Railsbank is a London-based company valued at around US$1bn and shaking up the world of fintech.
Founded in 2016 by Nigel Verdon and Clive Mitchell, it is on a mission to make it easier for businesses to access financial services.
The firm's innovative technology, which leverages APIs to allow businesses to create and launch fintech solutions directly from their own platforms, has been recognised as a pioneer in the field of embedded finance.
In this interview, Nigel Verdon talks about the company's origins, its plans for the future, and what he sees for the fintech industry moving forward.
Nigel Verdon (Full Q&A Interview)
Q: What made you want to get involved in fintech?
I first started out my career in engineering before moving into the finance industry working with some of the leading banks out there. In my time studying (two engineering degrees) and practising as an engineer, I saw the deep transformation within the manufacturing industry, which very much shaped how I look at the financial services industry when I made the switch.
The great advantage of being part of the traditional banking system is that you can see the mistakes made and the limitations of the legacy technologies and operational processes. I learned that things could be done differently and hence the move into startups and the world of fintech. I just wanted to do things better, that was my overreaching motive.
Q: Where do you see the biggest opportunities for fintech moving forward?
Since the credit crisis in 2007/8, fintech has digitised conventional financial services, most notably through neobanks that have improved the consumer banking experience. This has educated large sections of the population that banking can be trusted beyond traditional banks and opened their eyes to totally new ways of thinking about financial services.
However, I see the future of consumer finance being driven by consumer brands like Amazon, Nike or even your local car dealer. Why do I say that? Consumers crave experiences, they do not care about financial transactions. For example, consumers wake up in the morning thinking about buying a car, not dreaming of buying a car loan. The car is the experience consumers crave.
We’re already seeing consumer brands start to embed finance into their existing customer offerings. Take Auto1 in Germany for example who have embedded a car loan seamlessly into their car buying experience, meaning you can buy and finance a car in 40 seconds. This is what I call an embedded finance experience and the rise of the embedded finance experience platform.
Q: What inspired you to start Railsbank?
The vision behind Railsbank for me, and my co-founder Clive Mitchell, was to transform the finance industry in the same way that Apple did to the music industry when they created iTunes.
Despite the investment in technology in the finance industry, no fintech has yet done this to date as the focus has been on transforming financial transactions to digital and not creating transformational digital experiences. Therefore, we set out to deconstruct financial services into core digital components through which embedded finance experiences could be built from. The same way that iTunes deconstructed the music industry into a single digital track, so that new ways of experiencing music could be created (e.g. Spotify).
Therefore, we extended the concept of Banking as a Service into being an embedded finance experience platform, where we provide the tools for embedding financial experiences into any consumer experience. For example, seamlessly embedding the car loan into the car buying experience.
Q: If there was one piece of wisdom you could give to other people in the financial industry to give them an edge, what would it be?
Keep your customers at the centre and co-create great things together. Our customers are powerhouses of innovation and change, and our role is to provide them the tools, capabilities and know-how to create what was previously unimaginable.
Traditional finance has never been about that and has never really partnered with customers, for example forcing the customer to use the bank’s processes and UX.
Put the customer and their needs at the heart of everything you do and you can’t go wrong.
Q: Why is it so important now more than ever to focus on sustainable development?
If we are to tackle the issues facing our planet, all industries must assess what changes can be made towards a sustainable future. During the COP26 summit, we helped HealRWorld launch a debit card, which is the first-ever to reward sustainable businesses.
Users can offset carbon emissions on the consumption of goods bought with the card, while also contributing towards planting a tree with each purchase. If you think about how often we make a payment, you can see how a small change can go a long way over time.
It’s not just businesses with climate targets looking for this kind of solution. We recently surveyed young consumers (18-24-year-olds) and found that more than half (52%) are interested in a credit card that would actively support sustainability and the environment with each purchase.
Young consumers especially are more environmentally conscious, and as such, are changing the face of what we expect from financial services, so we need to provide the embedded finance experience tools to our customers to help achieve this.
Q: What are the best ways fintech companies can accelerate their growth?
Build and continually test value propositions that excite people and they will buy it. People buying things leads to growth.
Too many fintechs become impressed with their product functionality and impressed with their ability to raise finance. But, it all comes down to a simple fact in the end - will the early adopter customer buy your product and can the value proposition continue to add value outside of the early adopter type customer, so that you keep up customer growth.
If you can keep growing your customer base and deliver them a product, or service that they value and relate to, then you have the best formula for accelerating their growth. It’s a good lesson to continually see everything as your customer does - put yourself in their shoes and say, does this work for me. Talk to them, learn from them (even hash lessons). Growth will follow if you get this right.
Q: What excites you the most in the field of financial technology right now? And how do you anticipate things to play out by 2030?
By 2030, it’s estimated that the embedded finance economy will be worth $7.2tr. That is a huge market.
To date, most of the embedded finance applications developed have been product-based, including branded credit cards or current accounts. However, we’re observing a big shift away from mere products to embedded finance experiences.
A good example is the McLaren Racing Team who are launching their own debit card experience with loyalty rewards like exclusive access to the pit lane. This experience is going to get F1 fans excited, in the way that interest or cashback from your traditional bank can’t.
We’re only going to see more consumer brands integrating relevant finance experiences into their offerings, bringing them even closer to their customers.
Q: What are the opportunities and threats to the fintech industry?
Opportunities abound. UK fintech has had a record-breaking level of investment in 2021, and even saw companies like PensionBee and Wise list on the London Stock Exchange, marking a big vote of confidence for the industry.
There’s a considerable amount of money going into the startup and growth world which is going to result in the industry potentially reaching new heights, as it has the capital to make exciting things happen. In line with that, we’re going to see more consolidation in the market as businesses look to take out the competition.
Threats exist and we should be aware of them. Complacency when it comes to the end-user, taking your eye off the ball, forgetting to run a tight ship and understanding that we are just at the start of the fintech journey - there is so much left to do.
There are also those that still see fintechs as a threat, as the challengers who have quickly disturbed the cosy, and profitable, status quo that the financial services industry had been enjoying for decades.
Q: Please summarise your life in 3 words.
Keep it coming.
Q: What is next for Railsbank in the coming 5 years?
Our vision is simple - making finance a phenomenal experience everywhere.
Our team can achieve this by building an amazing embedded finance experience platform that powers the embedded finance economy globally; and while doing that, partnering with our customers to co-create embedded finance experiences that result in consumers enjoying engaging moments and deeper relationships with our customers’ brand.
Your favourite high street retailer and much-loved football club are all going to explore how embedded finance experiences can bring them closer to their customers, and we’ll be the driving force behind them.
Q: Last, what is the one thing you want everyone to know about Nigel Verdon?
I deeply care about opening up finance to everyone in the world. Finance should be a human right and not a privilege.
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