Holvi: Gründen im hochregulierten Markt (EN) | #Unternehmensführung 🧠

00:00:00: Hello and a warm welcome to another deep dive podcast from the Guitar Compact.

00:00:11: My name is Joakar Tvarek, as you can tell by my English introduction we have an international guest today.

00:00:16: please feel free to introduce yourself!

00:00:18: Yeah so my name's Tomas Thöbenen co-founder at Halvi.

00:00:21: We are a banking service provider for small businesses and freelancers currently in Finland Germany Austria and Estonia.

00:00:27: So four markets that we serve customers currently.

00:00:31: Okay As we can tell your name Thomas on this slide accent You're from Finland.

00:00:35: That's

00:00:35: correct, yeah.

00:00:36: Speaking about Halloween usually you know parents tell their kids to work in a bank... ...to work for the bank but not found back.

00:00:43: so what basically made you find it back?

00:00:47: In two thousand eleven by the way which is quite late.

00:00:51: Well, I mean it's a long story.

00:00:52: Myself and the founding team we very much come from background in entrepreneurship.

00:00:57: so one part of the co-founding team would have been running software consultancy.

00:01:02: One guy had run a freelance graphic design agency.

00:01:05: So he really came form a background for entrepreneurship And at same time also done lots non profit projects different kinds activities Running largest digital media festival in the Nordics.

00:01:17: In all those activities never found the tools to easily manage the finances of whether it was companies or non-profit activities.

00:01:26: As part of team came from a technical background, we'd actually build lot solutions ourselves and solve those financial management problems like selling tickets for an event building invoicing tool invoice customers simple online store managing expense claims stuff like that.

00:01:45: so built couple solution over years.

00:01:49: But then really, we kind of looked at that.

00:01:51: okay.

00:01:51: We have this problem and even needed to build solutions ourselves for these problems.

00:01:55: so there is nothing out in the market.

00:01:58: I mean our problems can't be that unique.

00:02:00: other people wouldn't have same-same problems.

00:02:03: And around or a little bit before that, there were some quite significant changes in the regulatory landscape.

00:02:09: In Europe with the first payment service directive so PSD-I.

00:02:13: we hear about PSD II now but arguably PSD I was bigger thing and for us it allowed to start building something which provides all of the banking services customers need But is much more likely regulated as an institution.

00:02:30: So, we got our first clearance as a payment institution in twenty eleven to operate in Finland and then they full payment institutionalized it in twenty fourteen.

00:02:37: that allowed us go other markets.

00:02:40: It was really kind of coming from the fact that... ...we needed something to run over all activities business activities non-profit activity.

00:02:47: there wasn't real solutions out there And with changes into law.. ..it kinda became possible.

00:02:52: you could build financial institutions on ground up.

00:02:56: Okay, to help people understand that they are not that deep into FinTech.

00:02:59: PSD stands for Payment Service Directive and we have two versions which is basically a European law that tries to regulate payments in banking.

00:03:08: As far as I understand PST-I was about payment and PST II more about banking right?

00:03:12: Both

00:03:13: of them were both about payments but there's couple different types of entities that offer payment services.

00:03:18: I mean classically it has been the banks before PSD-I.

00:03:22: if you wanted get an account send or receive payments.

00:03:25: I mean, you went to a classic traditional bank that was basically the only game in town and it had an option available.

00:03:31: but with PSD-I the law is a little bit relaxed so we could offer payment service also as a payment institution.

00:03:39: So as financial institutions can do almost all of these same activities as banks But with much more streamlined regulatory framework.

00:03:49: Now help me understand this.

00:03:50: I love companies that are founded because of problems, yeah?

00:03:53: That someone finds and tries to find a solution for.

00:03:56: you just said our business processes didn't fit the market products.

00:03:59: so what kind?

00:04:03: Well,

00:04:04: I mean what we wanted to make possible was people who are entrepreneurs or run non-profit activities that they can really focus on.

00:04:12: What their best at?

00:04:14: As we often say at Halvi like the small business owners They're not in the business of business management.

00:04:20: there In the business off providing whatever services they provide to our customers.

00:04:24: whether if you're a freelance yoga teacher Or dance instructor graphic designer or freelance programmer your skills in programming, yoga instruction and graphic design.

00:04:35: These are the things that you love to do.

00:04:37: these sort of thing is really good at.

00:04:38: And then The business management side Of course need take care of it.

00:04:43: You have to invoice your customers in a prompt fashion.

00:04:47: Make sure they pay taxes on time.

00:04:49: Do all their reporting on-time.

00:04:51: If we don't do those as well As there should be We're not running our business in professional manner.

00:04:57: But so wanted bring And that's a continuing mission, we are on to bring the kind of tools... ...that really help entrepreneurs focus on what is their core.

00:05:08: We bring those tools in order for them to manage business activities and tax reporting.

00:05:13: Collecting receipts making bookkeeping That was where I came into this picture.

00:05:18: Okay because when you were talking with your team it said Basically talking about Halvi as a Neobank, he said we do not consider ourselves to be bank but more something like entrepreneurship is the platform.

00:05:30: This what Halvi's basically about?

00:05:32: The banking account that focuses on entrepreneurs and helps them do their business

00:05:37: Absolutely, absolutely.

00:05:38: So the account of course as you're in business and need to have an account You need to be able to receive send or receive payments.

