The Finterview - Fintech Exposed episode 18.
In the rapidly evolving world of finance, technology has become the driving force behind transformative innovations. The rise of Fintech signals a new era where digital solutions are redefining traditional financial systems. Yet, as with any monumental shift, it brings forth its own set of challenges. How do we harness the power of these digital tools while maintaining security and trust?
To help you understand this, we dive into a recent episode of the Finterview Podcast. The host, Amar Kotak, talks with Aaron Carpenter from Transact Payments Limited. Aaron Carpenter is a noteworthy figure in the Fintech realm. With a storied career spanning roles as a solicitor, head of legal for a fintech company, and ultimately the CEO of Transact Payments Limited, Aaron has consistently demonstrated an ability to navigate the Fintech landscape precisely.
In this article, we will dive deep into Aaron’s unique perspective on the Fintech industry. Keep reading for the key takeaways from the episode or 🎧 listen to the full podcast here.
Aaron Carpenter's journey to Transact Payments Limited
Aaron Carpenter, the CEO of Transact Payments Limited (TPL), has had an eclectic career that has uniquely prepared him for his current role. He began his journey as a solicitor, specialising in commercial and corporate law. Later, he transitioned into the financial services industry, focusing on fintech-based companies in the UK. His experience equipped him to understand the business and legal aspects, which became an invaluable asset as he moved into more operation-centric roles.
From solicitor to COO
- First Job: Aaron started as a solicitor, emphasising corporate work.
- Pivotal Experience: He shifted to being head of legal for a fintech company, diving deep into the industry's nuances.
- Learning Curve: An opportunity in Gibraltar gave him his first taste of the payments space.
Aaron was in turbulent waters when he joined a company grappling with regulatory issues. He likens this period to being "bloodied in a rugby match," indicating the formative experience it provided. The challenge only strengthened his skills and prepared him for his subsequent roles.
Current role and challenge
He joined TPL at a pivotal moment. With Brexit looming, the company searched for ways to continue serving its EU-based customers. Aaron was instrumental in guiding the company through these challenges. His dual expertise in business and law made him an invaluable asset, particularly in navigating regulatory landscapes.
How entrepreneurs can trust their teams while scaling
Growing a business often means founders must step back and let experts take over certain tasks. If you're an entrepreneur, you might find it hard to loosen your grip on every part of your business. According to Aaron, the key is surrounding yourself with real experts. This helps you gain the confidence to step back. This doesn't mean you're out of the loop; you're making room for skilled people to contribute effectively.
His company went through a big change to make this work. They restructured who reports to whom and clarified everyone's roles. The outcome? They doubled the number of projects they took on without overwhelming their team, and they completed these projects more efficiently. Aaron suggests that any growing business should be prepared to adapt. Even if you experience rapid growth, your foundational principles can guide you through changes.
By letting experts do their jobs, you pave the way for your business to grow and adapt. This isn't just advice, Aaron has done exactly that in Transact Payments.
The challenge of transitioning from founder to leader
Changing your role from a hands-on founder to a leader who trusts your team can be difficult. According to Aaron, this change is often more emotional than logical. It involves recognizing when to step back and allow others to make decisions. You might relate to the internal struggle of wanting to do everything yourself if you're a founder.
- Acknowledge the need: Realise that to grow, you can't keep controlling every little thing. Sometimes, you have to let others make decisions.
- Seek advice: Aaron suggests leaning on mentors or experienced advisors for guidance. They can offer valuable insights and help you see things differently.
- Allow mistakes: Trust your team to make decisions, even if they don't always get it right the first time. Mistakes are learning opportunities that help everyone grow.
- Emotional hurdles: While logic tells you to delegate, emotionally, it's hard to let go. Acknowledging this emotional struggle is key.
By embracing these points, you can transition from a hands-on doer to an effective leader more smoothly. This shift is essential for personal growth and for your business to flourish.
Paths to success in the Fintech sector
The Fintech sector offers multiple ways to achieve success, like a journey with various routes to the destination. According to Aaron, companies like TPL have evolved significantly to adapt to the market's changing needs.
