Small UK fintech going global on backs of Visa, Railsbank

Small UK fintech going global on backs of Visa, Railsbank

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Small UK fintech going global on backs of Visa, Railsbank

The fintech Novus plans to launch an app that encourages environmentally sustainable purchasing. But to succeed, the five-person company must itself be sustainable – and scalable – as a business.

About 15,000 users have signed up for a waitlist for the London-based company’s product, which offers financial rewards that can be spent, saved and tracked on its app. The fintech’s small remote staff is spread between the UK, Finland, Switzerland and Bulgaria.

It has partnerships with Railsbank and Visa to support not only its debut offering, but other products down the road.

“We want to launch an investment product in the future,” said Shruti Rai, a co-founder of Novus. “To offer investments, it would be helpful to have open banking APIs to connect accounts for the investments.”

The collaboration with Railsbank helps the startup manage licensing in different countries, as well as application programming interface connections for consumers, NGOs and other organizations Novus engages with to support payment-related donations to different causes.

Visa is contributing through direct support in fee reductions to create financial space for the donations, while the card brand’s network supports Novus’s partner acquisition strategy, providing access to Visa’s clients and marketing at the upcoming Tokyo Olympics and other channels.

Novus’ app “ties purchase to donations across multiple causes,” said Shruti Rai, the startup’s co-founder.

The API connections between the different parties reduces the need for multiple bank accounts for different markets or different projects, Rai said, adding Novus’s expansion plans will also require cross-institutional data sharing.

At launch, Novus members chose to send a portion of payments to organizations or projects that support environmental causes, gender inequality, food insecurity and other issues. There’s an in-app marketplace that includes brands that have policies or programs that are supportive of the issues Novus hopes to address. Use cases include portions of supermarket bills diverted toward hunger relief programs, transportation payments contributing to tree planting projects, prescription payments partially funding child health programs and streaming subscription payments contributing to book purchases for schools.

“It’s like travel rewards, but not points. Instead it ties purchases to donations across multiple causes,” Rai said.

Railsbank has used assets acquired from Wirecard to build technology to support embedded payments and open banking, which both enable payments and other financial interactions from multiple providers.

Open banking refers to data sharing between a consumers’ bank account and third parties such as fintechs to support ancillary services, such as personal financial management or digital payments. Embedded finance uses enrolled payment credentials to bundle multiple financial services in a single app.

The Payment Services Directive 2 (PSD2) is the regulation that drives open banking in Europe, while in other countries such as the US open banking is market-driven. Open banking has enabled expansion for financial services such as investing by eliminating the need to copy and paste account details from a bank account to an investment app. Embedded finance is supporting collaborations between technology companies and financial institutions to build super apps, such as Apple Card.

For a small firm, it would be prohibitive to manage connections between consumers’ bank accounts to contribute to socially conscious causes, according to Dov Marmor, chief operating officer of North America for Railsbank.

“Most of the companies in the socially conscious fintech space are early in their lifecycle, like Novus,” Marmor said. “The challenge they have is the access to the partnerships they need to launch these products. There’s legal and tech firms, sponsor banks and regulations that have to be managed.”

By enabling these functions, Marmor said, the hope is to help startups like Novus control the “last mile.”

“They want to create a situation where a user swipes his or her card, and then the investment in the project happens,” he said, adding that before open banking technology became widely available, these connections had to be built from scratch by the startup .

Other payment firms are also linking to technology companies to link purchases to environmental impact.

The payments processor Adyen earlier this year partnered with the environmental technology company South Pole to launch a feature that allows consumers to view an emissions calculator and access an option to offset the carbon footprint of their payments through outlays to renewable energy projects. And MUFG Union Bank in New York recently launched a deposit product for business clients to use cash reserves to finance socially conscious and environmentally focused projects.

The demand for socially conscious financial services is increasing, creating an addressable market. Sustainable funds drew more than $ 51 billion in investment in 2021, compared with $ 5 billion in 2015, according to MCSI Research.

That growth in demand is pushing collaboration among large financial firms to reach a larger market. Mastercard recently partnered with the Swedish fintech Doconmy to build a calculator for banks to measure the environmental impact of purchases. That partnership includes an API to allow banks to connect to both firms.

To add more scale, Mastercard recently partnered with Ant Group and other organizations including Paytm, Rabobank and BBVA to share best practices for financial products that reduce carbon emissions as part of a goal to bring one billion consumers into environmentally-focused financial services by 2025.

Initial projects include Mastercard enabling third-party access to a gauge that measures the carbon impact of purchases in support of a reforestation project. Another initiative, Ant Forest, uses the Alipay platform to encourage consumers to reduce carbon emissions through incentives to replace paper bills with online payments.

The corporate commitments are for five years, and will include insights from external experts on climate change, carbon measurements and supply chains, an Ant spokesperson said in an email.

“We sit at the intersection of global commerce, our network is the foundation of our business and how we operate,” said Kristina Kloberdanz, chief sustainability officer at Mastercard.

The card brand forges partnerships with other firms through other alliances such as Every Action Counts and WEF’s, Kloberdanz said. “So when we think about creating a sustainabledigital economy, we not only think about our own footprint and operations, but also how to leverage the power of our global network of customers, partners and nearly 3 billion cardholders. Mobilizing collective action at scale is where we can have the biggest impact. “