00:05:44: But that's just kind of underneath not really The core value proposition that we provide for customers.

00:05:50: so on top of the account We build all the business management tools that customers need.

00:05:55: there is integrated invoicing There's integrated online store expense claim Management bookkeeping preparation All these things That do you need to understand how your businesses doing?

00:06:07: you can take the whole V-Mobile app and know how your business is doing.

00:06:11: The way that we make it possible, because we have integrated account with integrated payments.

00:06:16: so all of our data about business activities will bring value added information to customers.

00:06:22: It's really a business management tool.

00:06:24: That's what you need as an entrepreneur To be on top of your business.

00:06:28: And also the big differentiation between traditional banks You go into a traditional savings bank or or a big commercial bank, you get the account.

00:06:37: But an account doesn't really do much.

00:06:38: it tells that okay I received five hundred euros so i send three hundred euros but does not tell like how profitable your business has been?

00:06:47: How many taxes are you owed to tax authorities?

00:06:50: which invoices from our customers are paid and they're not paid?

00:06:54: So its the transactional functionality of the accounts.

00:06:57: It's a must have but isnt' really at the core Doesn't really tell you what your businesses doing?

00:07:01: What was the reaction for the markets in?

00:07:03: By today this becomes more normal, people use N-twenty six or contests.

00:07:08: Or even the normal banks look cooler on your mobile phone right now but back in two thousand and eleven I could imagine that it was quite a mind change.

00:07:15: What's the reaction from market then?

00:07:18: Well...I mean..it is interesting.

00:07:21: FinTech is an established segment of startup scene.

00:07:24: And, of course banks have always been in the business of technology.

00:07:27: they've been users of computer technologies since it was really commercially available from the sixties onwards but back in like twenty eleven like the word FinTech, no one really knew what FinTech was.

00:07:39: And it was in early days pitching to investors.

00:07:42: It's not always easy for them to understand What we were doing and that We're building something That is a replacement For traditional banks Not just a skin on top of an existing account or Something Like that But its real thing And came also from customers.

00:07:59: So, okay so I can use Hallavi.

00:08:01: How do i link my existing bank account?

00:08:07: Or their bank account to Hallavi?

00:08:09: and it was really hard to describe the people that no you don't link the existing account.

00:08:13: we provide you with your accounts as well because this is an alien thing for customers who actually get functionalities from a non-bank financial institution.

00:08:23: That was the time when it was still fashionable for people to always say that we are at X or Y. Investors tried make kind of understandable for themselves and one memorable thing is, We didn't understand all but they were like okay now I get what you're doing.

00:08:37: You guys are on YouTube with money!

00:08:40: And I said no don't know why he doesn't end up investing which probably a good thing because i'm not sure if he had domain knowledge.

00:08:52: I can tell one of my family members.

00:08:54: I'm not saying the name because they get killed otherwise, thought that FinTech would stand for Finland Tech like basically tech coming from Finland.

00:09:01: So in your case this fits quite nicely and

00:09:03: we have got these from those investors that have invested.

00:09:07: Like one guy was saying okay?

00:09:09: Okay i've been telling all my friends That am now a partner at FinTech investment firm And other days say that I've invested In a Finnish company They're like ok Finnish technology.

00:09:21: Okay, so isn't it stupid to think that fintech stands for Finland?

00:09:24: What is basically the promise you need to give away right now?

00:09:27: because when you open up newspapers and read about a generation why.

00:09:31: And these guys this generation aren't interested in banking at all then they feel stupid of them going into a place to do banking.

00:09:39: They want it mobile or cool but fancy.

00:09:43: It's really important when creating a bank service or financial services.

00:09:48: by now

00:09:51: The key thing for us and everyone else is, of course like how are you making the customer's life easier?

00:09:57: And for us as we service entrepreneurs it really living up to promise that if use all this services.

00:10:04: You get more time For your actual business activities.

00:10:08: If look at European small businesses on average they spend anywhere from five to ten hours a week in just the bureaucracy of being an entrepreneur.

00:10:16: So instead, of actually invoicing their customers and for us... The promise is really quite simple if out those five to ten hours even you save two or three hour every week from the hassle running a company To doing productive activities providing service for our customer.

00:10:30: so that's very tangible financial benefit For customers.

00:10:34: Well as it has always been any startup Any new company needs to articulate with their customers like how are they making the customers' lives better?

00:10:43: Do you create anything on your own, because there are quite a few banks or startups as well that use white label banks?

00:10:50: Or basically work at the platform bank for example.

00:10:54: So sometimes they do not even create these services but just buy them from others and sell it to their users.

00:10:59: How about you guys – do you create everything by yourself?

00:11:02: We were different in terms of the new crop… pretty much a full stack provider.

00:11:08: So we really build everything from the ground up, and that also comes from the fact that we were pretty early to the market starting in twenty eleven.

00:11:16: at that point some of these options didn't exist.

00:11:19: like now there is good kind back-end bank options like Solaris Bank here parent company BVVA invested a couple of months ago, so there is good options now on how if you want to just focus the customer experience.

00:11:34: You can take other layers from providers like Lex Solaris or Wirecard but we're little bit different in this sense that we build everything from ground up were independently regulated.

00:11:44: We have default stack and also be different terms where not really building marketplace model where we aggregate services from different providers, but really want to provide the services as integrated parts of the whole service.