Evolving Role in Fintech:
- Historical focus: TPL initially assisted unregulated Fintech companies, enabling them to offer card and electronic services to users.
- Current Trend: Today, there's a balance. TPL equally serves unregulated and regulated Fintech firms, understanding that different businesses have unique payment challenges.
Beyond traditional services
Businesses outside the standard financial sector can also benefit from specialised payment solutions. TPL extends its services to:
- Gig economy: Addressing payment challenges for gig workers.
- Online marketplaces: Simplifying transactions in digital spaces, ensuring smooth operations.
By continuously learning and adapting, TPL ensures it remains relevant. As you navigate the Fintech landscape, considering such adaptability is essential. Remember, there's no single path to success; the key is to find the route that best suits your needs.
The hidden complexities of launching a card program
Starting a payment card program may seem like a walk in the park, but Aaron advises that it's far from simple.
- Compliance: You must follow the rules the government and card networks set. These rules change often, so you can't just set and forget them.
- Resource Drain: Even after you launch, keeping everything in order takes a lot of work.
The role of advisors
A good advisor, known as a BIN sponsor, does more than help you start. They guide you through growing your program, helping with product changes, and even helping you work in different countries. They're not just a launchpad; they're your co-pilot for the journey.
Don't underestimate the work ahead. Your program will need to grow and adapt over time, so choose a BIN sponsor who will be with you every step of the way.
Choosing the right card scheme: Master or Visa?
Deciding between Mastercard and Visa can feel overwhelming. Aaron suggests that the decision should align with your program's needs rather than focusing on which scheme is "better."
- Alignment with program goals: Choose a scheme whose approach complements your program concept. They should have experience in, or be closely related to, what you're trying to achieve.
- Speed of approval: A scheme experienced in your program's domain might speed up the approval process.
The value of relationships
The right partnership isn't just about checkboxes and terms; it's also about relationship chemistry. You should aim to work with a scheme or supplier that meets your needs and understands your vision. This relationship is more likely to succeed if there's mutual trust and a belief in what you're trying to accomplish.
So, when you find yourself puzzled between Mastercard and Visa, focus on the scheme's experience and how it aligns with your program objectives. Additionally, consider the strength and quality of the relationship you can build with them. Both factors could make or break your card program's success.
What makes a successful card program?
Launching a successful card program involves more than good intentions; it requires a thoughtful approach. According to Aaron, the most successful programs share specific traits.
First, they avoid common pitfalls like trying to solve a problem that doesn't exist or delaying a product launch to perfect every detail. Instead, the focus is on quick market entry and ongoing improvements. You should get your product live as soon as possible to start learning from real-world user interactions. Doing so helps you fine-tune the product based on actual needs instead of wasting resources on features your customers may not want.
Moreover, gone are the days when high customer numbers would attract massive venture capital. Now, profitability and self-sufficiency take centre stage.
So, if you want your card program to succeed, pinpoint a real problem, go to market quickly, and commit to continuous improvements.
The path to success for fintech: revenue diversification and regulatory compliance
The success of a Fintech venture hinges on two crucial aspects: finding multiple ways to make money and understanding the evolving landscape of rules.
Aaron suggests If you're in the Fintech space, relying solely on interchange fees won't cut it. Instead, focus on offering additional services people are willing to pay for. This could be anything from money transfer services for workers far from home to subscription-based perks. This strategy adds another revenue stream and gives you an edge over competitors.
Regulatory compliance is another factor you can't afford to ignore: once viewed as a roadblock,is now crucial for long-term stability. Make sure to partner with entities that take regulation seriously. These partners should help you understand current and future laws, thereby reducing risks to your business.
In short, your road to success in Fintech involves more than just a good idea; it requires smart revenue choices and a solid understanding of regulations.
Navigating Brexit's impact on Fintech compliance
As Brexit unfolded, Fintech companies faced the uphill battle of adapting to new compliance regulations. Aaron explains that the Transact's experience was a testament to these challenges.
