RailsBank is a Banking as a Service (BaaS) platform, giving businesses access to global banking services in less than 5 lines of code. RailsBank has recently partnered with SolarisBank, Secure Trading, Arkea Banking Services and ComplyAdvantage and is in talks with several others to give businesses access to transaction banking services. RailsBank now has 700+ businesses on its waitlist and is growing rapidly.
Currencycloud provides businesses with an API to automate FX conversion while giving businesses and their clients low rates. Currencycloud powers some of the fastest growing and biggest fintech companies in Europe facilitating over $25 billion in transactions to date.
The veteran fintech entrepreneur spoke about how he started Currencycloud and Railsbank, the obstacles that appeared in both companies and how to retain customers in a B2B heavy business.
Here’s part one of our interview with Nigel:
Luka: How did validate that Currencycloud was worth pursuing?
Nigel: The first sign of validation for Currencycloud was when I phoned up an FX broker in the UK in 2007 to exchange GBP into Euros and they wanted to charge me a ridiculous 4%. I was working at a bank at the time and had a bunch of market screens in front of me where I could see that the actual bid offer was about 0.001%. Four percent was a considerable markup.
I ended up settling at about .7% with that broker, (which I still felt had quite a big margin) but I thought to myself “there must be a better way”.
After I left the bank I set up a small brokerage firm, which aimed to help colleagues of mine get better FX rates. In addition to offering better FX rates and transparency, I also wanted to help automate this whole process—because it was pretty tedious. The brokers in those days (2007) would send an email confirmation with a PDF. I would have to print the PDF, and then fax it to the broker with onward payment instructions - a complete pain! I wanted to automate that.
My team and I then started to build out a corporate customer base, but we quickly learned that everyone loves to hate their FX broker. So even if you show them transparency they still want it cheaper. They’ll say “I found another broker and I’ll buy it off him for cheaper.” So it became a “lowest price wins” type of thing.
However, banking was becoming more regulated and banks were stopping to “bank people” in terms of the manual processes, because the industry was slowly “de-risking” customers (basically cutting them off). That’s where we pivoted from being a broker to becoming an enabling platform that we called: Currencycloud.
We learned that selling an undifferentiated product (deliverable FX) on the lowest cost (and nothing else) was a senseless business, hence we pivoted to being a platform in Q1 2011 to demonstrate the value of our technology rather than “cheap FX”. Quite different from where we started from. It shows that the end-game business is always much different from starting a business.
Luka: How did you start RailsBank?
Nigel: Originally my co-founder Clive Mitchell and I were engaged to do some consulting work for a small bank in Europe.
The bank told us:
“Hey, we have all these rails in the bank: payments, issuing cards, a multi currency platform, as well as other products. Can we do something interesting with this?”
So Clive and I wrote the bank a digital banking strategy. We suggested that they become a digital bank that opens its APIs in order to get customers through a very non balance sheet intensive business, (meaning no lending) while making a margin off of everything coming in via the API.
They were very interested, but I don’t think they had the confidence to execute it.
So Clive and I worked on this original idea and started to develop it into a more platform type of business. And, armed with our PowerPoint decks, we started talking to potential fintech and bank customers: “this is what we’re planning on doing, wouldn’t this be interesting?”
We first spoke to our friends at Pockit, a pre-paid card for the underbanked and a bunch of other people we knew on the market, and we realized that there was something here that they all wanted: accessing banking capabilities through an API. And they wanted to do it fast, simple, and easy. They said “yes, we want this.” So we went out and built it.
Now we have customers doing live transactions and we’re live.
The difference between Currencycloud and RailsBank was: with Currencycloud we built things by investing a fair amount of money beforehand. But with RailsBank we did it with agood old powerpoint that just tested the proposition, which we nailed before we built any code.
How do you retain customers in Currencycloud?
It’s a B2B business in an API world, so smaller customers going out of business rather than losing customers to competition was a problem (there was little competition also when we first started).
Concerning retention, also not many customers switch to another service because the switch costs are too high.
Luka: What about for RailsBank?
Nigel: ForRailsBank, retention is also a “will customers go out of business” issue. Once you integrate with us, it’s not very sensible to switch because you’ll have lots of costs switching and transaction cost increases (e.g. like switching from AWS to your own co-located servers). For example, you would have to connect to your bank directly and each bank has different APIs, etc etc. (One of the problems we’re solving).
Luka: Just to clarify, in order to prevent businesses from going bust, your goal is to get them to market as quick as possible?
Nigel: Yes, that’s one strategy. Get them to market ASAP. Without them having to spend all their funding on massive set-up fees, etc.
But we do have to accept that some of them will go bust, because that’s the nature of small business. However, as a portfolio, some of them will be successful, some mega successful, and some will go bust. So that’s our retention issue.
Luka: How do you acquire customers, for Currencycloud?
Nigel: Currencycloud in the early days, primarily acquired via outbound sales. It’s pretty old fashioned where sales-people are calling up and emailing businesses.
There’s also a fair amount of marketing, but it’s still a very sales driven approach.
Luka: What about for RailsBank?
Nigel: We are invited to lots of speaking events and media appearances—which Startupbootcamp helped us with. That’s one of the reasons we joined the program: it was a bit of a growth hack.
Today, 98% of all our prospects have all been in-bound leads because we’ve designed RailsBank as a product that can be bought rather than sold. Also our proposition “access global banking in 5 lines of code” appears to massively resonate with people, and is unique. This has driven inbound prospects, considerably.
In our next interview with Nigel we speak about fundraising, the obstacles and infuriating bits of speaking to investors.
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