00:12:01: We provide for example a part of our account and we provide an integrated invoicing service because I think it's better that they get a good invoising service in terms rather than taking an account from somewhere and then they have five different options for invoicing.

00:12:17: Why do they need to spend time looking at which of these five invoising solutions is best for me?

00:12:23: We think it's much better that we've done the work, brought those good services as part of a integrated package.

00:12:28: so very full stock in the sense where you want one set of services really solve entrepreneurs' problems.

00:12:37: I was about to ask you which strategy is smarter, the asset light way of doing it with a white label bank or full stack where your are going.

00:12:45: But what i learned then?

00:12:46: that basically depends on business model and in your case obviously make sense.

00:12:49: control project product as whole?

00:12:53: Seven years later would change anything in this respect?

00:12:56: Would like buy-in services other banks do right now still build everything own?

00:13:03: Well, that's a good question.

00:13:04: Probably now there are lots of different options available compared to what was almost ten years ago.

00:13:10: you definitely should think about.

00:13:12: the best approach is as I said depending on whether you use a back-end banking provider or build it up in your stock It brings little bit different business models available.

00:13:24: some things will cost more and others much less allowing different business model to be built.

00:13:30: Of course using someone back-end banking provider is one way to accelerate the initial stages of building a company, because you can focus more on what customers see as part of things.

00:13:43: But then it does limit the thing that they do and only do those things when your back end banking provider can be in those markets.

00:13:51: so there's less flexibility or speed if kind of doing those things that back and provider allows you to do.

00:14:00: And, of course it allows you skip some of the regulatory barriers because your not independently regulated.

00:14:06: so don't need go through regulators like Buffin here in Germany.

00:14:11: You dont'need going thru process with regulator to get started.

00:14:15: That does make thing easier but also makes for a bit more crowded marketplace Makes harder to differentiate really taking common layer from somewhere and you have a little bit less space to build your own differentiated service.

00:14:32: While doing my research, I learned that Holvi is the Finnish word for safe like they're now not being safe but really the safety which can find in rich people's apartments behind the painting

00:14:42: it

00:14:42: is.

00:14:42: And basically you guys created a solution That's like really really safe.

00:14:46: From technical perspective what exactly does your tech stack look like?

00:14:50: What did you create, how do I have to imagine the tech part behind a modern financial service.

00:14:56: Yeah well i mean we're classical web stack.

00:15:00: in very many ways our backend is fully python based.

00:15:03: so we are really a python shop.

00:15:05: uh... We run Python Django and implement most of the back end services.

00:15:09: then off course they have the iOS Android apps.

00:15:11: Our Web App is Angular-based were fully on Amazon, but that was an interesting thing back in twenty eleven when we got the first authorization as a payment institution.

00:15:23: At that point with the Finnish regulators no one had up to that point run a financial institution fully into cloud.

00:15:30: it's always said you have your own on-premises servers.

00:15:34: so there wasn't any discussion about the regulator.

00:15:38: they didn't really have guidelines saying either can do everything in the cloud or guidelines saying that you absolutely cannot Do it with everything in The Cloud and the regulator really didn't have even experience on what.

00:15:51: does It Really Mean That You run fully In The Cloud?

00:15:53: so we kind of needed to go through pretty lengthy process in also educating the regulator that, okay this is what it means.

00:16:02: That we're fully into cloud and these questions like OK can you show me where the server is?

00:16:07: Like where's the exact server were our services on Amazon Cloud are running And its' like.

00:16:13: well We know that servers somewhere in Ireland In Amazon data center.

00:16:17: It's one of those servers in this data center which has ten thousand machines kind of really for the regulator, because it's a completely different mindset from the classical where you can actually go.

00:16:27: and yeah here is this physical box.

00:16:30: This is were the service running but then at the end today they we're happy with us to be fully on-the-cloud bit educating them pioneering work in an odd good sense Because that just takes a lot time.

00:16:41: If you have to educate the regulator than next guy comes.

00:16:45: Then the regulators already educated And get through faster.

00:16:49: But the fintech landscape It was very different from what it is now.

00:16:54: But how did you guys do that?

00:16:56: I mean, this also about encryption security and all of the stuff Did have a background in there or managed to create bank.

00:17:03: thats fully on cloud And at same time even helping regulators understand whats your doing.

00:17:09: This isn't taught in school right

00:17:11: No, but in our previous consultancy days we'd done something quite similar.

00:17:16: We worked for a number of years in the telecommunications industry and it was called billing and provisioning.

00:17:22: so when you purchase T-Mobile subscription then that needs to be provisioned all around the network through SMS gateway to actual phone gateways to voicemail gateway etc.

00:17:33: And whenever you actually use any mobile phone services It's a lot accounting data that gets collected about how many minutes you had a call to whatever destination.

00:17:43: So we actually have quite a lot of experience on building high-volume transactional systems in the telecommunications space, which is very applicable.

00:17:53: what they do.

00:17:54: and in banking domain if look at prepaid mobile phone subscription it's very similar to an account with balance.

00:18:02: The only thing is that in one instance you're looking at minutes and seconds, on the account of the other case you are looking at euros.

00:18:09: I mean we had not built a banking service from ground up before but we have relevant experience translated very well to this area.

