Market Landscape (In 2018 Fintech sector raised $58bn):
Traditional baks are retrenching and becoming increasingly fragmented due to regulatory obligations, capital reserve requirements and an ageing technology stack. Whereas customers are becoming increasingly demanding and price aware. New technology is driving competition hence the emergence of 'open banking' and new regulatory framework (PSD2), which is essentially pushing banks to open up their rails and capabilities for fintechs to utilise in order to build faster, cheaper and more dynamic banking services on. In reality the fintech market spans wide, but the majority of investment was attracted by players servicing the lower end of the value chain, such as retail cross border payment remitters C2C (Consumer to Consumer).
FX and Hedging:
Society Financial is moving up the value chain and focusing on the B2B (business to business) segment which has remained relatively undisrupted. We essentially separate FX liquidity provision and payment processing (via multiple channels e.g. SWIFT, SEPA, Faster Payments...etc).
FX: we plug-in 15+ global and regional banks (and non-banks) into our ECN pricing engine, giving us the ability to obtain pricing in realtime from multiple liquidity providers (LPs) 24/6 on over 130 currencies, which no single bank bank can offer. Meaning we can provide extremely sharp pricing on every transaction to our customers. We provide a range of hedging products and unsecured credit lines which banks are increasingly pulling from corporate clients especially SMEs and MMEs. Mainly due to mis-selling concerns and higher capital adequacy requirements.
We also have a real edge when it comes to compliance and the operational model, which is online and occurs in real time through using API based screening and validation tools. Allowing us to onboard customers really fast, typically within 24hrs (max 72hrs). We have also plugged this into the payments technology which again operates independently of the FX liquidity provider. Meaning we can execute single or batched payments 24/7 online (or phone/email) for clients requiring to pay cross-border suppliers, payroll, claim payments for insurance companies for example. We validates and sanction screen beneficiary bank details in real time as they are uploaded and as the payments are made, this ensures payment failure rates are extremely low. We also send customers auto generated transaction receipts and payment confirmations (including MT103 SWIFT confos) for free.
Bank Accounts: We also provide clients with virtual or physical bank accounts in their own name in over 60 currencies allowing them to invoice and hold balances without the need to set up a local bank in each jurisdiction. We take no risks on client money either, as funds do not get invested or utilised in anyway, but are rather held in client trust accounts with Barclays/Citi etc. Funds are protected by FCA client money rules and are ring-fenced and not commingled with company funds. Legally no one in the chain including the bank itself can have a claim on the funds in case of a credit event.