Arival was founded in 2017 by a dynamic trifecta consisting of seasoned fintech experts and investors, Slava Solodkiy & Igor Pesin and a young fintech entrepreneur, Jeremy Berger. Regarded for their successful investments in famous digital banks such as Simple, Moven, Fidor and Rocketbank — they decided it was time to take the bull by the horns & build their own.
There are many digital banks, but there is an entire
spectrum of clients they’re NOT serving
Many clients today are rejected by traditional and even digital banks because they are viewed as “abnormal”, “too risky”, or unusual.
It’s no secret that certain customers face a challenge when trying to open a bank account: 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 many more.
Abnormal is the new normal
This problem exists because of compliance. It's not forbidden to work with said “abnormal” clients. Regulators just require banks to be “prepared enough”, “equipped enough”, and “responsible enough” to onboard such customers.
We love other banks, especially digital banks, and unicorns (even though they’re unprofitable, which seems like the norm nowadays) – but unfortunately most of them prefer to provide something like “everything for everybody”, while focusing on “normal” clients.
Why? Because compliance is an obligation, headache and a huge expense for banks - not their passion, key feature, expertise or a channel to earning money for their founders and shareholders. In these terms, compliance might be the perfect getaway.
Differentiate or die: the first fintech bank
for “abnormal” customers
We are the first fintech bank tailored for these “abnormal” segments.
So why can we serve them & others can’t? Because we are arguably the first bank that made compliance our “secret sauce” and biggest differentiator. Sure, it's not as sexy as new colorful buttons in a cool mobile app, but it is something that matters not just behind the scenes.
This is what makes all of this possible. This is why we’ll onboard these customers in a sophisticated, seamless, & completely compliant manner. We believe the market for abnormal clients will only continue to grow dramatically. This is a blue ocean with zero competition today.
We’re different because you’re different
We intend to start as a digital bank for businesses (while pursuing a B2B2C model – in other words, serving businesses with large user bases). We’ll focus on crypto or blockchain-related businesses first.
Shortly thereafter, we’ll add more underbanked businesses to our customer base such as:
e-Residency businesses (the 40,000+ businesses from across the world registered in Estonia
Online startups with foreign founders “without a physical presence” (don’t get us started on how certain banks view tenants in co-working space),
Legal sellers of marijuana (only in states or jurisdictions where it’s legal).
Then, we’ll work with individuals: the 65 million expats, millions of refugees, politically exposed persons, bloggers and digital influencers.
We’re not a neobank or challenger bank
The first wave of digital banking started in the US with players like Simple and Moven responsible for “neobanking” - or in other words, launching due to a partner bank’s license and infrastructure. Full disclosure: our leadership invested in four of them and successfully exited.
Why doesn’t this concept work for us? Because (traditional) licensed banks don’t have the proper compliance in place to work with these abnormal customers – and this really limits us in more ways than one
The second wave of digital banking started in Europe known as “challenger banking” with names like Monzo, N26 and Revolut leading the way. This was when the UK regulator first decided to issue new special bank licenses for newcomers to challenge old players.
However, they’re not always providing a full range of products (or able to fully replace the traditional bank for you). In most cases, this usually just results into an alternative bank account (not primary) and basic bank card for their customers.
We’re on the way to the first fintech bank
The third wave of digital banking is here. “Fintech banking” is when:
you exist as a licensed bank,
you have an open infrastructure (to host other fintechs/possible competitors, on your BaaS-platform),
you want to provide a full range of products & services for your customers (in order to fully replace traditional bank for them),
but you are not doing this alone because each product line is provided by an existing 3rd party fintech company (this is why it is named fintech banking) in partnership with your bank.
We like to think we are the first ones to use this “wording” or concept. Heck, we even wrote a book about the concept of “fintech banking” - before the big dogs like Kleiner Perkins, Monzo and Revolut began to talk about it.
Fintech and banking experts support our
concept (and Arival Bank)
When we published our book about the concept of fintech banking as the next evolutionary step in digital banking - more than 11,000 fans supported our book on Facebook, we’ve received invitations to present this book and concept at Wharton Business School, INSEAD Business School, and from more than twenty leading fintech and banking conferences across twelve countries.
