NEO CEO Says Banks, Regulators Ignore Multicurrency Management Needs of EU Firms

$3 billion.

That’s the amount Barcelona-headquartered business-to-business (B2B) neobank NEO has cleared through its multicurrency accounts as of March 2022, saving European Union (EU)-based businesses an estimated $15 million in banking fees.

In an interview with PYMNTS, the firm’s CEO and co-founder, Laurent Descout, compared that achievement to the $1 billion it cleared back in September 2021 just 14 months after its launch, attributing both milestones to an underlying banking problem that continues to plague EU businesses.

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

“Opening a corporate account has turned into a corporate nightmare,” Descout said. “It’s either extremely long or it’s costly, and more and more corporate treasurers are looking for alternatives to the [usual] brick and mortar banks.”

One of the main alternatives that treasurers and chief financial officers (CFOs) are looking for, he added, is a corporate account with multicurrency management — a solution that very few specialized, B2B FinTech firms in Europe can provide today, let alone traditional banks.

“It’s either [incumbent banks] don’t have it or what they have is another set of accounts that you have to manage, or their pricing is not right, or they don’t have the appetite for that specific country you want to work with,” he argued, adding that traditional banks are increasingly reluctant to offer U.S. dollar accounts to non-U.S. based companies.

Open Banking Not Business-Friendly

Apart from the lack of multicurrency management solution for EU-based businesses, Descout noted that most of the investments made by incumbents to upgrade their systems have been mainly channeled towards consumer needs, with very little consideration for the needs of corporate clients.

He said clients have complained that compared to their modernized personal accounts, their corporate platforms feel like they’re “back in the 90s,” an indication that traditional banks are unwilling to move beyond basic banking solutions to provide efficient software solutions for their corporate clients.

At the regulatory level, he pointed to the open banking scheme, the regulation mandated by the European Union’s Revised Payment Services Directive (PSD2) to make customer account information available to non-bank third parties using application programming interfaces (APIs).

Even that law, he said, “is way too focused on the consumer and Euro payments,” and even though it enables consumers and businesses to view all their euro transactions in an interface, it remains a far cry from what corporate treasurers truly need.

“What they want is to have a single interface where they can conduct treasury forecasts as well as view all their audits and cash position in real-time, whether it’s in U.S. dollars, pounds sterling or euros,” Descout said. “That’s where the demand is.”

However, that corporate demand has been ignored, with more emphasis placed on the needs of consumers — the majority of whom only have euro bank accounts and can easily have all their transactions in one place.

“For a corporate treasurer point of view, it’s either you have everything or if you just have part of it — then it’s useless,” he noted. “And that’s the problem of open banking, it’s way too fragmented and I don’t think that will change soon. Unfortunately, there’s been a lot of talking but very limited application so far.”

Not A Technology Issue

Given that exchanges between Europe and the U.S., particularly transfers within the SWIFT network, have been going on for decades, Discount said that reluctance to offer seamless cross-border between the U.K. and Europe on one side, and the U.S. on the other, “is not a technology issue.”

Instead, he attributed it to past mistakes that have cost EU banks a great deal of money, such as the record $8.9 billion settlement France’s BNP Paribas was ordered to pay by the U.S. in 2015 due to claims that it violated sanctions against Sudan, Cuba and Iran.

“That has created a psychosis around U.S. dollar payments and U.S. dollar clearings [in Europe],” he explained, resulting in EU businesses deprived of a multicurrency management solution like what FinTechs like Wise (formerly TransferWise) and Revolut have in place for retail consumers.

Since going live in June 2020, the treasury management, payments and foreign exchange (FX) FinTech has been looking to fill this gap for its business customers. Today, it works with over 230 corporates across 28 European countries, with more than 5,000 banks connected to its Bank Identification Code (BIC) on the SWIFT network.

Through its platform, treasurers and CFOs can set up an international account with their own multicurrency International Bank Account Number (IBAN), enabling them to view trading data and manage multicurrency cash flows in a single location. Businesses also have access to a virtual wallet through which they can make and receive payments in more than 30 currencies.

Moving forward, Descout described 2022 as a year of consolidation as NEO prepares to tackle the next phase of growth — and if it’s able to clear another $3 billion through its multicurrency accounts by the end of the year, he said, “We’ll be very happy with that.”