24 Nov An interview with the CEO INCAT on the Cashless portal
We talk to Piotr Hanusiak, president of Incat, about how the current situation affects the condition of fintechs and how to reduce costs, and at the same time check whether the idea will catch on the market.
There is a pandemic time. We are actually dealing with the second wave of the disease. Although the authorities assure that there will be no further lockdown, it is not known how the current situation will affect the fintech industry. How do you assess the situation of entities operating in this area? What problems do fintechs face and what challenges do they face?
To answer this question, we would need to look at the subject from two perspectives. The first, not particularly conducive to fintechs, is of course the general economic slowdown and market uncertainty. The scale of this slowdown means that the recession affects all the market participants and allows customers to look for more reliable services or places to allocate their savings. In addition, banks, due to a significant drop in interest margins, have to look for solutions to keep customers with them, which increases the competitiveness of banks and fintechs.
On the other hand, however, the limitations imposed by the epidemic have forced customers to seek technological solutions that will allow them to function relatively normally in the new reality. There is room for fintechs, which are beginning to be more and more visible on the market, and thus quite efficiently fill the gap. Fintechs operate mainly on technological solutions available on the Internet and their business has generally not suffered in the situation of limited opportunities for meetings or movement, because they simply do not rely on the activities of their stationary branches. They also had fewer problems with changing the traditional working model to a remote mode. Added to this is the natural agility for smaller organizations and the ability to quickly react to market changes.
Several well-known companies found themselves in trouble when it became known that, in connection with a financial scandal, regulators ordered the suspension of Wirecard’s operations. Fintech Curve, which used the settlement systems of a German company, had to suspend its operations even for a few days. The customers were not thrilled. Let’s assume that fintech raised a little funding thanks to a good idea. Which elements of his business should it create himself, and which ready and safe solutions it can use to reduce costs?
We analyzed the challenger approach of banks and fintechs to creating a business. It soon turned out that the answer to this question was relatively simple. When creating a new financial entity, its creators have an idea for their place on the market. They find their niche where optimization of operations, innovative approach to well-known services or creating something completely new is associated with the idea of how to deliver this service to their client. Translating this into IT, fintechs know what and how they want to solve at the front-end level, i.e. the part of the architecture that the customer of the originator will see and use directly on his smartphone or in the browser of his computer. Preparation of this layer of solutions is relatively simple and easily verifiable as to the goals achieved.
What happens, colloquially speaking, “under the hood”, i.e. in the back-end layer is much more complex and often underestimated. How to record and process customer transactions, how to report them and finally, how to ensure a stable and safe environment? Of course, from the point of view of the full independence of such a financial entity, it would be ideal to create or have a solution that will allow it to operate continuously and regardless of a possible turmoil at the service provider. However, this approach requires very costly and time-consuming investments. We are talking about expenditures in the millions, which, once fintech enters the market may turn out to be completely unsuccessful and these investments will turn out to be irrecoverable. Moreover, the time spent on preparing full technological and formal support may turn out to be the time when the competition will occupy the niche on which our business was based, and our offer will no longer be innovative.
If we have a business idea and want to verify its legitimacy quickly and at the lowest possible cost, then relying on ready-made solutions is an ideal solution, especially in those areas that require time and capital for their implementation, not to mention the availability of specialists who would be able to prepare such solutions. Over time, when the chosen direction is confirmed on the market and fintech achieves the expected stability, it may think about becoming independent from external suppliers, thanks to profits or capital obtained from the outside. It is better to start a business and raise capital for investments of a proven development path than to apply for massive financing based solely on an idea.
An additional element securing the operational activity of a given entity may be all kinds of formal and technical solutions in the event of unforeseen circumstances, such as, for example, cessation of services. We have worked models to address these types of risks, thanks to which our clients can safely achieve their business goals without fear of being left without support.
Incat offers one of these products. How would you describe its operation? Who do you address your offer to?
At Incat, we have created the equivalent of the main transaction system, which is the basis of the IT architecture of every bank. We named our solution, perhaps somewhat immodestly, BOS. The name comes from a simple but telling development of the Banking Operation System. Our solution provides processing of customer data, bills and their transactions, including the handling of payment channels. Importantly, as part of the BOS, we also created a general ledger synthesizing transaction records.
Addressing the issue of the required business flexibility, we have also developed a service platform dedicated to fintechs, which is based on the BOS system, enriched with partner services. As a result, fintechs receive access to a set of services (API) that allow for full support of financial operations, including integration with clearing houses, customer on-boarding services, AML, anti-fraud, etc.
We are currently working on the development of the Fintech as a Service AI (FaaS AI) platform, adding new services supporting the operational part of fintechs, enriched with an AI component based on machine learning mechanisms. The service is of course offered via the cloud.
Our solutions are primarily aimed at startups entering the market with a new idea based on a solid transaction engine. The solution is scalable to almost any type and range of projects. We are ready to cooperate based on a license for our system, as well as low-cost bill processing and payment transaction services.
Is there a lot of competition on the Polish or European market in this area? Just a few days ago, Asseco announced that thanks to its Asseco BooX, a bank can be created in six minutes. What distinguishes FaaS AI from other solutions of this type and what will make the customers choose this product?
Of course, we are aware that the competition in this area is considerable, but what distinguishes our solutions from the rest is the fact that we address them to a slightly different target group. Asseco, Mambu and Solaris target their offer at business-mature banks, challenger banks or fintechs, providing them with a specific set of products combined with flexible operating processes. In short, competing companies offer Bank in the Box, but in so doing they limit the customer to the offer that is in that “box”. Our FaaS AI solution is more like a business sandbox, in which we provide a set of components ready for use by the customer, but we also give the possibility to expand it with customer’s own components or those implemented by other vendors. As a result, FaaS AI allows you to test business models and – depending on the model chosen at a given time – the clients can choose the optimal solutions for them.
I think it is also worth mentioning that apart from functional saturation, technological solutions that allow for full flexibility, not only in the technical dimension, such as processing efficiency, are an extremely important element of our system. The key is the business scalability of the implemented system. Why invest time and money in a full set of processes, if our idea of operating on the financial market is limited to addressing only a few of them, but in a way that will set new standards on the market? We assume that this approach guides the originators of starting fintechs, and our solution hits exactly this point.
Are there any implementations that the company can be proud of? If so, can we know any details? What were these projects?
We have implemented both the implementation for the fintech that is just starting in the scope that uses the full capabilities of our system with customer service, their accounts, transactions and the ledger in the installation model directly at the customer, as well as the implementation for the bank, limited to handling payment channels along with the functionality of virtual accounts . We are also in the course of the first implementation of our solution in the form of a service, based on a cloud installation using an almost complete suite of business processes and the general ledger.
Is the tool you offer compatible with the idea of open banking? What additional services will fintechs be able to offer to clients if they this mechanism – is it just an aggregation of accounts or something more?
Not only is it compatible, but it can be an element supporting this postulate in organizations that already operate on the market, but the limitations of their systems block them from taking advantage of the opportunities offered by new regulations. Thanks to open communication, we are ready to be integrated with any external system. This integration and the completeness of the supported business processes as well as the unique functionalities of the system allow us not only to aggregate information about accounts and transactions, but also to enrich it with added value, allowing our clients to offer new services and products based on data from other banks or fintechs.
Thank you for the conversation.