Mbanq’s Journey and the Future of FinTech: Vlad Lounegov talks to William Mills
● Vlad Lounegov’s background and transition from consulting into entrepreneurship and FinTech innovation as co-founder of Mbanq.
● Mbanq’s development from startup into global corporation and the necessary shift into providing a comprehensive ‘as-a-service’ portfolio to underpin its technology offering.
● Mbanq’s unique value proposition for brands.
● The future of Banking-as-a-Service both in the US and worldwide.
● Vlad’s advice to younger entrepreneurs who want to create a better FinTech world.
● The upcoming challenges for traditional banks, challenger banks and non-banks.
Hi I’m William Mills. I’m here at Finovate Spring and I’m pleased to be joined by my friend Vlad Lounegov, the CEO of Mbanq.
You founded Mbanq in 2016 after a very successful career. Tell us a little bit about your transition from being a consultant into a FinTech innovator.
I started my career in professional services in around 2006 in London where I used to consult banks on digital transformation. At some point in 2008 I decided that digital transformation was always driven by technology and technology providers. This is why I moved to the beautiful state of California and Silicon Valley in 2011. From 2011 I specifically focused on technology because the driver for innovation is technology.
In my consulting career I spent over a decade advising banks on core banking systems. However, what I found out was that we were advising banks to switch from one poor system to another – and both were built in the 90s. Some of the old core systems are as old as forty years.I thought: “there must be another way.”
In 2016 I thought there was some innovation that’s needed in the core banking space. There was a lot of innovation happening on the periphery of the core; banking payments for example; KYC; digital onboarding – and there are a lot of startups in that area. But nobody was really touching the core.
Back in 2016 when I founded Mbanq our focus was on technology. However, over time one of our pivots was towards services. We founded Mbanq to be a technology company first and then moved into service.
Now Mbanq has the most comprehensive as-a-service portfolio in the United States BaaS market.
So you’ve got more products and services that you provide as a service for Banking-as-a-Service than anybody in the US?
What else makes Mbanq unique and who are some of your key customers?
What makes us unique is that about two or three years ago we started focusing on major brands like NFL teams, like colleges and universities, and helping them bring financial services to their ‘affinity groups’ because they are so well positioned with either a student base or fan base. Now we’re launching fan based accounts for some of the bigger brands.
Banking-as-a-Service wasn’t even talked about here10 years ago. Now it seems to be everywhere. What do you see as the future of Banking-as-a-Service both in the States and worldwide?
The US market is probably the most lucrative market of the world, however, to be able to launch banking operations in the United States is very hard.
In places like the United Kingdom or elsewhere in Europe, there is an alternative to a banking license. You can get an E-money Institution License, you can get a Payment Services License, whereas in the United States this does not exist.
Therefore the United States relies on a partner bank. Once you bring a partner bank into the picture, then this becomes Banking-as-a-Service.
The first iteration of BaaS was providing a partner bank to sponsor financial products and services. However, very quickly the industry moved on towards other services like Compliance-as-a-Service because you have to be compliant every step of the way and compliance in the United States is very complicated.
There are so many regulators that sometimes you don’t even know who regulates whom. You have the Federal Regulator, the State Regulator, the Financial Services Regulator – so there’s a lot of regulation going on.
On the back end of compliance you also need to be able to handle complaints. You also need to be able to handle disputes, chargebacks, all the stuff nobody really wants to do.
There is no value in complaints, there is no value in chargebacks. But you have to provide it.
It’s the cost of doing business.
Exactly! You have to provide this. Right now we have the most comprehensive Banking-as-a-Service value proposition. Moving forward, the biggest driver of value in Banking-as-a-Service is Lending-as-a-Service. Almost every BaaS provider wants to go into lending. Lending is the key driver. If you ask me this question next year I may tell you that we are a Lending-as-a-Service provider as well as a BaaS provider.
You’ve been a successful entrepreneur in FinTech for quite some time. What advice would you give to younger entrepreneurs that want to create a better FinTech world?
Yes, that’s true, it’s been a long time. First of all, you have to be ready to pivot. Everybody pivots, we pivoted when we started. We started off as a technology company and soon realized there is more money to be made in services. Now we position ourselves as a services company.
Number two, partnerships. You need to embrace partnerships. We have some of the most spectacular partnerships in the industry. It’s very hard to deliver any value proposition alone. So you have to find like-minded individuals and like-minded companies and bring them all together to stitch a joint value proposition together and bring this to market.
Number three, you have a product that fits the market. If there’s no market for your product or your product is not really quite there, I think you will struggle. So don’t be afraid to try and try again. Don’t be afraid to fail. You have to fail. Without [understanding] failure there is no success. As we say at Mbanq – “success has many fathers and failure is an orphan.”
What do you see as the biggest challenges in the coming years for both traditional banks, challenger banks and non-banks?
If you talk about the United States, I would say regulation is really challenging because there is so much of it going on. At the end of the day you don’t know which way it will pan out.
About 12 months ago everybody was talking about crypto. Where is crypto now? It has disappeared [from mainstream finance]. It’s a taboo subject now. Is it going to come back? Probably, it can’t just go away. But the regulator needs to be ready.
So as it stands right now, there is a lot of potential regulation that’s likely to happen, including in Banking-as-a-Service. I personally believe that BaaS as a discipline needs to be defined and regulated. If you ask me this question again 1, 2, 3, 4 years from now, most likely our company, Mbanq, will have some kind of [further] regulation.
Vlad, I really appreciate your time today. And, again, we’re here at Finovate Spring, San Francisco.
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