When we presented the first ever public demo of Arival Bank itself, we won the best of show award at Finovate (the “Oscars” of fintech), another award at Fintech Inn (largest fintech event in the Baltics), and even another one at Driven by Design at London Design Awards. Our co-founder & COO also recently received the Forbes 30 under 30 award - given to the most promising entrepreneurs under 30 years old across the globe.
Our future customers have shown
Regarding real demand from underbanked customers – we’ve received more than 750 requests (without any formal advertising) to open business bank accounts with Arival. Based on our initial business plan, we predicted that it would be sufficient to attract only 100 businesses during our first year post-license issuance!
What’s more important: they’re ready to pay for Arival. Our belief is if you’re really trying to solve a problem for customers – they should pay for that value. If not – you have to compete with others via discounts or other fees. We are not planning to provide free accounts, free cards, free transfers, or free anything. Everything costs something in this world.
The first pure transactional bank:
back to basics 2.0
We have two revenue streams (which we’ve discussed & tested with our future customers):
fixed fees from our side (subscription plans, one-time charges, basic account fees, etc)
revenue-sharing payments from partnered fintechs
The latter part is fundamental for our financials. In the revenue-sharing model, we are the first pure transactional bank. We’re going back to the basics of banking, but with a digital approach.
What's even cooler: we’re not engaging in any balance sheet risk linked with taking deposits or loans (let’s not forget the recent banking crisis!) because almost all of Arival’s products and services shall be provided by 3rd party fintechs.
Our killer feature and another revenue stream will be…compliance!
Compliance will be a huge revenue stream
During the last 18 months, we’ve spent most of our time and money on compliance, compliance, and 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 will improve their compliance too. 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 & faster for them, rather than trying to create something independently to improve their compliance procedures and processes.
Not to mention, we’ve been approached by twelve other (traditional and digital) banks interested in using our compliance solution for their customers. 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 also use AWS).
One more “unexpected” revenue stream: BaaS
Our future customers have indicated that they also want to provide financial services for their own users. For example, they’d love to open bank accounts and issue bank cards under their brand for their users (Arival’s future customers have millions of end users).
In this case, they need an advanced bank-as-a-service provider. Here we are. Since the beginning we’ve built our architecture as an “open and easy-to-be-integrated solution”. It looks like LEGOS – each element, or product, or function of the bank is a brick, and you could build new buildings using our construction blocks.
The fancy guys promote their digital banks as open banking adepts – but please ask them one simple questions: can I launch a financial service based on your license and bank infrastructure? With us, you can.
What if all your favorite fintechs will arrive as one bank?
Arival itself, will provide the ability to open and manage business bank accounts, and also simple yet useful business financial management tool to analyze profits and losses.
All other products and services will be provided by the best fintechs on the market in partnership with us. Based on our conversations with interested customers, they require the following products as a bundle: local and international money transfers, e-invoicing, corporate and payroll cards, mPOS- and online-acquiring, profitability via deposits or investments, access to borrow money via different ways like balance sheet lending, P2B-lending, online-factoring, and also advanced accounting support.
Imagine a world where you could register and use not only Square for mPOS-acquiring, Stripe for online-acquiring, FundingCircle for p2b-lending, Kabbage and OnDeck for balance sheet lending, TransferWise for money transfers, Brex for corporate cards, Raisin for deposits, TradeShift or MarketInvoice for e-invoicing, and so on - all inside one bank with one account!
We’re not competing with other fintechs (or digital banks)
You can surely use all of these fintechs by yourself directly, but:
Not all customers even know these fintechs
If they know them, opening an account can’t be done from just any location (quite often, you’ll need to be an American or UK-based company)
Even if you bypass this:
you need to apply for each service separately: provide different documents, wait, remember login and passwords.
continue to manage a plethora of different accounts...while opening 10 windows/apps on your laptop/phone in parallel.
import/export data from one fintech to another.
reach out to different customer support centers, need be.
With Arival, you’ll apply only for our bank account, and we’ll integrate and align our onboarding and compliance with our partners; hence, all the data will be aggregated and managed from one dashboard. There is no need to import or export data.
