Challenger banks are old news now. The first wave paved the road to new ones, who can grow more quickly and cost-efficiently by mixing and matching bits of existing infrastructure. Without the need to invest in unproven tech, newcomers can shift focus to market needs, and make money. Which is significant in a new, more demanding post-WeWork startup reality.
TFT sat down with Ivan Zhiznevskiy and Andrei Dikouchine, the founders of 3S Money Club, one of the best-kept secrets of Barclays’ Rise.
What made you start 3S Money Club?
We saw gaps in business banking while running our other more mature ventures. When talking to high street banks we realised they couldn’t understand businesses. They don’t get fintech or cross-border activities. And if anything falls outside of their box-ticking process you get rejected.
What are the main problems that high street banks can’t solve?
There are two major problems. First, high street banks are either focused on very large plcs, or are happy to run with some very simple domestic business activities. When it comes to something slightly more complex, they don’t have the resources or the knowledge to assess those businesses.
Second, their business banking functionality is quite limited. Even a small fund like us had to use two banks! Why should a small business with 5 employees need to do that, and worry about liquidity management?
But isn’t it very expensive to start a bank?
Starting a bank would have been impossible and unaffordable a few years ago, but today, with all the brilliant digital solutions already out there we can shift away from in-house development to being a tech project manager. We partnered with the existing players for different parts of the business. This made everything possible.
What have you built?
Firstly, we see business banking as a relationship business with technology at its core. We marry the best tech solutions with an intelligent human approach.
The main problem of scaling in banking is KYC, it is a very complicated procedure. Nik Storonsky once said that all KYC will be AI-driven in 2 years’ time. That was 2 years ago, and it’s still not the case, not even in B2C. Our KYC professionals “X-ray” each new client. It’s inefficient, some might say. But, what we can do – very few can. We ask intelligent questions. And our clients don’t mind answering these for as long as it makes sense. In fact, business banking clients often need someone to talk to them. When you talk to people, you can really solve their issues. Clients appreciate that, they want this experience.
Secondly, we have accumulated a vast amount of expertise in tech, payment methods, and we keep learning more every day. As traditional payment rails are being replaced at the local level with things like Faster Pay someone needs to have the knowledge of how to charter payments from one country to another. Equally important is to support clients in investigating why things went wrong. And as anyone with global payment experience would attest, things do go wrong as wires bounce. We look at each case, fix it and tell clients what to improve in processes on their end. Again, huge appreciation from clients for this approach.
That’s 3S Money Club, a relationship, and knowledge-based business. Business banking with a human touch.
we see business banking as a relationship business with technology at its core. We marry the best tech solutions with an intelligent human approach.
What is your solution?
We support businesses with cross border activities. Many clients, by the time they come to us are already banking with three or four banks! It’s 2020, and still, one bank was not enough to support cross border activities. It’s madness. One bank can pay to China, but can’t accept money from China. The other one can transfer to India but can’t accept US Dollars… Cross border businesses use different payment channels and different distribution channels. Even moving funds between your own accounts at different banks may trip an AML check and cause a hold-up.
We are the new digital merchant bank to service them. We can bring all these channels together, and combine all these accounts into one on the 3S Money platform. With one account, you can get different sets of bank details that you can use for your business. A business that banks with us can provide their clients with the bank details that are easy for the client to pay into in the country and currency they want.
Could you describe a use case?
You can set different bank details to suit your clients’ needs. As an example, a UK business sells goods in Russia. The clients in Russia need to pay in local currency without international payment fees. What is the usual way? The business would need to open a Russian entity, a Russian bank account, hire the accountant and a director in Russia, and create this incredibly complicated, and expensive structure – all just to be able to trade with that market. Using the 3S Money Club platform this UK business can easily share the Russian bank details with their clients to receive money. Once the money has arrived, this business can easily transfer funds to their GBP bank account to pay their UK employees, or to their Euro bank account to pay suppliers in Germany. All within one platform. It’s a seamless journey for everyone.
Where does the human approach come in?
The 3S Money Clubs on-boarding process is driven by humans, and it’s designed differently compared to any other bank. The first thing a high-street bank usually asks for is a passport. That’s the risk model they act upon. If you have a foreign passport, and your business trades internationally, this will most likely lead to a lot of waiting, no one talking to you, and then, quite likely, they won’t open an account anyway.
We ask for business accounts and bank statements. We base our assessment on the company’s business activities, not the nationality of the owner, or countries they trade with.
Why won’t high-street banks do it?
High-street banks closed their doors to international businesses for a reason. There is a lot of money laundering going on out there. It’s a real problem. They just don’t have the resources to assess medium-sized international businesses, so they don’t risk it.
How do you find your potential clients?
We are a Club, a community of open-minded global entrepreneurs. We accept clients on a referral basis only. Our ecosystem features hundreds of professional services firms referring clients to us. After that initial filter, we have our own highly experienced KYC team go through all the details of the clients’ business, analysing business processes. In our KYC department, we recruit professionals with a background in international trade. They need to understand how goods and services are being moved across borders.
Why do you focus on mid-sized businesses?
Large businesses are well-staffed and work with big banks. Small businesses are sufficiently covered by the first wave of challenger banks while transaction volumes are low.
Mid-sized international businesses are currently underserved. Try transferring £20K to a Revolut bank account! It will sit there for weeks until that chatbot finally gets you on the phone with a human who will tell you that this transaction is blocked somewhere higher up the food chain. They just don’t have the KYC resources, and they can’t serve these business clients. Which used to force mid-sized businesses to pay for multiple banking relationships, create subsidiaries in different countries to get access to new markets. That’s where we come in.
Aren’t all companies becoming global these days?
Yes, that’s the trend, all trade is now becoming global. A study shows that over 40% of SMEs considered starting trading internationally, but gave up because it’s too complicated and too expensive! We are on a mission to change this.
It’s the 21st century! You don’t need to create a business branch in a foreign country just because you need a local bank account. With 3S Money Club, you don’t have to establish different relationships with different banks. You can have all the functionality in one platform. We are an aggregator: you don’t need several contracts with separate terms with all those banks. You just need to have an account with us and get the benefits of all international bank accounts connected through our platform.
A study shows that over 40% of SMEs considered starting trading internationally, but gave up because it’s too complicated and too expensive! We are on a mission to change this.
Wow, how long has 3S Money Club been around?
We started at Barclays Rise in May 2018. We already have over 200 corporate clients and more and more are joining every week. 30% of all the new clients are referred by existing clients. So, we must be doing something right…
Where do you see yourselves in 5 years?
In 1 year, we will start lending money to businesses. In 5 years, we will be coming after HSBC. We are building a B2B “HSBC”, cross border. With a human touch.
What do you find most challenging in achieving your goals?
Firstly, it’s getting the right people capable of diligently running the processes and being a good fit for the team culture which is already in place. Digital banks were not around a few years ago, so we need to focus on growing our own talent. It takes time and patience.
Secondly, it’s the high wire act of being a tech company with little in-house tech. Writing your own code is easy but makes one obsolete very fast. Running multiple vendors and retaining control over the big picture is hard work.