Banking Tech Leader Mbanq Bets Big On Arival
Mbanq, an accredited investor, has backed Arival Bank by acquiring shares. Mbanq provides digital core technology and Banking as a Service (BaaS) and is one of the fastest growing fintechs globally. Arival Bank also chose Mbanq as its technology provider for its digital banking core back in July 2018. Arival is the first fintech bank for extraordinary and non-traditional clients. It is poised to become the first licensed digital bank in the US.
We also just inked a deal with SeedInvest, a US-licensed equity crowdfunding platform, to raise our pre-series A round of $3M. Previously, we raised a $1M seed round in 2018 after jumping into the digital banking scene. Since then, we’ve accomplished a lot:
● we’re close to the approval of our international banking license in the US (Puerto Rico) after undergoing rigorous regulatory and compliance checks
● built a ready-to-use banking platform and integrated it with a core-banking system, SF-based Mbanq; Subsequently, Mbanq’s CEO, Vlad Lounegov, together with his board, were evidently impressed with Arival’s vision to back us as investors;
● discovered how to satisfy compliance and regulatory requirements in working with “abnormal” clients and built the MVP of A.ID, our compliance-as-a-service product;
● received numerous international awards for our product and a surplus of customer requests to open business bank accounts with Arival, as well as requests from other banks to use A.ID.
We have our sights set on a Series A round of $10M later this year. This A round will be linked directly to the issuance of our license. Half of the funds raised will be used for paid-in bank capital.
Before the IFE license is issued, the regulator will first issue an official “Permit to Organize” (to set up the bank named “Arival Bank International Corporation”). At this point, we’ll be required to provide the first tranche of paid-in capital. This is why we’re opening our $3M pre-Series A round.
Mbanq, our core-banking system vendor, invested an undisclosed amount to officially become a shareholder of Arival. Mbanq also committed to following up their OTC deal with an additional investment in our latest round on SeedInvest.
Integrating with the right core banking partner was always of the utmost importance. The reality is that the client’s money in each bank is stored in the ledger of a core-banking system.
There’s no sugarcoating it. The right core-banking system partner can propel your banking experience from a tech standpoint.The wrong partner can sink it. Above all, this is what the regulator assesses when reviewing banking applications: the quality of your core-banking system.
The process of evaluating potential partners, and then integrating the right solution is not easy. This is why most newborn neobanks typically just show “nice pictures” connected with Excel in the back-end, without real accounts and transactions during their initial demo days.
We’ve analyzed more than 20 different (old and new) core-banking and BaaS providers from different countries. We arrived at Mbanq’s solution, based on parameters such as cloud-based architecture with open APIs, all-in-one integration, very easy-to-start, their flexible-for-scaling platform, and transparent pricing based on a pay-per-use approach. We’re now technologically able to open bank accounts to customers in eight currencies and to make money transfers.
Another reason why a cutting edge core-banking system is so important is because we want to build the first real borderless bank. We’ve already applied in Malaysia and started the application process in Lithuania, with Singapore, Hong Kong, Japan, Australia, and Dubai also in the pipeline. We’ll need to connect all of these banks and accounts together in the proper way.
We’ll be able to onboard international clients from different (non-sanctioned) countries with our US license. But why should you be limited to opening a bank account with just an American, UK, or Singapore-based bank?
The world is changing (look no further than Estonia’s e-Residency program). You should be able to open bank accounts everywhere! Please, don’t tell us that your bank is an international bank with many licenses — all these international banks act as a bundle of banks under the same brand, but they are not operating as one bank.
Moreover, you can’t open a bank account in another country without an additional account application, and you can’t manage and move your money internally as if it’s one bank. They are not international at all. The same goes for other fintechs and digital banks, who position themselves as borderless. In reality they are limited to onboarding customers only from countries where their license or bank-partners exist.
Together with Mbanq, we’ll be the first bank to help direct competitors launch, grow, and become real partners. Arival’s future customers on our waiting list have millions of end users. And they (themselves) would love to open bank accounts and issue bank cards under their own brand for their own clients.
In this case, they need an advanced bank-as-a-service provider. And here we are. Since the beginning, we’ve built our architecture as an open and easy-to-be-integrated solution.
It looks like LEGO. Each element, or product, or function of the bank is a brick, and you’re able to build new buildings using our construction blocks. The fancy guys promote their digital banks as open banking adepts — but please ask them one simple question: “can you launch a direct competitor based on your license and bank infrastructure?” With Arival, you can.
We also work closely with banking’s fast-changing compliance landscape. This led us to develop our own compliance-as-a-service product named A.ID. Our cutting edge compliance serves as our secret sauce and enables us to onboard crypto-related businesses and other “abnormal” clients, and will be one of Arival’s main revenue streams. Instead of spending our earnings on compliance, we’ll actually generate revenue from it. During the last 18 months, we’ve spent most of our time and money on compliance, compliance, and more compliance.
Since the beginning, we’ve built this service as a standalone product integrated into our bank through open APIs. Why? Because our biggest clients are B2B2C clients — they want to be onboarded as a company, but they also have a large customer base with a lot of money they need to store for them. And it’s impossible to verify each dollar from these customers until they also improve their compliance.
Therefore, we’ll be sure to align their compliance levels to ensure it meets our standards. This is why our customers are willing to pay us to integrate and implement our compliance engine. It’s cheaper and faster for them, rather than trying to create something independently to improve their compliance procedures and processes.
We’ve been approached by Mbanq and other players interested in using our compliance solution. So it seems like A.ID, our compliance-as-a-service solution, will be the same for Arival Bank as AWS is for Amazon: something that started purely for internal usage and now generates almost 67% of the company’s profit. Even competitors of Amazon use AWS.
Too many clients today are rejected by traditional and even digital banks because they’re viewed as “abnormal”, “too risky”, or unusual. E-Residency businesses, charity organizations, expats and refugees, legal sellers of marijuana, freelancers, crypto or blockchain-related businesses, politically exposed persons, bloggers and digital influencers and more, face a real challenge when trying to open a bank account.
We have over 750 requests (7.5x higher than we predicted at this stage) to open business accounts with us. And we are not even officially launched yet. We’re one step away from becoming the first licensed digital bank in the US. We just won 3 major fintech awards. We’re like Revolut, N26 or Monzo, but with our own special edge:
1, we’re improving banking for businesses & entrepreneurs
2, the US will be our first base
3, we’ll onboard customers the other guys can’t
4, we’re laser focused on margins and profitability, not on becoming another “unprofitable unicorn”
Please follow Mbanq and bet on us here.