It stepped into a void left by the global retrenchment in correspondent banking services, offering banks white label accounts that bring down the cost and complexity of operating internationally.
The Bank of International Settlements (BIS) claims that correspondent banks have been paring back their crossborder banking relationships for the past decade; they’ve been reduced by as much as one fifth. This retreat affects some countries more than others – jurisdictions with weaker governance and deficient controls to prevent illicit financing have suffered the most – but, certainly in western Europe, it’s often small and medium-sized enterprises (SMEs) that take the biggest hit as a consequence.
That comes on top of an often already strained relationship with account providers. A 2019 research paper by Banking Circle highlighted that limited access to banking services, late payments and restricted credit are growing problems for small business owners. When you consider that there are 24 million SMEs in Europe alone, constituting 99 per cent of private businesses, that’s not just an issue for individual business owners, but for entire economies.
Banking Circle concluded that ‘for small companies, access to flexible and fairly priced banking services still means the difference between increased sales and selling up. At Banking Circle we’re committed to making sure that access to essential financial services – from lending to bank accounts, crossborder payments and transactions – is not a barrier’.
La Cour believes the solution lies not just in advanced technology, but in cooperation between providers in the chain of financial services moving money from A to B. The bank is now one such critical link underpinning global trade, with plans to make supporting and facilitating flows between East and West a priority over the next couple of years.
La Cour has been consistently clear that Banking Circle would never be a competitor to other banks, even when the company gained its banking licence. Rather, it greases the rails for clients of firms like Alibaba, whose financial arm is now one of the world’s top 10 banks, to move products and services around the world more smoothly.
“We are still in the early stages of working with the Asian markets but we have already worked with some of the very large marketplaces there to help us get the product completely right from a cultural perspective,” says la Cour. “Alibaba is one of our big clients, with a vast amount of bank accounts on our setup. Over the next couple of years, Asia will have a strong focus in our strategy, given the growth opportunities we have seen there.”
He believes that growing up in the European regulatory environment from which many other countries have taken the lead, puts Banking Circle in particularly good stead as it sets an ambitious global agenda.
“In the last few years, the revised Payment Services Directive (PSD2) did a lot for wider transparency in the market. I think you will see the same trends in North America and Asia over the next couple of years. Obviously, all geographies and regions have to apply those trends in their own cultural context but I think some of the same pushes for a more open banking infrastructure will materialise,” he says.
La Cour thinks the open banking movement has had an encouraging if unspectacular start, with more to come.
“If you look at it from a data perspective, I think we can see the realisation of some of the hopes that the regulators and governments had when they imposed open banking legislation. If you look at the transactional side of things, it hasn’t succeeded yet. But I think it’s just about phases – the first phase nailed the data and a second phase will be more around the liquidity.”
Banking Circle plans to play a significant role in facilitating phase two.