• Maxim Ivanchenko, Owner and CEO at Advapay


• 14.09.2023 05:57 am

Today Financial IT speaks with Maxim Ivanchenko, the owner and CEO at Advapay, a Core Banking software provider.

1. Can you tell me what Advapay does?

Advapay is a fintech technology company based in Tallinn (Estonia). We offer core banking software to various fintech sector companies across the UK, Europe, the Middle East, Africa, and Canada. We believe in combining strong technology with numerous technological and payment services partners to simplify the market entry for fintech businesses. We’re currently building an embedded payments ecosystem solution that allows a wider range of fintech companies (including non-licenced) to start their businesses in a matter of months.

In addition to core banking software and Banking as a Service (BaaS) solutions, we provide fintech consulting and licensing services to companies worldwide.

2. What are the biggest challenges fintech companies are facing?

Numerous businesses are currently grappling with the challenges posed by global instability. Heightened regulatory conditions, escalating expenses, and the need for substantial budgets and rapid market entry all contribute to the difficulties faced by these companies.

The regulatory environment is experiencing substantial transformations, with stricter regulations and growing challenges in acquiring licenses. This trend is notably prevalent throughout the European Economic Area and the United Kingdom. Acquiring a Payment Institution or E-Money Institution license has become significantly more demanding due to heightened regulatory requirements and increased control measures. Regulators now impose stricter criteria on applicants, including the necessity for local presence and higher initial capital. Moreover, regulators have shifted their approach from passive observation to proactive monitoring, closely examining fintech companies before any issues arise. These challenges directly influence the number of issued licences and decreased licenced institutions in the EEA/UK market. That’s why companies seek new locations with less strict regulatory environments for their businesses. Several jurisdictions of this kind are gaining increasing popularity, including Canada (with its MSB registration), Mauritius (Global Treasury Activities Licence and Payment Intermediary Services Licence), and the UAE (offering different types of financial services licences).

However, acquiring a specific license is merely one aspect of establishing an operational company. Fintech enterprises also need robust IT systems and various technological partnerships. Creating in-house software and developing payment infrastructure can be time-consuming, often exceeding one year and incurring costs of around 1 million euros. Given the rapid pace of development in the fintech market, it is evident that one year is an exceedingly lengthy timeframe to launch a fintech project.

The availability of ready-to-market solutions effectively addresses these challenges. For instance, utilising pre-built core banking software that integrates with various embedded finance or BaaS providers can significantly save time and expedite time-to-market for companies aiming to offer digital banking services. Instead of spending over a year on software development and building a partner network, fintech companies can launch their businesses within a couple of months. Additionally, by partnering with the right embedded finance or BaaS provider, fintech companies can leverage license-as-a-service and become agents of EEA/UK-licensed institutions, such as PSD or EMD agents, without needing their own license. Since acquiring a license in the EEA/UK can take around 1.5 years and cost at least half a million, including initial capital and other related expenses, becoming an agent presents a lucrative option for fast-tracking fintech business establishment. 

Furthermore, embedded payments/finance and Banking-as-a-Service offer greater opportunities to reduce costs, accelerate time-to-market, and foster growth.

3. What are your thoughts on the future direction of Embedded Finance, and what do you anticipate lies ahead in this domain?

What Is Embedded Finance? Embedded finance refers to the concept and technology enabling non-financial companies or financial companies without developed payment infrastructure to integrate with licensed e-money or payment institutions to offer/distribute banking, e-money, and payment services. This integration is possible through APIs and communication between various systems and applications. 

With embedded finance, companies can provide a wide range of financial services, including payments, lending, insurance, and investment services, to their customers.

Embedded finance is widely regarded as the future of fintech. In 2022, the global embedded finance market generated $54 billion in revenue. Future Market Insights predicts it will reach $248 billion within the next decade.

The emergence of embedded finance can be attributed to significant advancements in technology and regulations. Firstly, APIs (as PSD2 requirement) have simplified communication between different systems, allowing companies to integrate financial services into their existing products or services seamlessly. Secondly, following the regulations PSD2 and EMD2, non-licensed institutions can act as agents for licensed payment institutions and e-money institutions, enabling the distribution of payment and e-money services.

From both the consumer and provider perspectives, embedded finance represents a significant market trend. On one hand, it enables the inclusion of payment services within different applications, enhancing the overall customer experience. On the other hand, it presents valuable opportunities for non-licensed institutions or licensed institutions without their own developed payment infrastructure to connect with licensed payment or e-money institutions that possess robust payment infrastructure. Additionally, licensed payment and e-money institutions with established payment infrastructure can generate additional revenue streams by sharing their infrastructure with other companies.

Hence, the future lies in ecosystems enabling non-financial institutions or licensed institutions without developed payment infrastructure to connect seamlessly with BaaS (Banking-as-a-Service) or embedded finance providers. Our core banking software, Macrobank, is designed with pre-built integrations with BaaS/embedded finance providers, empowering you to launch a fintech project within months.

Establishing trustworthy partnerships is essential for the smooth operation of any fintech venture. By implementing core banking systems like Macrobank with pre-built integrations, you streamline your operations and time-to-market and secure reliable partners for your business.

4. Please provide insights into Advapay's future direction, including expansion strategies, technological advancements, and possible collaborations.

We are excited to announce the launch of our latest development - the new core banking back-office operator interface. This application offers a convenient and efficient way to manage applications, customers, and transactions.

In addition to this development, we have an array of upcoming technological advancements in the pipeline. However, the highlight of our upcoming releases later this year will be introducing embedded payment solutions within our core banking platform. We recognise the significance of strong partnerships, and to ensure a comprehensive solution for our clients, we are actively integrating with various embedded finance providers. 

In the upcoming months, we plan to announce several strategic partnerships. Stay tuned for more updates as we forge alliances to enhance our offerings further and provide even greater value to our clients.

Additionally, we are broadening our fintech consulting offerings to guide fintech companies regarding fintech licensing. We now extend our services beyond EEA/UK jurisdictions and encompass non-European regions, including Canada, Mauritius, and the United Arab Emirates.