Transact decided on Malta as their new base. Why? Malta offered a regulatory environment that didn't force them to rewrite the rulebook for their business model. But make no mistake, the move was far from simple. They had to act fast because the Brexit clock was ticking.
The race for licensing
Transact believed securing a new licence would be straightforward, but they were wrong. They faced delays that took them right up to the Brexit deadline. But with teamwork and some high-quality new hires, they made it just in time.
What does all this mean for you if you're a customer? Transact was able to switch its customers over smoothly when the rules changed. But not every company was so lucky. If the UK and EU rules don't match up, you, the customer, could face two very different sets of procedures when doing business.
The future of ethical banking in Fintech
Ethical banking is making waves but still has room to grow. Aaron points out that financial services can do more for the underrepresented and the environment. Specifically, ethical banks aim to widen financial access to marginalised communities and businesses while taking steps toward sustainability, like carbon neutrality.
Challenges and collaboration
You may wonder why this hasn't caught on yet. Red tape and lack of collaboration are major roadblocks. For instance, some rules make using eco-friendly materials, like biodegradable plastic, hard. Moreover, the success of ethical banking relies on all players in the financial ecosystem aligning their goals.
Small and medium-sized enterprises (SMEs) are an underserved market needing ethical banking services. This gap presents an opportunity for both Fintech companies and traditional banks to step in. However, this is possible only if all parties are willing to collaborate.
In essence, ethical banking holds untapped potential. The obstacles are real but not insurmountable. It's time to look beyond limitations and envision a more inclusive and sustainable financial future.
Overcoming regulatory hurdles in Fintech
The challenge of navigating stringent regulations to make financial services more accessible is an urgent issue in Fintech. Even new Fintech companies find it difficult to open corporate accounts to pay their bills. This situation reveals the gap between what regulation permits and what technology can achieve.
Challenges and barriers
- User onboarding: Current regulations often require documents like IDs, address proofs, and sometimes even income slips to open a bank account. This is cumbersome, especially for the underbanked, who may lack these documents.
- Societal impact: Events like COVID-19 and the crisis in Ukraine show how these barriers can be life-changing. People couldn't easily access essential services because they failed to meet the traditional Know Your Customer (KYC) criteria.
- Traditional vs. modern verification: Relying on utility bills for identity verification is now considered outdated. Biometric data and mobile digital verification are better suited for the modern age.
The way forward
Who should lead the change? Aaron suggests a top-down approach, emphasising that the push should come from governments. He believes current technology, which securely stores vast amounts of our data, should be utilised to ease these processes. A more flexible yet secure system would benefit not just consumers but financial institutions as well.
Exploring untapped opportunities in cross-border payments
Cross-border payments are a big deal in today's globalised world. While some companies excel in this space, many regions still lack adequate services. Aaron suggests that this area has untapped potential worth exploring.
Why focus on cross-border payments?
- Huge demand: Some areas worldwide don't have good services for managing large money transfers across borders. These are known as "underserved payment corridors."
- Existing models: There are already successful companies out there, meaning you don't have to start from zero. You can learn from what they are doing right.
- Room for a niche: Even with big players in the field, there's still space for more. You can find your special area or "niche" where your business can be the best.
If you're considering starting a business, consider focusing on these overlooked areas in cross-border payments. Tapping even a small part of this market could lead you to success.
In conclusion, the landscape of Fintech is a dynamic arena where finance and technology converge to shape our financial systems in unprecedented ways. While opening doors to innovation and convenience, this fusion also ushers in challenges that require careful consideration.
Aaron Carpenter's journey from solicitor to CEO of Transact Payments Limited demonstrates the evolution of a leader who adeptly steered his way through the intricate regulatory currents of the industry.
As we peer into the future of Fintech, cross-border payments and untapped markets offer fertile ground for innovation. While challenges persist, applying modern technology and a regulatory landscape supporting flexibility and security could catalyse transformative change.
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