In June 2015, we published the news that a UK-based international remittance FinTech company, Currency Cloud, raised $18 Million in Series C to expand in the U.S. We have followed this space diligently and recently, we had an opportunity to chat with Mike Laven, CEO of Currency Cloud. In an expansive discussion with LTP co-founder, Amit Goel, Mike shared insights into the business model of Currency Cloud, importance of APIs in banking and payments, competitors in the space and many other things. Here’s an exclusive transcription of the interview with Mike:
LTP: What's the story behind the startup?
Mike Laven: Our story starts with FX Capital Group, a brokerage firm founded by Nigel Verdon that believed that there was a fundamental problem in the way international payments are made. FX Capital realized that the future of international payments lay in technology, and customers were consistently being underserved by traditional providers. It knew, too, that transparency mattered. It was out of this change of thinking that Currency Cloud was born. The company was launched in the market in January 2012, the same month that I was named chief executive officer.
For something that businesses have to do everyday, global payments are overwhelmingly expensive and complex. Payment firms and banks find themselves needing to integrate with a number of different entities in order to provide a complete service. Currency Cloud saw the opportunity to integrate with numerous FX and payment systems worldwide, so when our clients elect to work with us, they only have to integrate with one platform.
We have created a SaaS platform that will help to automate currency receiving, conversion and payment for more than 40 currencies in 212 countries over the Cloud in as transparent a manner as possible, o that the small companies can also look towards remittance as a business opportunity.
In the business world, payments can be very different. A B2B transaction can have an international component and the A/P can be different than A/R. Payments in the business world need access to APIs. A single product is not enough. We provide the business clients with the necessary infrastructure and let them built the rest of it.
LTP: Most payments and remittance startups focus on the B2C segment? Why did you choose the B2B segment instead of B2C? What according to you is the key USP of Currency Cloud?
ML: API is our key USP. The Currency Cloud, cross border payment-as-a-service provider, has enabled developers to integrate international payment processing with an API: XBPConnect. Prior to Currency Cloud, payment/invoice software required users to leave the platform and engage a third party to process an international invoice. Currency Cloud allows cross border and multi-currency transactions from a single platform. The API allows developers to integrate the functionality into existing apps and platforms.
LTP: Regulation and Compliance is a big factor in your business. How do you deal with the challenges on that front?
ML: If you think about regulatory compliance and reconciliation, there are a lot of things like AML, KYC and liquidity management. Currency Cloud has the ability to do it fast and accurately. Our workflow is associated with businesses and the payments to their suppliers. We are not associated with the end consumers of those businesses.
For instance, there are a lot of regulatory problems in the U.S. Every individual state has different regulations regarding money and payments. Companies in the U.S. like Yelp and Indiegogo need what we do. When they make global payments, they have to look for other options like tying up with banks, which in the U.S. is a big and cumbersome process. It is not the regulators but the banks who are worried. Banks have a simplification imperative. However, they are under pressure from the regulatory bodies.
The 2 main points of intervention on our part are:
1. Complete KYC (Know your Customer) of the customer with details like peer business signup, director, size of the business and other parameters.
2. A well established process for completing the KYC is laid out and look upon everyday.
We have a multi factor lookup included in the process. And now, we also have to authenticate banks. Last year, there were some Russian banks who came short on this and had to be kicked off the system.
LTP: Can you brief us on your product/service? How do you manage to offer remittances at such a low cost of $1.5 + 0.25% of the transaction value?
ML: We’ve built an efficient technology platform that fully automates international payments for businesses. By plugging into our API, our clients — and their end customers — benefit from real time wholesale rates and a fast, secure payment network. By providing this end-to-end service, we allow our customers to pass on the heavy lifting of payments infrastructure setup to us, which thereby allows them to focus on their core business.
LTP: Currency cloud also offers 30 day cancellation. How does this work when you provide your service to e commerce companies which may have high return orders?
ML: Integration via the API leads to no churn. In e-commerce, the churn rate is generally high. It doesn’t take a long time to use our product. The customers can start using the product with a low commitment to sign up. Our pricing is transaction based. It is based on the value of the dollar. API calls can be for different purposes based on customers’ needs. They customers can split the savings from using our API if they wish.
LTP: Who are your major customers? Why do you think they prefer your product?
ML: Our customers include banks, payment service providers, large e-commerce businesses, FX brokers, remittance firms, card processors, prepaid card companies and business payment firms. We have decided to be very startup friendly. Many startups are our customers and they are predominantly tech led.
Our API is free on the web. Our Payment Engine is the ideal payment vehicle for small to mid-sized businesses that would not receive competitive rates from mainstream banks and require more flexible money transfer services. When our clients grow, so do we as the volume of payments and value of transactions increase.
LTP: Where do you operate currently and what other geographical regions do you plan to expand your services to?
ML: We are in the whole of Europe right now. We want to expand in U.S., Canada and North America next. We make international transactions all over the world in about 120 countries.
LTP: How many customers do you have and can you give us an indication of the size of the transactions through your platform?
ML: Right now we have 125 platform customers and our service has reached more than 150,000 end-customers. Our company process 60,000 transaction per month in volume and $1 billion per month in value.
LTP: What about data? Is that part of your business model?
ML: We use the transaction data and data becomes the product. We don't share any data with trading firms.
LTP: It’s been a fascinating conversation, Mike. One last question: What keeps you awake at night ?
ML: As we are in the remittance business, there are a lot of regulations and compliances. That keeps me awake at night. Another thing that concerns me is acquiring customers efficiently. Since we provide them with the API platform, we need to keep a check on all the rules and regulations so that the customers are not charged for not adhering with any legal procedures.