What problems does the financial industry face and how are the new institutions trying to solve them?

Monday 11 September 2023 08:20 CET | Editor: Diana Lupuleac | Interview

Olegs Cernisevs, CTO of Blackcatcard, explains some key problems within the banking sector and how neobanking is actively addressing them.


What is Blackcatcard for those who do not know it yet?

Blackcatcard is a European neobank. The project was launched in 2019 by Papaya LTD, a financial institution with an Electronic Money Institution (EMI) licence received in 2015.

Blackcatcard now stands as an all-in-one online banking solution. As a neobank, we provide services to both individuals and corporate clients. Residents of European Economic Area (EEA) countries get access to all the products, including a prepaid and credit-grade card, while residents of other countries have access to an IBAN account and crypto services. 

Blackcatcard issues both plastic and virtual Mastercard cards for all people over the age of 16. The basic card is prepaid, but users can order a credit-grade card. This option allows our customers to have access to services that don’t traditionally accept debit, like some hotels or car rentals. These cards, however, are credit only by grade – they do not grant customers access to credit funds or permit overdrafts.

Moreover, through an ecosystem partnership with Manerio UAB*, we have created a solution that allows our users to buy, sell, and store three of the most popular cryptocurrencies in one app. Later in 2023, we are set to roll out collaborations with cryptocurrency exchanges that will enable our users to top up crypto wallets in fiat and withdraw funds from the crypto stock exchange into their bank accounts in EUR, while using other options of the integrated stock exchange of the Blackcatcard app.

What are some problems the financial industry is facing that Blackcatcard is focusing on solving in gaming or interbank transactions?

Fintech is an ever-changing industry. Nonetheless, certain challenges remain consistent, especially for regulated industries. When it comes to financial services that deal with gambling, for instance, one of the biggest challenges is risk assessment associated with card acquiring for settlements between users and companies. Transactions in regulated industries often involve multiple parties, and it can be difficult to determine whether the transaction is legitimate or not. Players can use this loophole to have a chargeback on authorised transactions. 

Another challenge has to do with Merchant Category Code (MCC) limitations. An MCC is a four-digit code used to classify businesses by industry or by the goods and services they provide. Many traditional acquirers and financial institutions tend to consider transactions within certain categories as limited. For the financial services that deal with gaming and crypto, it means that some transactions may be blocked automatically, and users cannot make payments and use their bank accounts.

For companies, accessing money can also be a challenge. Some payment providers that work in the industry have a so-called settlement fee, something you need to pay to access or transfer your money.

How do you solve these?

The solution that we have created goes hand in hand with the global trend of embedded fintech and the ecosystem approach. The underlying concept is straightforward: avoiding time and money loss on multiple-party solutions by opting to integrate and create a frictionless experience for users.

The Blackcatcard Payment Gateway is based on intra-bank transfers. Technically, when making a purchase, the client uses direct deposits from the bank account – not a payment card. This payment type can be finalised almost immediately. For this to be implemented, the merchant must integrate a ’Pay by Blackcatcard’ button to their website. At this point, we are acquainted with the merchant after having gone through our thorough screening process. As a result, we proceed with the transaction without automatic blocking, which is typical in traditional bank acquiring.

In this scenario, both the merchant and the customer should have a Blackcatcard account. This gives us another crucial feature – the lack of settlement fees. With Blackcatcard, the money is delivered directly from the consumer to the business, and vice versa. 

Once the initial trust is established, our platform becomes a tool for customer retention and enhancement. That's where we can help our partners create their loyalty programmes, offering various benefits to players, such as cashback on gaming account replenishments, bonuses for gameplay, and more**.

One of your unique selling points is focusing on meeting AML/KYC compliance. Why do you see these aspects as crucial for the financial industry?

When it comes to dealing with money, security is our priority. As a financial institution, we must have bank-level compliance. The fulfilment of AML and KYC regulations is crucial to ensure the security and legality of transactions, as it reduces the risks associated with fraud and money laundering. 

As part of the use of the Blackcatcard Payment Gateway, every time we have a new customer, whether individual or corporate, we run an extensive security and compliance check on them. It helps to make the customer experience less prone to friction, as double verification is not necessary. All of it is made with the user’s consent and if, for some reason, one user doesn’t want their data to be shared, they can still access everything separately.

Additionally, our service can help companies navigate AML and KYC compliance requirements by providing them with pre-verified traffic. This reduces the burden on companies, allowing them to focus on their core operations while staying compliant. This is also only done with the user’s consent, as they can always decline the pre-verification and authorise it separately, on a third-party platform.

Referring to industry players that are entering the crypto payments market, what challenges do they face, and how can you help them?

Those in the financial and crypto industries often face difficulties integrating traditional banking services with crypto. For end-users, managing crypto and fiat currencies is challenging because these currencies need to be held on separate platforms. Furthermore, transacting between crypto and fiat through different institutions can introduce compliance needs.

The solution provided by Blackcatcard’s partner, Manerio UAB,* involves verifying users for both their crypto wallet and fiat, which makes these transactions transparent for us. We've combined the use of crypto and fiat in a single app, eliminating the need for third-party involvement. As for the further development of the project, we plan to include new partners from other crypto exchange platforms to facilitate the use of fiat and crypto on both ends. We envision a future of fintech marked by the integration of crypto and traditional banking.

What are the main benefits of integrated payments solutions, and why are professionals talking more and more about these solutions at industry events such as Money 20/20?

We noticed a pivotal shift in interest toward neobanking at Money 20/20. The financial industry can be very conservative, especially when it comes to industry leaders. Traditional banks have long underestimated the potential of neobanks and dismissed their significance. 

However, we are currently noticing a growing interest in integrating with these newer platforms. We anticipate that the future of neobanking won't be confined to offering payment card services but will encompass the incorporation of various services and collaboration between all industry stakeholders, including traditional banks.

About Olegs Cernisevs 

As the CTO of Blackсatсard, Olegs spearheads product development and technology optimisation. He has experience in banking and payment services, including at PrivatBank, First Swiss Card, and the Acquiring Committee of the Association of Commercial Banks of Latvia. Olegs has been instrumental in shaping IT projects for various European financial institutions. He holds a master’s degree in international business and management and two certificates in anti-money laundering management.

About Blackcatcard

Blackcatcard, launched in 2019, is a European neobank. It provides financial services for individuals and corporate customers, such as mobile and online banking with a personal European IBAN account, virtual and plastic payment cards, free intrabank money transfers, SEPA payments and an integrated сrypto exchange*, with custodial crypto wallets, cashback, and bonuses**.

*An integrated crypto exchange and custodial crypto wallets are provided by our partner Manerio UAB. 
**The bonus payment is a part of the loyalty programmes provided by FINTECH ASSETS OÜ. 

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Keywords: neobanks, EMI licence, credit card, cryptocurrency, payment gateway, banking, AML, KYC
Categories: Banking & Fintech
Companies: Blackcatcard
Countries: Europe
This article is part of category

Banking & Fintech


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