Exclusive: ‘With this fintech, I thee wed’ – Ray Brash, PPS and Norris Koppel, Monese in “The Paytech Magazine”
Partnerships have come to define neobanks. But how do you ensure it’s a happy marriage? We asked Norris Koppel, Founder & CEO of Monese, and Ray Brash, CEO of its supplier PPS
In the banking space, real innovation doesn’t just improve the technology; it fundamentally rethinks the model in order to build something completely new.
In many cases, that means decoupling from the infrastructure that legacy banks thought it was essential to own and control, but which, when regulation bust open the data vault, proved to be a prison. Even though technology had handed banks the key to the cells, the monkey-in-a-cage mindset made it difficult sometimes for those banks to walk out and start a new life. But fintechs were born into a global village, an extended family of solutions providers, all coming together to build and maintain the proposition of a neobank.
Such fraternity and ‘openness’ brings with it risks, too, of course. The most recent example of how things can go spectacularly wrong when you rely on a strategically important partner that then lets you down, was the Wirecard collapse of 2020. It doesn’t appear to have been a reset moment, though. Rather, it served to demonstrate how critical partnership working and the ‘as-a-service’ model has become, and how the challengers’ approach to it must be mature to protect both them and their customers.
Norris Koppel, founder of challenger banking app Monese, says that, if anything, fintechs are being compelled to seek out these more strategic, long-term relationships at unprecedented rates.
“There is less now of the quick and dirty kind of partnering,” says Koppel, for whom partnerships were fundamental in getting Monese off the ground in 2015.
Looking back, he admits that, during its early years, Monese chose partner companies that ‘roughly ticked a box’, and that Monese could ‘actually afford’. But it’s only through rigorous selection and due diligence since that it’s been able to build a European bank across 30 markets, one that relies on partners to offer customers localised services in each, and all made possible by its relationship with banking-as-a-service partner PPS.
It’s an example of a partnership that, in Koppel’s words, can ‘properly add value and strength to a business – to the partner’s business, too’. Most recently, PPS facilitated French IBAN accounts for Monese to extend its ‘bank like a local’ concept to customers living and working there. At the same time, it joined forces with Paysafe to offer ecash top-ups via barcode for millions of customers, starting in France.
“When you look at technology business, it’s very easy to build a prototype, push it live, see how customers react, but in financial services, just waiting for the licence can take a good couple of years, and what young fintechs don’t typically have is time. So I think relying on partnership is absolutely mandatory,” says Koppel.
While the COVID-19 pandemic has inflicted financial damage on fintechs, with the likes of Revolut, Monzo and Monese making job cuts across Europe, it has also created unprecedented opportunities for financial services companies to form alliances with data management companies, Cloud-based providers, end-to-end reconciliation services… the list goes on, all in order to manage and respond to the globe going digital in double-quick time. Circumstances caused by the crisis have seen, for example, wealth management companies cosy up, including app Nutmeg launching an investment partnership with JPMorgan Asset Management, while digital wealth firm Freetrade got into bed with application programming interface (API) provider TrueLayer to launch open banking in app.
An ‘Open’ relationship
Like Koppel, Ray Brash, CEO and chairman of PPS, only sees these relationships growing and deepening, particularly across an increasingly fragmented payments industry.
“There are hundreds of players coming in,” he says. “A fintech would not necessarily need to build its own open banking interface, for instance, because it can partner with a business that’s already built it.”
PPS provides challengers such as Monese, Tide and Yolt, with banking and payment solutions, including a white-label payments platform. Brash advises startups to bolster their businesses through partnerships instead of wasting money building services that might be soon be commoditised in-house.
He says he can’t think of a single successful fintech that didn’t have a partnership to help get it off the ground. Such a strategy also helps cash-strapped founders under pressure from their venture capital investors who want to know where their money is being invested.
“Especially if you’re broadening your offer – going into credit, going into marketplaces – then a good way is to partner,” says Brash.
He points to successful, asset-light companies like Uber and Airbnb, which have utilised existing infrastructure more efficiently, and used partnerships to build their brands – in many cases diffusing the risk associated with scaling – as proof that you don’t need to own all that you need.
There is a ‘but’. The corporate world, particularly in financial services, is littered with examples of big brands being undermined by the failings of an outsourced entity, raising questions about the extent of a brand’s due diligence. Remember when TSB suffered a customer backlash over an IT fiasco in 2018 that was caused by shifting data to an outsourced IT system managed by its parent company Sabadell, which bought TSB in 2015? Thousands of furious TSB customers, locked out of their accounts, weren’t interested in who was providing the IT; their anger was directed at the bank.
And rightly so, says Koppel: the buck stops with them. “You can’t say ‘oh, our partners failed. Don’t worry, we are on it’. It must be the brand itself that picks up those pieces, instead of sending a customer to a partner to sort it out.
“When you look at younger businesses, they are typically much riskier for big partners then the other way around, because a company with a limited track record and money is automatically more risky, that’s for sure.”
That wasn’t the case with Wirecard, of course, when it collapsed with fears that it would disrupt much smaller partners, such as Revolut and Curve. In the event, the contagion (in the UK) was contained, But Brash points out that Wirecard’s demise is a cautionary tale.
He said: “I think any firm that woke up and found its funds frozen, suddenly realised, in hindsight, they should’ve paid a bit more attention to who they were partnering with.”
Railsbank, the UK startup backed by Visa, has now purchased Wirecard Card Solutions, the UK arm of the firm. But the controversy raises questions about whether partnerships should be kept below the radar, preventing a public outcry if things go wrong. Not a good idea, says Brash – you only have to look at banks’ experience with offshoring customer call centres, where the quality of service fell below standard, to see why transparency is important. “That’s an example of where it was pretty visible that the outsourcing was not what the customer was expecting,” Brash says. And many brands are now making a public virtue out of their UK call centres, including a recent TV campaign by Starling Bank.
Ensuring the culture of the brand and its partners, as experienced by the customer, is indistinguishable is essential to success. In all its partnerships, Brash says PPS is invisible to end-users – and it’s they who will decide which tie-ups work and which don’t. “That’s why Norris spends all his time talking to customers!”
Koppel agrees: “The strength of good partnerships is you can move fast, you are safe, you are regulated, you can get quick customer feedback. And, ultimately, they the bosses. You can’t mess with them.”