Modular: The Way Any Organisation Can Become A Bank


Photo:  Vilve Vene, CEO and co-founder of Modularbank

Financial IT:  Please introduce us to Modularbank

Vilve: Modularbank is a new entrant into the UK Fintech scene. We provide a flexible banking platform, allowing any business to rapidly offer seamless, tailored financial services to its customers. 

The company was launched in 2018 by a small group of Estonian financial IT pioneers and entrepreneurs. Modularbank is a spin-off from another Estonian fintech: Icefire, which is responsible for the infrastructure of the Estonian tax system and which has successfully built more than 15 banks and financial institutions. 

Financial IT:  Who are your primary clients? What is the number of clients? Please name your biggest clients in the banking space.

Vilve: Our customers range from incumbent banks, to fintech start-ups, as well as other businesses from different industries who wish to enter the financial services sector, such as retailers. We currently work for one of the largest financial services group in Finland, a leading Baltic retail group and a Frankfurt stock exchange-listed fintech company operating in 23 countries.

Having recently entered the UK and German markets, we are in talks with several fintech companies and other businesses in both countries. 

Financial IT:  What is the Unique Selling Proposition (USP) of Modularbank? Please name your competitors

Vilve: We offer a full core banking platform and our USP is the flexibility our solution offers to our customers. Thanks to our 15 years experience in the financial services industry, we know the sector inside out, and we understand what businesses need to enter the arena of financial services. 

We have designed the Modularbank platform with a business first approach to allow a rapid implementation of the product enabling companies to serve their clients quickly. Our experience in the industry helps us in ensuring that each part of the product meets our clients’ needs. 

As a result, our platform is easily configurable and can be launched quickly by different types of organisations (from incumbent banks to retailers) without additional customizations. For example, features such as the operation in multi-currency and multi-tenancy environments have been built and integrated as part of our platform. In addition, we offer various deployment options, ranging from SaaS or on preferred public cloud or on-premise BaaS. 

All of this is possible thanks to our Application Program Interface (API) based platform which can be quickly and easily integrated to any ecosystem. To give you an example, our API capability enables data migration from a legacy system.

The key concept is therefore to help our customers to become “modular”. In other words, allowing them to choose the specific services or modules required to meet their needs as easily and quickly as possible.

Other modern banking platforms are usually focused on specific companies, mainly incumbent banks or fintech start-ups. On the contrary, thanks to our flexible offering, we can target a range of different businesses, across industries, even outside the financial services sector.  

Financial IT:   What are the unique features of the product that you offer? What is the offering in your existing portfolio that generates the highest revenue?

Vilve: Modularbank’s unique feature is the full core-banking suite that is composed of flexible and independent modules covering end-to-end everyday banking processes, which are easy to implement. 

It is very flexible and provides a range of options to our customers. For instance, they can choose to integrate the whole platform to their existing systems, seamlessly, or “pick and choose” which parts are the most relevant to their needs. In other words, a retailer can choose to only integrate our lending module to introduce its own credit service. Thanks to our API-first design, this service can come into effect rapidly to serve its customers right away. 

This presents many business opportunities with mature organizations. To give you an example, an established international financial institution decided at first to only integrate our core banking module. After working with us, they showed interest in other modules such as our lending module to build new loan products.

When we work with a long-established bank, we adopt a targeted approach to ensure we meet its needs and requirements to establish a long-term partnership. We have already shown our value by delivering the integration of new technology in just a few months, which would have taken years otherwise. 

Financial IT:  Modularbank is a new entrant to the UK market. What is most attractive for you in the UK fintech space? What are the key differences in operating in Estonian and UK markets?

Vilve: The way the UK fintech sector is developing and innovating is fascinating, and there is a real demand for state-of-the-art financial services. The UK fintech scene is a leader not only in Europe, but also in the world, as no other countries have witnessed such rapid evolution of their banking landscapes. What is particularly noteworthy is how the regulations and legislation have evolved to encourage these changes.

