#31 – RegTalks Live from Money 20/20 Europe

Episode Notes

Joining host Claus Christensen in the beautiful MoneyPot studio at Money 20/20 Europe are Maria Prados, Senior Vice President for Go to Market Global Enterprise at Worldpay, and Ugnė Buračienė, Group CEO at payabl.

Tune in for an insightful discussion about:

• The evolution of Fintech since the term was first used in the 1990s
• How the Fintech and RegTech industries are powering each other’s success
• Regulators’ approach to emerging financial products such as ‘Buy Now, Pay Later’ and embedded finance
• The hidden value of friction and complex regulations for payment providers

RegTalks is a podcast produced by Margherita Maspero for Know Your Customer.

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Episode Transcript

Claus: Hello everyone and welcome to a very special episode of RegTalks recorded live from Money 20/20 in Amsterdam. For those of you who are joining us for the first time, RegTalks is a podcast dedicated to the latest trends from the world of RegTech, Fintech and financial regulations. My name is Claus Christensen and I’m the CEO and Co-founder of award-winning RegTech provider Know Your Customer. I’m honoured today to be joined here in this beautiful studio by two extremely knowledgeable experts. For the next half hour, we will delve into the deep and essential connection that exists between the worlds of Fintech and RegTech. So, without further ado, I would like to officially welcome our special guests: Maria Prados, Senior Vice President for Go to Market Global Enterprise at Worldpay…

Maria: Thank you. Thanks for having me…

Claus: And Ugnė Buračienė, Group CEO at Payabl.

Ugnė: Hi, glad to be here.

Claus: It’s my pleasure to have you both here and to get started I’d love to hear a bit about each of your journeys into the Fintech industry. In particular, I’d love to know what brought you to this incredibly vibrant sector and what is keeping you interested these days. Maria, let’s start with you.

Maria: Sure. So mine was a little bit by luck to be honest. I wish I could say: “Hey, I always dreamed as a little girl that I wanted to work in Fintech”, but unfortunately that is not the truth, right? Probably back then “Fintech” wasn’t even a word. I used to work doing a lot of financial and e-commerce consulting at the beginning of my career, and then I just came across this amazing team that were doing this great project, and that was WorldPay. It was right after the spinoff from RBS, a long while ago, almost 10 years. And they were going through this transformation from being a bank to being a Fintech. So, I knew very little about payments if I’m honest, I was more on the business and development side of the retail landscape. But then I really bought into this transformation, what they were trying to do, what the team was about. Back then we were privately equity owned, Advent International and Bain Capital; we then IPOed, we then were bought by Vantiv, then by FIS and now we’re spinning off from FIS. So, if someone asked me: “Did you ever get bored?”, I mean, no. And since then, for the last almost 10 years, I just haven’t moved because it is such an exciting industry to be in. And yeah, I was lucky to just come in here by chance, but I’m definitely not moving.

Claus: Fascinating, thank you. And Ugne, can I ask you how did your journey into Fintech begin and how it’s been progressing?

Ugnė: I have to resonate a little bit with Maria. It’s not that I ever dreamed of being in Fintech. I’m 34 now, which is scary as that means that almost my first job was actually related to Fintech. But Fintech at the time, 16 years ago, was not really Fintech. The industry was very segmented and also let’s say the solutions that were out there and the tech was nowhere near as interesting as it is now. So I ended up in a company in England that was providing solutions and software solutions for banks and financial institutions and acquirers globally, from Africa to Asia. Europe was a harder market because the change in the migration of the software for banks was quite a difficult task at anytime, but then it was even more so, and there was not a lot of pressure to do so. So I started from the tech side and then kind of moved to marketing and the sort of pre-sales support. But then I soon realised that where I really wanted to be was close to the clients and the business development. But I have to say that the average age of a salesperson in that industry selling into banks was, I’m sorry to say, a 60-year-old man and I was nowhere near to be able to even progress further in my career there. And then payments were becoming a little bit more prevalent, and Fintech was really starting to take shape. So I moved into the payment space, really focusing on payments, from the PSP side, acquirer side, pay fax, you name it. So the last 10 years have been related to that for me. I worked with every bank, and every acquirer. Three years ago, I took over Payabl. We are a Fintech and paytech provider that provides solutions for merchants and clients alike. We have a very varied solution set because we not only focus on the brick and mortar acquiring, we do banking, we do a lot of things. You know, we do embedded finance, issuing of cards for clients. The journey has been pretty interesting because the last three years we’ve experienced a lot of growth, so I had to grow as a CEO and as a person and also to lead the team into all the right things. But the reason why I suppose I got stuck in it, the same way that Maria said, I don’t know where else I would be. It’s changing, there are still a lot of things to do. It’s very progressive, especially now. I never really even thought about being anywhere else, there’s really nowhere else I would want to be. And also being on the tech side, the consultancy, the merchant side, it’s a cool thing to do, really. I can see the appeal for sure, and I can see a lot of people who change their career and want to come into Fintech because there really are reasons for it.