00:18:18: Okay, what I was also asking myself is how did you finance it?

00:18:21: because i took a look at crunch base and It said that You only erased four point three million euros which as far As I know building A bank Is much more expensive than Four point Three million euros.

00:18:31: I think in germany its already five millions?

00:18:33: You need to have In the bank account To get The license to do a Bank who basically invested into Guys.

00:18:37: And How Did you build it up so cheap?

00:18:38: if this number is correct Which I can't tell

00:18:42: On the face of it, correct.

00:18:43: But one thing that helped us a lot in Finland is that government ecosystem for helping technology companies and startups was really good.

00:18:52: so we went through all relevant government programs with three or four different agencies.

00:18:59: We had lots of grant or R&D financing from the state which usually you bring fifty percent funding to private investors.

00:19:09: then they put another fifty percent.

00:19:11: So that actually added a lot of non-dilutive capital to build the service.

00:19:16: That's nice!

00:19:17: It is very nice, it IS very nice.

00:19:21: so in total I think we did eleven or twelve kind of grant applications and what was quite exceptional... The finish system is great but for our case we had hundred percent hit rate every off the grant applications that were successful But i don't know why.

00:19:39: Why were we that successful?

00:19:41: As I said, FINDIC was completely new at that point.

00:19:43: So we're actually doing something completely new which is exactly what the state agencies are meant to finance.

00:19:50: That added a lot of capital but also run very lean and mean operation.

00:19:59: And where did the private fifty percent come from?

00:20:01: and how do you manage to convince these guys?

00:20:04: I mean if you talk to investors they usually look for proof of concept.

00:20:07: If FinTech is completely new, yeah How did you managed to convince them in what it came from?

00:20:13: One thing that people always say, with investors you need to build relationships for the long term.

00:20:19: In twenty-eleven we got initial set off of angel investors from Finland coming form the financial sector.

00:20:27: at same time we also go seed camp on the pan European Seed Program as investor and we've gone all so different.

00:20:33: government funding is part of dad but it's easy can be already had a long-term engagement.

00:20:39: We have applied for seed campaign were kind select this final but not part of the program already in two thousand and eight with a different concept company that then morphed to Halloway.

00:20:49: So we had built kind of that relationship also over time, so... But yeah finished Angel investors than over the years.

00:20:56: We added couple much bigger angel investors from Denmark and Sweden really an Nordic investment.

00:21:04: In twenty fourteen we got Speed Invest, an Austrian venture capital firm to invest.

00:21:09: That was maybe a little bit odd that the Finnish company gets investment from Austria but at that point Speed Invest they were one of only ones who had portfolio of fintech investments.

00:21:22: so they have four or five fintch investments before then plus some partners are very much like long-term Fintech background.

00:21:30: That was a very good fit for us as an investor who actually understood the industry.

00:21:35: Because one of the kind of advice that I would have or anyone working in, whether it's in fintech or regulated industry is to define investors who understand this space.

00:21:45: because once you're in a regulated industry there are lots things which start just much slower than other kinds of startups.

00:21:53: and if we had investors not really plugged-in into the industry and who don't understand why some things are somewhat slower to do, when you're onboarding a customer.

00:22:05: Why not just ask an email or password?

00:22:08: Why take them through video call and run them through sanctions on politically exposed persons checks?

00:22:16: Why check adverse media like whether these customers have reputational risk

00:22:21: etc.?

00:22:22: So there is lot of this Inertia that comes in a regulated business, and if you have investors who don't understand that then your spending way too much of your time.

00:22:32: Just kind of them again educating the investors whereas.

00:22:35: You should be getting insights from From them rather than vice versa.

00:22:38: so

00:22:39: yeah was also about to ask you guys About this.

00:22:41: basically they set up their starting point with customer because when I take look at Your ad words ads it basically says open up a bank account in five minutes.

00:22:51: How do you do?

00:22:51: That i mean As far as I know from opening quite a few business banking accounts, it's quite a pain in the ass.

00:22:58: This money laundering thing checking up... The managing directors and all this stuff.

00:23:04: Dozens of pages that need to identify with your passport or ID card.

00:23:09: how do you guys manage to create such things?

00:23:14: It has been an investment building KYC or Know Your Customer setup so we can identify and verify customers.

00:23:22: First of all, when a customer comes in we need to identify the individual.

00:23:25: Like who's the person representing the company?

00:23:28: There are couple ways that you can do it.

00:23:30: In the Nordics We have pretty good fully electronic identification mechanisms so You don't even need to bring your passport or anything.

00:23:37: Just use this.

00:23:38: either government provided Or other institutions provide electronic identification.

00:23:43: None of those are available.

00:23:44: Then take customers through a video call.

00:23:47: So they go through this video call where it photo taken of the customer, show their passport and all that.

00:23:53: That's kind of first step in identifying customers.

00:23:56: then we need to take individual through all the sanction screening on any sanctions list or whether they are politically exposed persons.

00:24:06: We take them though a credit check To see if they're banned from business.

00:24:12: So that's already a lengthy process to check the individual.

00:24:16: Then if you're onboarding G&B Hauer and Uge, then we need also identify the company... ...and there will be direct links with different business registries in all of these countries so they can fetch information about the company directly electronically.

00:24:32: This is done by technology or people?