The UK market therefore offers great opportunities for us as it is not only mature, but there is also high demand for new services driven by technology. Companies and institutions across the country have recognised the need and opportunity offered by financial services technologies. They are now at the stage to make the required changes in their culture and mindset to fully take advantage of what the sector can offer.  

This is what the UK and Estonia have in common, both markets are mature and in high demand. However, Estonia is a smaller market which limits our business opportunities. To widen our options, we have launched in the UK and in Germany, and our current focus is to successfully penetrate these markets. In the longer term, our aim is to enter other European countries. 

Financial IT:  Following the latest news that N26 has quit the UK, citing Brexit as a reason, and the COVID-19 breakdown, what's next for UK challenger banks? What does it all mean for the proliferation of open banking services?

Vilve: The maturity of the UK fintech sector does not only offer great opportunities, it also makes it a very challenging market for challenger banks to enter. There are numerous existing players with a strong presence and equally good offering. Brexit and the current crisis caused by COVID-19 only make this situation even more challenging. 

However, it is not all bleak. The circumstances we are facing offer a chance for fintechs to shine. For a start, with the population forced to stay at home, the demand for digitalisation is at an all-time high. Fintechs who can seize the moment and offer relevant services that make a difference in the current situation will benefit from this crisis.

In addition, banks in the UK are under high levels of pressure, especially now they are at the front line of the UK government’s coronavirus rescue plans. This means that fintechs have a role to play in helping financial institutions to digitally transform themselves and will continue to be an ever larger priority in the current landscape. As a result, modern platforms enabling fully digital offerings allowing banks to quickly adapt to challenges, and even enabling them to stand against challenger banks, will be needed. 

The current crisis has changed the priorities for both banks and fintech players, and open banking services are not first on their list. At the moment, the main focus of banks and other financial services actors is to adjust and cater to the current consumers’ needs, in terms of changing interest rates, new loans, changing payback terms etc. It is clear that banks have been taken aback by these circumstances and depending on how  successfully they adapt to these new challenges, we will see a renewed interest in open banking .  

Financial IT:   What’s your marketing and business strategy for the next 3-5 years? 

Vilve: Our first aim is to strengthen our client portfolio. As previously mentioned, our target audience ranges from incumbent banks, to neobanks and fintech start-ups. Our solution is also relevant to other businesses such as retailers, utilities and telecom companies and manufacturers. 

In doing so, we will focus our effort in further enhancing our platform and offering to ensure we can serve these different groups of customers to ensure we can meet their specific needs. 

In terms of market penetration, our aim is to have a strong foothold in Central and Western Europe, mainly in Germany and in the UK. In the long term, we are also considering expanding into the Southeast Asian and North American (Canada/US) market.

Financial IT:   How long is it before we have a Fintech solution that enables governments to extend credit to literally millions of small businesses - either through conventional banking systems or through lending platforms - in a matter of days?  

Vilve: This is a topic which is close to my heart! The issue is not about technology, as the technology exists.

The fact that the British Business Bank, (the state-owned development bank administering the government’s Coronavirus Business Interruption Loan Scheme), has brought in new actors into the programme shows that there is a real need for a speedy access to the scheme. 

Challenger banks are in a good position in showing their values but incumbent banks can also step in. However, this will be determined on whether they have the right technology, and if they are able to run the service of a modern banking platform, alongside their existing one. Banking platforms, such as Modularbank can help in doing so, but only if banks decide to partner with them.  

Indeed, our lending modules can be integrated into banks eco-systems easily thanks to our APIs. Our solution can work alongside any existing legacy systems, and our products are fully configurable which means they can be easily adapted to the financial institution’s needs to cater to their customers quickly.

However, even though the relevant technology is available, it is important not to forget that it is only an enabler, not the solution. Other factors come into play, for instance, regulation, the credit institutions’ structure, its processes and its culture. With this in mind, it is difficult to say when a fintech solution will be available to extend credits to small businesses quickly. 

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