Claus: Thank you so much. For the last three years, I have been interviewing many experts in our space and simply love how different each journey into Fintech always ends up being. And my own is only 8 years old, so I’m not as long in Fintech as you’ve been. I myself came from the tech side, of computer applications in race cars and then aerospace. I was surprised coming from that area by how complex a world financial technology can be. It does come close to rocket science, don’t we agree?

Maria: Sometimes it does.

Ugnė: Sometimes… Maybe… I think if you unnecessarily make it to be that way, yes. But it doesn’t really have to be rocket science.

Claus: That’s right. Especially it doesn’t have to be in front of a customer. That is simple and very straightforward.
During the week in Amsterdam here I certainly had plenty of occasions to see just how exciting and innovative the Fintech sector still is, even after quite a long time. The term itself, “Fintech”, turns 30 this year. From my point of view, there is one aspect deeply connected to Fintech that only gets limited attention right now, and that’s what I’d like to talk about next. I’m referring to the close relationship between Fintech and RegTech, which is obviously what we concentrate on. It’s true that in the past few years RegTech has been gaining a lot of momentum with industry leaders and also with regulators. But the general public isn’t as aware. It’s been said many times that RegTech is the secret sauce that powers Fintech’s outstanding and revolutionary new customer experiences. For KYC, I don’t mind staying in the background and silently or secretly – the secret sauce – powering the Fintech customers. RegTech is what makes it possible to simplify processes. But on the other hand, it’s also true that Fintech companies such as yours here are powering RegTech’s growth, as you are among the early and fast adopters of all sorts of new solutions in this area, long before more established financial institutions ever move. That’s definitely something we see at Know Your Customer, where payments and Fintechs are by far the greatest percentage of our client base already. I’m very interested to know how you see the interaction between these two areas and how your companies are currently harnessing RegTech to reach overall business goals. Ugne, maybe we start with you.

Ugnė: Sure. It’s a very complex question and I think you’re right to say that the growth for RegTech comes from the fact that the Fintechs are innovating. We want to be digital. We want to simplify things. We want to grow our customer base as soon as possible. Also to make the journey for the client as easy as possible and also to be compliant fully. There are some difficulties there as well, because yes, there is a lot of growth, but it’s actually the regulator who in my view kind of stalls some of the development and some of the further growth in that area. And I can give you an example. From our own perspective, we face some regulators that are wary of certain digital solutions that we use for KYC. So they don’t take it as equal as a good old true certified copy of certain documents.

Claus: There’s nothing true or good about true certified copies.

Ugnė: Exactly! Also, it’s only the concept of it, because that doesn’t necessarily mean that’s a true certified copy, right? In my view, I have more trust in the digital rather than in the physical. And I suppose because the physical has been here for so long, and I honestly think that to deceive that is easier than, in some cases, the technology. So it’s a tricky situation, especially for companies like ours, because we want to leverage the technology, we want to grow and we want to use it and to use the best providers and solutions for our clients. But we have to be also very sensitive and careful whether our regulators really like it. I don’t see that it will change in a way that the growth is not there. The growth will continue, but I suppose that little friction that we have to, at some point, improve.

Claus: Thanks. That was absolutely wonderful. From what you have seen, Maria, in the last few years, how do Fintech and RegTech contribute to each other’s success?