00:24:35: It's done through technology for most parts but we do have an operations team who could automate one hundred percent.

00:24:42: But it's often better to automate eighty percent or ninety percent, because then the last ten percent often takes like ten times the amount of work than the first ninety percent.

00:24:51: So if you're the person who owns a company... ...the companies in their registry

00:24:56: etc.,

00:24:57: we can take that process fully electronically.

00:24:59: Then there are edge cases where someone is setting up an account which isn't actually the owner of this company.

00:25:05: We need information from the owners so they authorize them to open the accounts.

00:25:11: some of those steps intentionally we haven't automated because there's a lot of this back and forth that you then need to have with the customer over email or over the phone.

00:25:20: So trying to automate all of that, in all those corner cases doesn't really make sense.

00:25:24: so... We have operations teams who take care of those ten-to twenty percent of cases which are not fully automatically onboarded.

00:25:32: I mean, as i said.

00:25:33: I opened up quite a few bank accounts and in the case of Deutsche Bank... ...I needed to go there and sign dozens and dozens and thousands of papers.

00:25:40: And yeah In the case FIDO for instance.. I had also got through such processes But it took me two months to get the register stuff done.

00:25:49: Yeah, so basically a company registered all this also because of my me being little stupid to be honest.

00:25:54: but I think what we do see here is that your business quite hard from regulatory aspect and on-boarding getting it done thing as you said knowing your customer doing other checkups How well can you transform all that stuff to other countries?

00:26:09: Because when I take your German activities, as far as I learned.

00:26:13: You guys for instance...you focus pretty much on accounting but do not have an integration in Dathef or the Finnish IBAN is quite hard for German tax authorities to handle.

00:26:24: such small things sometimes may make it difficult to internationalize business.

00:26:30: how does this work and basically go abroad with a concept.

00:26:35: That's an interesting question, and when we look at European regulation for the most part.

00:26:40: We've been very happy.

00:26:42: as a payment institution I mean be passported to all European countries.

00:26:46: so technically we can take customers from any European economic area country.

00:26:50: So... And the way that EU law always works is you have the EU level directives or regulations but those are then transposed to local law.

00:27:00: When the transposition process from EU directives to local laws happens Some countries are nicer in the sense that they bring the European law exactly as it is to local law.

00:27:11: Some countries, notably also Germany tend to add additional stuff on top so kind of localize the laws... ...the EU directives and that makes things a little bit tough.

00:27:23: In our case being based in Helsinki and Finland Is actually very good because Finland is model student of EU.

00:27:31: any EU laws we just bring to our laws exactly as they are.

00:27:35: So if you do everything by the Finnish law, it's fully compliant on a pan-European basis and can operate in different countries.

00:27:43: but then there is these cases where you have local differences.

00:27:47: It's an interesting question.

00:27:48: this I-Band issue that he mentioned That something has been getting much better over time.

00:27:54: We don't see huge issues like one year or two ago already was bigger.

00:28:00: Legally it shouldn't be one, right?

00:28:02: No.

00:28:02: I mean legally.

00:28:03: there is a term called i-band discrimination And you can read about in the European Central Bank.

00:28:10: They run this payments workshop or working group that meets two times a year and It's been a perennial topic In their minutes that they kind of say that we encourage The authorities in different EU countries to fight i band discrimination.

00:28:23: One of the things A very big mistake was made when SEPA was brought in bank transfers all across Europe.

00:28:30: I mean, that works!

00:28:31: You can send bank transfers country to country and they're all domestic transfers.

00:28:35: but where a big mistake were made is not introduced at the same time EU i-bands.

00:28:40: Why do we need to have DEI bans, FII bans etc?

00:28:44: We could just run with EUi Bans And we wouldn't have any of this problem.

00:28:49: you wouldn't even really know what account it's based on.

00:28:52: It would be European accounts because SEPA has a payment method, it is really European.

00:28:57: So that's something someone didn't think through when the SEPAA area was...

00:29:03: Welcome to the word of politics and regulation!

00:29:04: It

00:29:08: isn't always obvious in best solutions that end up being deployed but I mean this has been getting much better.

00:29:15: German saying is hope dies last.

00:29:19: We can hope for that.

00:29:20: Let's dive again into your product, for a second.

00:29:23: You basically started as an entrepreneurship as platform service helping business guys to do their businesses by providing them stuff.

00:29:31: How did the market pick up it?

00:29:32: By now I was wondering, because the two main factors you offer are basically accounting and online shops.

00:29:39: And i was asking myself who in this world that is interested doing e-commerce really using their shop system of a bank?

00:29:46: Are we talking about small business providers?

00:29:48: as you said maybe the yoga teacher wants to sell yoga mats or yoga blocks whatsoever Or what's your strategy behind it?

00:29:56: The online selling functionality that we have, it's really targeted to the main segment of customers who are selling services.

00:30:03: We're not focusing on a high volume e-commerce where you sell effectively physical goods.

00:30:12: That's not the target that we have.

00:30:14: It is much more an example, a yoga teacher called Satu Tuamala.

00:30:19: she divides her time between Helsinki and Berlin so runs front studios in both.

00:30:23: So she uses online selling functionality as well as the invoicing functionality And can then depending on where customers are doing their purchase She might run these yoga retreats In India and Sri Lanka.

00:30:38: Aswell can have the online shopfront to sell those services directly... ...to her Facebook followers, etc.

