How Railsbank is re-designing the future of retail banking

Nobody would accuse the traditional retail banks of being close to their customers. Even now, with challenger banks using digital technologies to poach their customers and their revenues, the incumbents are stymied by legacy attitudes as well as legacy systems and processes.

The idea that the traditional banks will be reduced to highly regulated balance sheet utilities yoked to the central banks while a horde of innovative new entrants handle product distribution and customer relationships, once considered outlandish, now looks like an increasingly probable future for many of the most venerable names in retail banking. When it happens, Railsbank, the London-born Open Finance platform whose technology promises to enable any company to get into the banking business, will be able to claim a good measure of the credit. Future of Finance co-founder Dominic Hobson spoke to Nigel Verdon, CEO and Founder of Railsbank, about what the company believes and does and where it is going next.

Questions being asked

1. Crunchbase list Railsbank under Banking, Developer APIs, Finance, Financial Services, FinTech, Payments and Software. Do you ever worry that what you do is hard to pin down?

2. Is the clue in the name? The payments industry uses the term “rails” to refer to payments market infrastructure. Are “rails” what you provide?

3. You often compare what you are doing to the Apple Mac and iTunes. Can you explain the metaphor?

4. Your marketing materials have long promised to give everyone “access to global banking with 5 lines of code.” What does that mean in practice?

5. The marketing materials emphasise two sets of services. The first is access to wholesale financial services (IBAN issuance, sending money, receiving money, converting money (FX), collecting money via direct debit, subscriptions etc. issuing and managing credit and debit cards, and borrowing money). How do you do all that through an API that takes 30 seconds to register and 15 minutes to go live?

6. The second set of services offers “marketers, product managers and developers” the opportunity to build and launch customer financial applications such as one-time virtual debit cards or loyalty or reward points schemes. Is this a Lego brick model in which the user pieces together what they want from existing components?

7. Don’t users need regulatory licences to offer financial services?

8. What do the providers of the underlying services (such as bank accounts) get out of what Railsbank does?

9. How do you work with payments market infrastructures such as ACHs, RTGSs and SWIFT?

10. “Embedded finance” is a relatively new term, sometimes referred to as “Bank as a Service (or BaaS), which most people take to mean as payment without entering bank details or borrowing money without going to a bank, and it’s relatively easy to see how APIs make that possible. Why does the market exist and how big can it be?

11. How difficult (and expensive) is it to design and build services for use across websites and smartphones (from a technical perspective)?

12. What does “embedded finance” mean for banks in the long run – are they reduced to utility status?

13. You are a card issuer yourself but “Railsbank is [also] on a mission to democratize, reinvent and unbundle the credit card market”. What does that imply for the major card networks (Visa and Mastercard)?

14. Payments have attracted a lot of interest and investment over the least 20-25 years – globally, there are 20,000 companies doing something in payments – and some big brands have succeeded in creaming off revenues from banks and creating value for themselves, but nothing fundamental seems to have changed in payments (i.e. they rely on bank accounts and payments market infrastructures). What does genuine disruption in payments look like?

15. Your customers are clearly not consumers. Who are your target customers – FinTechs, challenger banks, retailers, airlines, any brand at all?

16. You’ve just raised another $70 million following a $37 million raise in November last year. What are you spending it on? International expansion .. .??

17. You have a substantial presence in Asia, from Singapore to Sydney. Why is Asia such an attractive set of markets?

18. What are you doing in North America?

19. How many other markets are you in now, and how many do you plan to enter?

20. You bought Wirecard Card Solutions in August 2020. How much of the client base had survived the failure of the parent company?

21. What are you doing differently from, say, Unit or Plaid?

22. Your origins lie in the Open Banking initiative in the UK. Is Open Banking or, more broadly, Open Finance or even Open Data, still the opportunity you are exploiting?

23. Can Railsbank help reduce financial exclusion?

24. Is what Railsbank does extendable to sectors other than payments, e. g. insurers or utilities such as energy, water or broadband?

25. Do you have a crypto-currency strategy?

26. Do you have a digital asset/token strategy?

27. According to Crunchbase, Railsbank has raised $121.3 million to Series B. As you look back to the seed round in 2016, to what extent has the original vision remained intact and to what extent has experience enlarged your vision of what is possible?

Questions that are being asked