Maria: Yes, I think they’re completely embedded, like you were saying. And Fintech even started because financial services were not innovating enough. So Fintech brings in the technology into financial services. It’s already a highly regulated industry, the regulation comes with it. But then the innovation starts to go and progress so quickly. Sometimes the regulation can’t keep up, right? So what ends up happening, and especially for us as a more traditional, more legacy payment player, it’s you just keep growing your processes that are more legacy just to keep up with some regulation that you know it’s coming, but you don’t know exactly what it’s going to be saying. So then RegTech plays a key role because that’s really how you bring technology to 360 degrees. At the end of the day, Fintech companies, we are not experts in regulatory compliance. We do have a lot of expert people now because we had to and that becomes a key leg of what we do. But at the end of the day is not really our core, is it? We need to start being much better at enabling and working with more of the newer RegTech providers that are coming in saying: “Hey, I’m going to help you streamline the KYC process that you’ve been building in a very manual way”. And this is kind of a bit of a pain for us, but also it’s a pain for our merchants because, obviously, ideally you would have it all digital and seamless. As you say, I think the industry takes a little while to catch up and even within Fintech, which is supposed to be the technical side where the faster, the newer innovations come in, it still goes little by little and smaller. So, RegTech, I think is definitely key to continue to enable the growth and the innovation and the technology in highly regulated industries. And I think that’s why you say: “Fintech providers are probably our largest customers”. Of course, regulation is all around us, we need to streamline that, and we need to work with those companies that are getting and building it from scratch. It’s hard for us to then build a completely new automated KYC process because that’s kind of not really what we do, but then who do we play with and how do we ask as an industry and lobby with the regulator to help push the next change? Because we need to keep growing and there are a lot of new parts of Fintech like ‘Buy Now, Pay Later’, for example, that have been living in this grey regulatory zone.

Ugnė: Not for very long, I think.

Maria: Not anymore, right? But they have been. And now all regulation comes in and a lot of them are like: “Whoa, what is this? How are we going to cope with it?”. They don’t have all of these legacy, larger compliance things that we would do for example. In the end regulation always comes, it’s a bit of a question of when. So we just need to be ready and be much more proactive to drive it through technology, rather than just keep adding to more legacy old processes.

Ugnė: I think it’s also a very important point that you mention, because our goal is not to build RegTech solutions. But we are the ones that actually know what we need, right? Because we have to leverage this customer journey, the requirement from the regulator, so we ultimately really know what the solution should be and the way it should look like, right? But we do need providers and RegTech to make that into an automated process or, from our perspective, we know: “OK, this is what we really need to automate”. But on the other side, also, as the CEO, I have to take a decision and ask myself: do I build it? No, I mean I build Fintech solutions, but still it has to be based on the fintech’s – or whoever the client is – key requirements and key balances, right? Because otherwise, it doesn’t really work.

Claus: A picked up on one thing. There seems to be a different speed of technology adoption between the retail-facing part and the B2B facing part. Would you say that’s true?

Maria: Yes, I would say that’s true. I think actually if the retail part moves slowly, the B2B moves even more slowly. That’s probably because, at the end of the day, the more B2C services are dealing with the consumer who doesn’t understand really what’s going on, they just want what they want. They are becoming much more tech-savvy, they’re really pushing for what they want. During COVID as well, and now we are five years ahead of what we would have been if we didn’t have COVID. So that’s kind of positive on the digital side. User experience has to be seamless like we were saying before. Taking a payment, sometimes when a payment works, it’s like: “Whoa, thank God it works!”, but anybody who doesn’t work in payments would be like: “Why wouldn’t this work? I mean, it’s so obvious that I pay and it just happens”. So that pushes all of the B2C merchants to just be much more on it. B2B comes a bit after because you’re talking about business-to-business. Everyone understands a bit more and the legacy systems are terrific. That’s where the industry will be pushing next. B2B is probably one of the areas that will be moving into more innovation and technology pretty soon because it still hasn’t happened. So it just has to follow at some point. Probably it’s just more around expectations and who has more of the power when the transaction happens.

Claus: Well, this explains a little more how we experience the whole thing as KYC vendors that concentrate on KYB – or business-to-business. We’ve been doing this for eight years and we’re very successful now with tier-one banks and all. But for a time it was a long journey. In between. I would have said: “Well, if you want to start a company, you want to run a company, be the CEO… it’s a good idea, but don’t do it in compliance, don’t start there”. And by now I would say: “Well, just with that information, if you do, then don’t start in B2B Do retail”.