00:30:49: But then she also has invoicing functionality and can invoice these same services.

00:30:54: And we have customers that for example sell translation services.

00:30:58: So some of their long-term customers just send them monthly invoices.

00:31:02: but they have an online sales channel where we provide a possibility.

00:31:06: if you want to purchase two hours of translation service then someone can come to the online selling tool and purchase that.

00:31:14: And the great thing with that is it's prepaid.

00:31:17: when you invoice as an entrepreneur, they're always taking a credit risk.

00:31:21: Is this other person or company that are invoicing?

00:31:24: Are they going pay-or not?

00:31:26: whereas if we use our online selling tools You send customers a link saying go here Payed first and then I'll deliver the service.

00:31:35: And sometimes you want to limit the credit risk that we have, but okay... ...I only start doing work once i've got money.

00:31:43: so they kind of offer this prepaid or postpaid options for customers.

00:31:48: Does this mean in consequence that your target audience basically is companies that are rather small, like up to ten or twenty or fifty people?

00:31:56: Yeah.

00:31:56: That's our segment and where we want focus on sale in EU classification micro enterprises so usually under two million euros in annual turnover and one to nine people in the company.

00:32:08: That's this segment that we feel would be most underserved segments, it is like if you look at traditional banks If your go as a freelancer or small company they won't take you into section.

00:32:19: for really Corporate customers or middle-stand customers is you're just simply too small.

00:32:25: So usually these customers are then bucketed with retail individual customers, but that's not the right place either because as a business owner You actually need business services.

00:32:34: You need a business credit card?

00:32:36: Do you need the ability to accept online payments etc.

00:32:40: from a traditional banks point of view It is a segment That that it very hard to service if you can't really offer The same personal service that you'd will for two larger companies.

00:32:49: but then just the one size fits all services that are offered to individual customers, they're not right either.

00:32:56: So we really want to bring a service for this specific segment.

00:33:01: I took quite a few looks at this segment, like the micro-businesses you mentioned.

00:33:04: As far as i know we're talking about service providers... ...a lot of restaurants and hospitality and retail.

00:33:12: so does it mean in consequence that for instance could focus on restaurants which would then make sense to think about cashier systems or co-operating with such guys?

00:33:24: Does this make sense?

00:33:25: Or do you have a totally different target group like Freelancers or maybe really SSH Service, digital goods that they're selling.

00:33:33: Yeah I mean it's much more on the Digital Goods and Services side of the freelancer space than we are servicing.

00:33:39: but also we work with platform economy companies.

00:33:43: so just announced couple weeks ago big partnership which were doing with Uber in Finland, so the taxi law is changing at the start of July.

00:33:52: The whole taxi business is fully liberalized which means that Uber's coming back to Finland as not-so-legal service a couple years ago.

00:34:02: but then they exited the market and now are coming back very big way.

00:34:06: we have partnership with Uber that all the folks who want to drive for Uber, because they need to be registered as registered sole traders before they can participate as per the new tax law.

00:34:17: So we are partnering with Uber.

00:34:20: so people would like to drive and set up a whole-of-the-account and have them setting their business up and running.

00:34:27: That's really helping prospective drivers get paperwork in order so they can then participate in Uber's ecosystem.

00:34:34: But isn't it a problem that these micro-businesses go out of business quite often and quite fast?

00:34:40: Well, I mean there is reasonable amount turnover in micro businesses.

00:34:44: That's a fact of life.

00:34:45: like other companies the success rate off new company not the hugest but what also interesting to see this segment.

00:34:53: we're seeing much more people who might have day job.

00:34:57: then they had some area where expertise or passion operate as a part-time entrepreneur, and that's big segment where especially if you're a part time entrepreneur.

00:35:10: You don't really want to spend much in the hassle of keeping that part time business running.

00:35:14: You just want do your work earn little bit extra money on this side.

00:35:18: so it is also a big segment.

00:35:20: we help and continue to help there.

00:35:23: Of course If you are doing entrepreneurship as a site gig For three months, you have a lot of customer flow.

00:35:30: Then it might be one or two months where we're not that active.

00:35:34: but then it picks up again and because they are service businesses the capital requirements for their non-capital intensive business.

00:35:40: so you can kind of dip in and deep out from the businesses without having to fully shut down the business and restarted.

00:35:46: Yeah.

00:35:46: But if you think of Holvia as a SaaS business yeah That's quite tough Because Cheren is number one killer growth in SaaS As far I know.

00:35:55: Well, in this case if you kind of have a business where maybe some months are not that active but still want to keep the business account there.

00:36:02: You still want your accounts and even when they haven't had activity then we need to file the devaluated tax report.

00:36:11: so for us the subscription model works quite well.

00:36:21: Okay, let's use this as a great moment to dive into numbers.

00:36:25: How many users do you have right now and what does the growth rate look like?

00:36:29: This is an area where we've been two years part of BBVA – The Large Spanish Bank even though we continue operating fully independently.

00:36:38: there are some things that being part of a stock listed company brings us.

00:36:43: You can check growth numbers etc.

00:36:45: from BBVS quarterly earnings releases, but we cannot quote anything directly.

00:36:51: Then let's compare it and you could comment on it.

00:36:54: I learned in N-twenty six that they grow by two thousand five hundred users a week.

