NEO Takes on Business Banking’s Cross-Border ‘Availability Problem’

“Complete nightmare.”

You wouldn’t expect opening a business bank account in Europe to be described this way, given the advanced technologies that developed regions are known to possess.

But that seems to be the case, according to Laurent Descout, CEO and co-founder of NEO, who said that what used to be a specific problem of the underbanked — either having a bad credit score or working in a difficult industry — became a general challenge for business customers everywhere in the wake of the pandemic.

“I don’t know about the U.S., but what’s for sure is that wherever you look in Europe, opening a business bank account just became a total nightmare,” Descout told PYMNTS’ Karen Webster in an interview.

It was a “nightmare to find a bank that’s going to support you, a nightmare to find the right person within that bank who will offer you the service with the pandemic, a nightmare to even be able to step into the bank, and in front of these less and less servicing banks,” he said of banks that were constantly restructuring their departments or getting rid of people who are very knowledgeable about business banking.

All of this has created a vacuum where companies are not able to open and access the accounts they need, “and that’s the huge value we try to bring — which we call the availability factor,” Descout told Webster.

Business banking customers can open an account in as little as 48 hours on NEO’s platform, and the one-stop-shop solution allows corporates to buy and sell a range of FX products, including for risk management and hedging purposes, cash flow management and payments data analytics.

Reinventing an International Bank Account

Since going live in June 2020, the Barcelona-headquartered B2B neobank has cleared $1 billion through its multi-currency accounts and now boasts over 200 corporate clients across Europe, who send and receive payments in more than 30 currencies. It also counts over 3,000 banks worldwide that are connected to its SWIFT network.

Another reason behind the huge strides NEO has made in a relatively short amount of time is closely linked to globalization, whereby banks that were previously operating with classic national accounts and mono currency accounts are suddenly required to offer services in Singapore dollars, Mexican pesos or Canadian dollars.

“Here again, banks haven’t prepared their online banking tools to deal with multi-currency invoicing, currency collection and multicurrency edging,” Descout said of the once nonexistent multicurrency management solution that clients desperately needed.

The firm has seen a growing demand from CFOs and CEOs around Europe who want to avoid spending hours of their day putting together a spreadsheet. FinTechs based in the U.K. with no more EU accounts are, post-Brexit, reaching out for help with multicurrency payout as well, Descout said.

“We wanted to reinvent an international bank account — simple to use, efficient in terms of pricing, that can easily integrate into the CFO’s financial technology,” he explained.

The Business Model

NEO created the core business banking infrastructure and ledgers that consolidate, clear, settle and manage all the entries and payments of their clients who operate – or want to operate – across countries and currencies.

Descout said NEO has opted to work directly with corporates instead of powering the banks that need new tech to serve them. “We are like the bank,” he said. “We make solutions for end users; we don’t make solutions for banks.”

That doesn’t necessarily mean that working with the small to mid-size regional banks – which need a completely different infrastructure to cater to cross-border businesses and sellers who need to set up bank accounts in different countries – is out of the question.

“I think the correspondent banking relationship has proven to be very complicated and inefficient in many ways, and [it’s possible] that regional mid-size banks looking for a currency opening may approach a FinTech like us more than going to the [larger banks],” Descout said.

Efficient KYC and KYB

NEO abandoned blockchain technology for the core banking infrastructure, but found it useful in two areas: for circulating large amounts of information in an efficient and secure way, and for the speed of settlement. What once took weeks of gathering documents and communicating data to the right departments for AML/KYC checks is completed in a matter of seconds using blockchain technology.

While banks take “a long time to tell you no,” Descout said NEO is very efficient in how it undertakes KYC and KYB, making sure not to waste clients’ time, especially when “we know we will end up not being able to onboard [them].”

What’s Next

By any account, going from 0 to 200 corporate accounts in a year’s time is a notable achievement, but Descout said 2022 is on target to triple that, as NEO plans to enhance its platform with add-ons like treasury forecasts and account simulations to facilitate both strategic decision making and day-to-day cash flow management.

“We want them to be able to do things not outside of their bank accounts, but from their own bank accounts,” he said.