Mainstream banks facing difficulties in competing with the foreign exchange offerings of new entrants like N26 and Revolut now have an answer thanks to a new solution from Irish fintech firm Cambrist. The Cambrist solution enables banks to offer new and innovative foreign exchange solutions to customers without the need for an expensive replacement of the legacy systems which have been holding them back until now.
"Our product is an add-on to the existing transaction processing environment and does not require the installation of new software into the bank's processing environment," says Cambrist chief commercial officer Ross Leonard.
"It's not just about technology. It's about new opportunities to develop services. The traditional banks are unable to meet the changing needs of their customers in foreign exchange and those customers are turning to new market entrants like N26, Revolut and Monzo. Between them,they have over 10 million customers, while Revolut now has around 300,000 customers in Ireland.
“These new entrants don’t just threaten the banks in foreign exchange, they are also moving into more traditional banking products.”
The product incorporates a number of modules. The first is a multi-currency payments module.
“This enables the bank to take control and set the foreign exchange rates its customers are paying,” says Leonard. “The payments world is very complex and at present a cardholder either accepts a rate offered by the merchant or the rate which applies when the transaction goes through several days later. Our technology enables the bank to set the rate at the time of transaction in a transparent way that improves service to customers.”
The other modules enable the banks to bring these rates into their existing systems and manage the risks associated with rate setting. “There is an analytics engine to help manage the financial risks,” says Leonard.
This deals with the situation where a bank sets a rate today for a transaction which is only going to be cleared in a number of days’ time. That creates a risk as the market could move in that time. “The analytics engine helps manage risks such as that, ”says Leonard.
“Overall the system enables banks to offer new and differentiated products. Most product teams in banks haven’t had to look at foreign exchange for a very long time. The only thing the card teams thought about was making customers understand that the exchange rate offered by them is better than the merchant offer. The advent of these new entrants is changing that and foreign exchange is becoming part of the competitive mix.”
The initial idea for the solution arose as a result of the direct experience of the company founders, according to Leonard. “They all worked on the initial development of multi-currency products on pre-paid payment cards. They saw that all this capability was available in pre-paid cards but not on the cards in your wallet. They thought that was odd and shouldn’t be that way. They asked why can’t banks do it for their customers.”
The answer was that it was a little bit complicated and not really a focus area for the banks.
“Now the growing presence of Revolut and other services has created a point of pressure around it. Another driver is regulation. The regulators have started to look at it, and there is another piece of regulation coming down the tracks to address transparency in foreign exchange. These three factors combined to create good opportunity to provide something new and innovative in the space. Simply put, the founders worked in the area, and created a product they saw wasn’t yet available.”
Market reaction to the solution has been very positive.
“We are still at a very early stage. The company was founded in 2016, and we went live with the solution at the start of 2018. We are only really getting started with major customers now.
"The first big vote of confidence for us came when we were selected as a participant in the RBI Elevator Lab programme run by the Raiffeisen Bank in Austria. We successfully completed that programme and that has resulted in continued development with the bank. That was a big step for us.
"Business is going very well. We are hoping to go live with a large South African bank shortly, and are having lots of discussions with other potential customers. Our initial focus is on South Africa, Australia and Europe. We have a health pipeline of potential customers at present."
Looking to the future, he says banks are beginning to explore the additional opportunities created by the Cambrist solution. “They are being creative about how to use the service to offer different things to customers. One bank is talking about using it to offer volume discounts to large foreign exchange customers, for example.”