Of course, we’ll give you a unified customer support center.
You won’t pay more: we’ll charge exactly the same price for each service, that you would pay using it directly.
For each customer segment of Arival, we’ll deliver a bundle of services tailored for their needs – considering not everybody needs the same exact bundle.
Just one step away from becoming the first licensed
digital bank in the US
We need to have our own license because current bank-as-a-service providers and bank partners globally aren’t suitable partners for our model – mostly because of compliance considering they’re not ready or able to work with “abnormal” clients.
We’ve started with the US market – known as the biggest, hardest and highest in terms of regulatory requirements. In June of 2018, we applied for a US-based IFE (international financial entity) banking license in Puerto Rico. We’ve already successfully passed through many steps, checks and tests.
We’re in the final stage to receive our license – pending the issuance, it will be the first license for any digital bank in the US (only a handful of British, German and Lithuanian digital banks are licensed).
And it will be the first license in the world granted to a digital bank focused on “abnormal” clients.
Inching closer to becoming the first real borderless,
licensed, fintech bank
We’ve been transparent with the regulators from day one. We’ve made it clear that many of our clients will be coming from outside the US.
In fact, we’ve started the application process in Lithuania. We’ve also applied for the sandbox for digital banks in Malaysia. The UK, Singapore, Hong Kong, Australia, Japan, Dubai are certainly in our pipeline.
We’ll be able to onboard international clients from different (non-sanctioned) countries with our US license, but why should you be limited to open a bank account with an American, UK, or Singapore-based bank? The world is changing (refer to the e-Residency in Estonia) and you need to 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 (try opening/managing an account with Bank X in the US, then in Singapore with the same bank). They are not international at all. And we want to build the first real borderless bank.
The Good Guys Will Make It Happen!
Six years ago, we launched Life.SREDA, a fintech venture capital firm with 22 investments across 8 countries, 9 successful exits, including 4 digital banks (Simple, Moven, Fidor and Rocketbank), 2 fund licenses (in Singapore and Malaysia), and many awards like ”TOP35 most influential fintech-investors in the world” in 2016 and 2017, “The Fintech Finance 40”, ”TOP 20 fintech influencers in Europe”, and ”TOP 100 fintech ecosystem builders in Asia”. We were invited as keynote-speakers to share our digital banking and bank-as-a-service insights across major fintech conferences, involved as contributors for leading business and tech media, and we held many workshops regarding trends in fintech for regulators in different countries.
You never know everything, but we know something, and know what we don’t know. If you know somebody better than us – let us know, we always prefer to hire people smarter than us.
It’s always impossible before it’s done
We started over one year ago and raised $1M in seed investments with a post-money valuation of $10M.
During the past year, we’ve achieved a lot:
applied for a license and successfully passed most of the steps;
built a ready-to-use banking platform and integrated it with a core-banking system (SF-based, Mbanq);
Discovered how to satisfy compliance and regulatory requirements to work with “abnormal” clients and built the MVP of A.ID;
received many international awards and a surplus of customer requests to open business bank accounts with Arival (and for A.ID separately as well).
Banks are old, we’re not
We are preparing to raise our Series A round of $10M later this year. This A round will be linked directly to the issuance of our license.
Before the IFE license is issued, the regulator will first issue an official “Permit to Organize” (to officially 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 (around $500,000).
This is why we’re opening a $3M pre-Series A round. Other proceeds will go towards A.ID & additional compliance R&D, BaaS and main product development, and operational costs.
Do or do not, there is no try
Too long, didn’t read? 🙂
The ‘fintech bank’ concept is the next big thing in fintech.
Our focus on “abnormal” clients gives us the opportunity to (1) not compete with other digital or traditional banks (2) avoid spending money on advertising or customer acquisition & (3) allows us to focus on margins.
Our cutting edge compliance serves as our secret sauce and enables us to onboard “abnormal” clients, and will be one of the main revenue streams for us.
We have already received many fintech awards for our concept and demo of our product. We have over 750 (7.5x higher than we predicted at this stage) business account requests. We are at the final stage of receiving our banking license in the US, which would make us the first licensed digital bank in the US.