00:36:59: as far as I know or even the month was a week.

00:37:01: Is this normal growth rate for your segment?

00:37:04: In twenty six and what do we do?

00:37:05: is of course different per day.

00:37:07: Sorry its even per day.

00:37:08: Two thousand nine five hundred new customers per day.

00:37:12: But I mean, that's pretty different from what they do and what we do because that is fully for individual customers or as we service businesses.

00:37:18: So each of the business has much higher value And of course the numbers are slightly less.

00:37:24: What's the difference then in basically providing businesses with a banking account at the services than private customers?

00:37:30: Of course businesses have much higher requirements In the sense if it's your private money You don't have regulations that say, of course you need to pay your taxes but there is no regulation.

00:37:40: That's why we keep doing double entry accounting on private money.

00:37:44: You go to a bar and buy beer... ...you do not save the receipt or account for it.

00:37:50: Whereas at the moment this is business money.

00:37:53: We start to account for that.

00:37:55: We know where the money comes from,... ...where the money goes back in time etc.

00:38:01: The game changes completely when its business money... compared to your own personal money.

00:38:07: And how does this fire back on the sales process?

00:38:10: How do you attract these guys, and find them to wake interest in their product?

00:38:16: We're very much present with different entrepreneurship associations for entrepreneurs so that's one channel Dennis.

00:38:23: of course I mentioned already the Uber partnership.

00:38:26: also partnerships with parties coming into contact with entrepreneurs a lot

00:38:30: So kind of reselling basically.

00:38:33: No, not re-selling.

00:38:34: It's more complementary partnerships.

00:38:36: for us Uber is a good channel.

00:38:37: They need someone like us so that the drivers get their businesses registered.

00:38:42: So it's more to good synergy and symbiotic service rather than them being a reseller.

00:38:47: Then Telcos

00:38:47: might also make sense.

00:38:48: all right because these guys need internet stuff or telephone lines.

00:38:52: Does this makes sense?

00:38:53: Or is too late?

00:38:53: already when someone buys a telephone And the Internet staff from Deutsche Telekom does you already have a banking account by then?

00:39:01: No, I mean that there is of course this core set of services that every entrepreneur needs.

00:39:05: They need the account they need a company mobile phone subscription... ...they often pay for Dropbox or Adobe Creative Cloud whatever tools they need.

00:39:15: and actually one of the first things we see when customers take Hall-V Account in to use And then you get the Hall-v Mastercard.

00:39:22: So within your first month You start getting a lot of these recurring card payments.

00:39:28: the folks, maybe they've been paying there as a freelancer.

00:39:31: You have Adobe Creative Cloud.

00:39:33: that gives you Photoshop other tools than what do we need?

00:39:36: We may be paying directly from your personal funds or card but would see kind of within first month.

00:39:42: then people switch all these SaaS subscriptions to being paid through their whole account by direct debit and that's already big benefit for customers who started separate like the personal money from the company, because we automate all of their accounting that they need to do.

00:40:03: So once they start paying those subscriptions with Hallowei or kind of automated at the big hassle for them right there and then...

00:40:10: Okay!

00:40:10: Then since you're not allowed say something about numbers let's talk a hypothetical financial service.

00:40:18: How would such a service manage to acquire customers?

00:40:22: Like you said, the partnerships already.

00:40:23: But how much does it cost and what does the typical basket look like?

00:40:27: Like how much has such as service earned from one customer And how long does he stay?

00:40:32: so our customers are actually very sticky.

00:40:34: if You're completely new business then they don't have anything set up.

00:40:37: but If your an existing business there's always A little bit of things that need to switch From Your existing kind Of solutions where The best market That we see is really The freelancers who they've maybe been freelancer for a year or so, They haven't professionalized their business.

00:40:53: There's still running it on there like personal account are mixing the the personal and Business money completely.

00:40:59: So that's an area where we then bring the solution For them to switch over the business money too to Halloween.

00:41:05: once they have done that That switch...they're very sticky because you put the investment in.

00:41:10: Then now I run my business In more professional way And Once You Have That Set Up You don't really want to go changing that every month or two.

00:41:19: So in that sense, there's a bit of switching cost to come into Halloway but then once you're in There is even more switching costs to leave it.

00:41:27: so In that sense It's pretty good for a sauce business.

00:41:30: What about customer lifetime values and such the model?

00:41:33: I always tend to try To understand how much does it cost to find a customer And How Much Does He Pay For The Service Over Time?

00:41:40: what would you say Is the average Customer Lifetime Value A Freedancer As You Said Would Have In Your Case?

00:41:45: Well, it of course depends what services the customer is using.

00:41:49: In our case we have subscription packages that customers use and then there are additional services they can use.

00:41:56: And for us in other companies big revenue streams is card usage.

00:42:00: Every time a card is used so-called interchange flows to the card card issuer.

00:42:06: So if you have active usage of cards Then thats very interesting revenue stream.

00:42:12: I mean, we did a check-up and analysis of the market together with eTripes which is quite cool agency here in Germany.

00:42:19: And what basically found out during our research was that it costs you between one hundred and three hundred euro to acquire customer in the FinTech segment might be wrong, please feel free to correct me.

00:42:31: They basically then went and took a look at N-twenty six And even though you're right the comparison is not fair because they are basically target private users and euro business uses.