Ugnė: That perspective kind of makes sense also if you take volume into consideration. Volume, it’s key for everything, right? We’re talking about scale. So, yeah, B2C scale in my view and also for RegTech providers is kind of appealing in a sense. But maybe we’re a little bit luckier because what we earn from our clients can be subsidised. We can subsidise the costs for those checks because it’s faster for us, so we will justify the cost for it in a way. Whereas someone in the B2C space, they’re very cautious about what they’re paying.

Claus: I have another question that I’m selfishly interested in learning for my company. As we look to the future, what do you see as the top challenges for Fintech companies? And do you feel that RegTech providers have a role to address these with you? Maria, let’s start with you.

Maria: Challenges or opportunities, depending if you want to see the glass half full or half empty, right? I like to call them opportunities as well. I think there’s a lot of innovation coming within Fintech. There’s a lot around embedded finance for example. I think that’s one of the areas that are growing really, really fast. Within it as well, providing some kind of lending… we talked about Buy Now Pay Later before as well, tons happening in there. We actually released a Research Global Payments report. I don’t know if you guys are familiar with it. We saw that Buy Now Pay Later grew 5-fold from 2018 to 2022 globally in e-commerce, which is massive. So there’s a lot to do in that space. We’ll probably see now who has that scale that we were talking about to take it to the next level. Not only on the Buy Now Pay Later, but we have a lot of merchants now offering their own instalment solutions and saying like: “Hey, why do I actually have to send my user to another payment provider? I don’t see their whole end-to-end journey, and then they disappear from my website. Sometimes they come back and sometimes they don’t come back”. So I think there’s going to be a lot of push on that and some kind of banking as a service, embedded finance that is just going to enable all of the merchants to offer that piece. I think that piece is quite interesting. And maybe the other one that I would call out is more the account-to-account payment or the real-time payments. It is again growing really fast, and I believe in the report we said around 8% of all the global income transactions at the minute. It’s hyper fragmented, very, very domestic… there are over 65 real-time platform schemes in the world. Each one works completely differently. Regulation is coming around. So these innovations within the payment industry, which is where I work, are revolutionising already the space and regulation in Fintech is key. But as new technology comes in, the regulator is to say: “These different trends have already gained this scale”. So now they are on the regulators’ watch list and that’s kind of the next thing, how do we make sure that everyone within the industry is trying to lobby and cooperate to get the right regulation, which is needed, with the right technology to avoid a lot of the more and more manual processes that are not good for anyone?

Claus: About your last point about the fast payment systems, I’ve seen something happening there in Singapore where they do actually go against that fragmentation and try to connect multiple systems. I think that there was a trial between Malaysia, Thailand and Singapore at least, maybe another country as well, where you can now do real-time payments through one platform.

Maria: That’s right. And you see, even in the US as well, there’s like a couple of different schemes that they’re trying to say how it’s going to end up working. Do we consolidate, or do we not? In Europe, because we’re just much more fragmented country by country, how do you get to aggregate? Definitely, the evolution is to be that at some point, with open banking as well, everything’s going to hopefully be more simple. But right now it’s at that point where the demand is there, it is growing, and everyone wants faster payments. So you get a lot of new competitors, companies, and innovators coming in and wanting a bit of the market, right? So then it’s going to be into what happens next, how do we make it in a way that you are giving your merchants or the end consumer the right product, but that is also with the regulation that you needed, and all in a very tech way and not manual?

Ugnė: I agree, there’s a lot of mess actually. A mess from the regulator side because there are things that are coming out but that the regulation is not following through fast enough. There are new concepts because open banking is just a concept. How you use it is a different thing. So, account to account is just one part of it, right? A lot of things are coming up, but I have to say that there is nothing revolutionary in my view. Because if you talk about embedded finance, embedded finance is as old as it gets. What is embedded finance? It is just a financial service that is provided by a financial company to someone that doesn’t have the regulations. It’s the issuance of cards and we talk about all of these great things, but actually we recycle everything. So there’s nothing really that grand in my view. We just have to make this mess into less of a mess. We have to regulate it. We have to really crystallise what works, what doesn’t really work. What I’m looking forward to in the future is housekeeping, in a way, and that the regulators come together. But we have to be realistic. There is nothing that phenomenal happening. It’s just that doing those things really, really well and making it easy for the clients to use, for us as a payment service provider, I think that’s the key.

