PCM Vol.3 Issue 12

Banking Circle: Opening Up The Global
Market For Financial Institutions
By Anders la Cour
My name is Anders la Cour. I am one of the co-founders
and the CEO of Saxo Payments Banking Circle. My career
in payments started at a law firm in Copenhagen, where we
were dealing with one of the large FinTechs emerging in that
space. It caught my interest. A couple of years later we set
up the business that today is Saxo Payments Banking Circle.
Repositioning Saxo Payments Banking Circle
We are still part of the Saxo Bank Group, with the same DNA
that we had at the inception of our business. Our evolution
over the last couple of years has been rapid and we have
achieved significant growth in a very short space of time.
That has brought us to a place where our role as a financial
utility has been firmly established, evolving from simply
being a facilitator for cross border payments. We are now
putting a lot of resources into building our market position.
We are still Saxo Payments Banking Circle and our platform,
the Banking Circle, is getting more attention in the market.
Due to the evolution and huge changes currently impacting
the financial landscape, financial utilities will become more
and more important.
Over the last couple of years, we have seen a trend where
Financial Tech businesses and banks are moving up the
value chain and are trying to get as close to the customer
as possible. This has created a transition towards more
separated parts of the value chain. Ten or twenty years ago,
everybody wanted to own the entire value chain, integrating
all the components that underpin their service as part of
their internal operations. Now we are seeing businesses
focus more on their core proposition, and outsource the back
office functions to companies with the specific expertise
required to make the offering successful. This is where
Banking Circle is coming into its own. We are providing
the means for financial institutions to be open to service
businesses operating in the international marketplace,
sending and receiving cross border payments, whilst
still allowing them to focus on the customer relationship.
Banking Circle takes away the traditional requirement of
multiple banking relationships and all of the paperwork
and loss of time usually associated with the correspondent
banking model of international payments.
Changes to the international banking industry
The enormous change that has occurred over the
last decade, and which continues to accelerate, has
been driven by the emergence of new technology and
new regulations coming into force. We live in the era
of a networked society where everyone is connected
through different devices and this, therefore, accelerates
innovation. Both consumers and corporates need
to operate effectively and efficiently in
this digital world.
The traditional banks are facing the challenge of effectively
servicing businesses that handle SME payments on a
global scale. Changes to regulation mean that newcomers
in the market, especially within the FinTech industry, have
been able to step in and fill the gaps left by larger banks
that no longer want to service this sector. This has created
the global single digital marketplace for financial services.
However, whilst the larger banks might have started
the process of change slowly to address the digital
marketplace, given their traditional heritage, they have
a lot of knowledge, a lot of capital and a lot of
insight in the industry and they will definitely
bounce back. By 2020, the banking
industry is likely to be more fragmented,
but the different ways of delivering
“banking services” will be broader than we
see today. It will be interesting to see who the
winners will be in that digital space.
Financial Utilities
As companies become more global, there is an
increasing demand for corporates to transact across
borders; without delay, without friction, and using only
a handful of bank accounts to manage liquidity. The
challenge is to do that competitively, and profitably. A
bank’s operating cost of processing a cross border
payment is somewhere between $25 and $35 per payment.
With an operational cost base of between $25 and $35 per
payment, it does not make sense for a financial institution to
deliver that service as the cost passed on to the customer
will be obstructively high. This is where financial utilities
like Saxo Payments Banking Circle come in. They will
allow anybody in the financial space to provide a service
which would not be viable for them to provide in-house.
To understand how this works, a useful analogy is the
beginning of the industrial revolution 200 years ago. Most
factories tried to have their own power generator. Today
no factory would attempt to operate that utility themselves.
Instead they source their power from a third-party supplier.
We are seeing the same
change taking place in
the financial industry
right now. And over
time this will make a
big difference, allowing
financial institutions –
whether the emerging
Financial Tech companies
or the incumbents - to
focus on what they are
best at, which is the
customer relationship,
the user experience and
product development.
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