Leading the way in futureproof banking solutions

In 2012, Anders la Cour and Laust Bertelsen identified a way to address several B2B cross border payments challenges such as time and costs. Four years later, Banking Circle (then known as Saxo Payments) launched, and in 2017, Banking Circle Virtual IBAN was rolled out as a means to provide access to faster and cheaper payments both locally and internationally. Today, a significant membership has been built, which includes banks and Financial Tech businesses, with Banking Circle processing more than 1.5 million transactions each month.

Businesses of all sizes, especially the smaller, younger companies, can be held back from meeting their full potential due to difficulties with payments and cashflow. Despite this area of business being highly influential, it often is left out of business planning. Transfers can be too slow and expensive, and without access to additional funds, many SMEs struggle and potentially fail. Moreover, traditional banks are unable to provide flexible, fast, and low-cost solutions, which leaves many SMEs financially excluded. Banking Circle has built solutions that aim to support financial inclusion by providing the previously excluded businesses with access to essential lending, banking accounts, and cross border payments.

Tackling market challenges

When new businesses launch, payments are often low on the list of priorities. SMEs traditionally manage payments through banks where legacy systems cause inflexibility, meaning banks struggle to provide the best businesses solutions.

Payments can be slow and expensive, especially across borders. In addition, many banks are pulling back from correspondent banking because of risk and compliance concerns, and, post-recession, traditional banks have become reluctant to lend to smaller businesses. New companies are finding themselves unable to compete effectively, thus limiting their potential. Hence, Banking Circle has created a suite of tools designed to meet the changing market needs.

Banking Accounts and Banking Circle Virtual IBAN

Through Banking Circle, banks and FinTech businesses can provide customers with accounts in over 25 currencies. Financial institutions can issue multi-currency physical and virtual IBANs for customers in their own name, in multiple jurisdictions. Banking Circle Virtual IBAN enables financial institutions to give clients their own virtual IBANs, eliminating the need for several banking relationships. Benefits are experienced across payments acceptance, screening time, reconciliation/settlement times, and customer experience.

How Banking Circle Virtual IBAN works

Banking Circle is the first non-bank to provide multi-currency virtual IBANs for businesses to offer to their clients. Banking Circle Virtual IBAN delivers full transparency and faster settlement on payments and transfers, enabling Banking Circle members to give their merchants easy payments acceptance and settlement worldwide, including same day SEPA payment settlements.

Merchants can apply for Banking Circle Virtual IBAN accounts through their payment provider, or through an online Marketplace via its payment provider. The merchant is provided with a unique virtual IBAN account in its own name.

When a payment is received into the virtual account, Banking Circle sends a report detailing the transaction, and because the unique virtual IBAN is used, the payment provider can automatically and instantly reconcile the payment to the merchant’s account. From there it can be transferred to a physical account or used to pay suppliers directly from the virtual account.

The use of these accounts allows payments organisations to control a master IBAN account where they can create and allocate a segregated virtual IBAN account to each of their customers, aiding settlement and instant, automatic reconciliation. The use cases for Banking Circle Virtual IBAN have increased significantly since launch. Initially starting as a means for supporting cross border payments for FX and payments businesses it has now been modified to deliver benefits for: prepaid card issuing, marketplaces and marketplace sellers, FinTech banking providers, payroll, and invoice discounting, with many more to follow.

In the first six months after its launch, virtual IBAN accounts handled on average 2,000 payments per month. In the following six months that had reached on average 15,000 per month. Banking Circle expects 250,000 monthly transactions to be taking place by mid- 2019. Over 1 million virtual IBANs have been issued in the past 12 months, to 30 institutional clients.

Banking Circle Lending and Banking Circle Instant Settlement

Banking Circle recently commissioned a study of 500+ SMEs to uncover pain points they experience in accessing funding through traditional lenders. In response, the company built two propositions - Banking Circle Lending and Banking Circle Instant Settlement.

Where once smaller businesses were unable to achieve global ambitions due to a lack of necessary funds, Banking Circle is improving financial inclusion by giving financial institutions the ability to offer SMEs fast access to loans with flexible repayment options.

Banking Circle Instant Settlement, a receivables financing solution, enables PSPs to offer their merchants instant access to cash, while they wait for payment from customers or marketplaces – taking up to 90 days. The tool provides an instant cash advance for receivables due, giving merchants access to the cash flow they need to run their business effectively. FinTechs can also offer merchant customers fast access to cash through Banking Circle Lending.

The Banking Circle future

Banking Circle gives businesses the ability to offer their merchants the facility to pay suppliers and partners directly from a web interface delivered by them, in their name, without the need to invest in internal infrastructure. This is done without any loss of time or cash, empowering global trade for even the smallest business.

Regularly conducted research among Banking Circle customers and the wider industry has revealed the importance of payments that occur quickly and at low cost, seamless reconciliation processes, and affordable, fast, and flexible access to cash, especially for smaller businesses. New solutions must also ensure compliance with the latest regulation. Banking Circle has built solutions which give FinTechs the ability to offer their merchant customers banking accounts in over 25 currencies, in their own or their client’s name.

This editorial was first published in the B2B Payments and Fintech Guide 2019 - Innovations in the Way Businesses Transact, which offers insightful editorials and use-case analyses on how to envision a proper regulatory and technological framework for safe and effective cross-border and instant B2B payments.

Join Tom Longhurst of Banking Circle and publisher Melisande Mual to discover how payment providers working together with financial utilities can change the current landscape – and add value to their service proposition. Register now for the SMEs Battle for Cash: Obstacles and Opportunities within SME Lending webinar.

About Anders la Cour

Co-founder and Chief Executive Officer of Banking Circle, Anders la Cour is a hands-on leader driving innovation to facilitate more efficient, cost-effective banking solutions. He was instrumental in arranging the acquisition of Banking Circle by EQT VIII and EQT Ventures.

About Banking Circle

Next-generation provider of mission-critical banking infrastructure, Banking Circle is underpinning the service proposition of Financial Tech businesses, PSPs, FX providers and banks. Banking Circle is helping financial institutions provide their customers with faster and cheaper banking solutions, including local and cross border payments, banking accounts and lending.