Claus: Thank you so much. That is very, very interesting. We are pushed to wrap up our conversation, but I would like to ask both of you one question that I actually ask all of my RegTalks podcast guests. Ugne, we’ll start with you… If you woke up tomorrow and somehow had become the global financial regulator, what would you do, and why?

Ugnė: OK, first of all, I would like to hear what this regulator has to say. Because, honestly, it’s very hard to imagine that someone can take all of this and kind of wrap it all around. But honestly, I think that then that would be the end of payments in a way. Because you need a little bit of this fragmentation, a few issues. You need to be a little bit innovative in how you resolve some of the issues. If you don’t have any issues, if everything is transparent, if there’s one regulator, no fragmentation, what are we going to do? What kind of payments are we going to provide, right? I mean, it’s like we wake up and then we say: “OK, thank you very much. Our job is done!”. Everything is easy, you get the payments, you onboard the merchants anywhere globally. If you’re a European acquirer you only onboard European merchants. So now I wake up and I can target anyone, I can go wherever I want? OK, amazing. But it’s kind of a little boring.

Claus: I love that take. This is such a controversial one. Nobody else has ever said that, and that’s just fantastic. You could do one thing just to resolve that. You could just issue a regulation that no two countries are to have the same regulation. If they ever come up with same idea, they have to find a different way.

Maria: Oh my God, you would be the most hated regulator.

Ugnė: I know, I would probably be the most hated. But it’s so unrealistic to think this could happen because let’s face it… the world is big and there are a lot of things happening. And aI said, I really think that that would feel a bit like the end of a lot of things.

Claus: Maria, would you have an even more controversial approach…?

Maria: Ah, gosh, no. I would actually appreciate a little bit more simplification at the minute. I would create, and I know they exist but I would have more, groups of experts to discuss what needs to be regulated. A lot of the time what we find is that the regulation comes a bit late and sometimes it’s actually not fixing what it’s supposed to be fixing. So then we have to go back and say: “Well, this is a good idea. But, you know what? This is just adding complexity. No one can comply with it in the times that you’re telling us, and it’s actually not fixing the problem”. So in my ideal world, I would get this kind of council of experts sitting down to say: “OK, we know what needs to happen. Let’s all put it together, come in as industry experts to say what needs to be regulated. We understand these pieces, this is how the regulation should work”. That would be the first part. For the second part, I would include more of the RegTech providers in there. Because you have the regulation there, that’s great. But the second thing is: how do you implement it? We get thrown regulations on our desk all the time and say: “How on Earth I’m going to make this work? What does this even mean in these specific cases?”. So then let’s have more of the experts on RegTech at that table saying what the technology that could solve this would be. At that point, we’d be OK as we would know: this is the regulation, this is the technology. We just need to implement it together and then launch it to make sure that we’re compliant. That’d be Heaven for me.

Ugnė: Also just a small, small thing that I will say… open banking is a very good example, right? Open banking came and there is really no customer or consumer protection for the PIS, for the payments. There is no infrastructure to do refunds or chargebacks as we understand them in the card environment. So here you go. You know, it’s like. It’s there. Deal with it. And then what do you do? So, yeah, I agree. And completely. I’m stopping.

Claus: Ugnė, Maria, this has been fantastic. Loved it.

Ugnė: Thank you so much for having us.

Claus: I learned so much. Thank you both.

Maria: Yeah, thank you. It’s been fun.

Claus: And to our live audience out there, thank you very much for listening in.

If you liked this episode and you’re interested in the global Fintech and RegTech space, make sure to check out our past interviews. We now have more than 30 episodes in our series. RegTalks is available on Spotify, Apple Podcasts, Google Podcasts and at knowyourcustomer.com/regtalks. If you have any questions or suggestions for future guests, please e-mail us at info@knowyourcustomer.com. Thanks again and hope you enjoy the rest of the week. It’s been a blast.