00:42:40: um...they managed to buy them.

00:42:41: like if you take a look At the cash burn rate of sixty five Euro which was quite cheap Is it really case that You need to pay such much money in your space?

00:42:50: Basically To acquire a customer?

00:42:52: I said a lot of scope because we took it.

00:42:55: look at credits and investments in all that.

00:42:57: stuff like FinTech is pretty big, you know.

00:42:58: Yeah

00:42:59: yeah as You say It depends on what services your selling.

00:43:03: so some service are more expensive to acquire customers for but That's definitely the numbers.

00:43:09: you're quoting our own The high end of things And its very much how much you can then bring into the mix pure organic or viral growth.

00:43:18: Maybe the best example that we have is Monzo in the UK, similar to N-twenty six who spend zero euros pounds and marketing fully by building an enviral hooks for a product.

00:43:29: The thing with small businesses are most small business primarily do business with other small businesses.

00:43:36: So, what we want to do is that when our customers who use Hallavi and whether they invoice other small businesses or other small business purchase from them through the online store.

00:43:46: That gives us a possibility really be in front of other smaller businesses And thats quite effective for being able... because it's an implicit endorsement If you are a small business You're invoicing some others small business so your directly saying there something good on this service that I'm using.

00:44:07: So, it allows us to get quite a good network around these small businesses.

00:44:12: and if we look at the area where we have a lot of customers using online selling functionality which is like event ticketing when you go for conferences or other places then people often tell me they might not be hobby users directly themselves but still have seen and heard about hobbies a ticket to an event or something else, so that's good way of bringing awareness off the brand overall.

00:44:39: How did you manage create sales in general by the way?

00:44:42: As far as I understood you guys were more from the tech scene when you started Holvi and all of sudden we need to think about

00:44:47: sales

00:44:48: partnerships SEA Facebook marketing maybe even out-of-home.

00:44:53: yeah how did your managed?

00:44:54: do it?

00:44:55: just hire people and start it on.

00:44:56: how did you go about?

00:44:58: and it's very different now, but in the earliest days there was only one co-founder Christopher Lawson.

00:45:04: He is also a tech guy who basically took on the task of evangelizing this service.

00:45:09: so he was each an every possible event giving talks at entrepreneurship societies etc... And we should do that here as well because no one leaves.

00:45:25: you can leave after you've created a Holvia account.

00:45:29: So everyone take their mobile phone, create a Holvii account and that way we would always get the twenty or thirty new accounts.

00:45:36: He drove all around Finland with Land Rover basically recruiting customers And then we did couple of tours.

00:45:43: also When we started to open up the German market at twenty twelve thirteen time frame We actually brought a sauna To the Betahaus one way to market.

00:45:56: So really, I mean in the earliest days it was being super present in entrepreneur communities.

00:46:02: and then the other thing is that we were able to recruit a couple of really good influencers still on our strongest segments especially Finland.

00:46:14: health and wellness entrepreneurs whether anything from yoga teachers or dance instructors very well-known people in those segments who started to use Halloween, were very happy with Halloween.

00:46:27: And their endorsement and recommendation that they're networks other than doing the same thing as them was always super strong.

00:46:35: I mean there are not experts of financial services or bookkeeping.

00:46:41: but if you are a dance instructor then some guy is like this one guy whose leading salsa teacher in Finland And he knows that this guy is really a pro in the business of dance.

00:46:55: He then says, hey I've had great success and experience with this service.

00:47:00: it makes me spend more time as a dance instructor rather than running bookkeeping off my services.

00:47:06: If thats your recommendation you get because you trust him already.

00:47:11: so those kinds of recommendations in the early days and still are any amount of money that you would want to put into something.

00:47:18: You don't get the same impact as getting this completely unsolicited from the hard recommendation, from someone that we

00:47:25: trust.".

00:47:26: Okay so I learned that referrals are a strong channel for you guys.

00:47:30: let's finish up with taking look at competition.

00:47:33: then obviously outlook.

00:47:34: what Hulvi might become in future maybe should start with BBVA?

00:47:38: As you said you were acquired in two thousand sixteen.

00:47:41: What has changed since?

00:47:44: Not much.

00:47:45: We continue operating as an independent company with very strong support from BBVA, but what has kind of course changed is that we've grown us a company a lot where about fifteen people at the time of acquisition were now five times that and in that time would build a sizable office Now here in Berlin.

00:48:02: We have fifteen People hearing in Berlin?

00:48:04: We have about sixty people in Helsinki.

00:48:06: So they built up to team quite a lot And off course pretty good resourcing now to do what we need, and overall super strong support from BBVA.

00:48:16: We're part of something called New Digital Businesses so it's a unit that the task is find new digital ways to service customers and build really new businesses for the bank And our mandate within the New Digital business are two things To serve as underserved segment freelancers.

00:48:38: Why did you sell in general?

00:48:39: I mean, was it because of the growth aspect that you said?

00:48:42: okay... ...I can see right now.

00:48:44: if we want to become a pan-European bank.

00:48:45: We need a lot money and this does make sense as an incorporation.

00:48:49: or what basically made you sell your company?

00:48:52: On one hand side is resources really do things on a pan European scope.

00:48:56: but then there's also the possibility to do thing with much more long term focus.

00:49:03: When your venture capital finance start-up, you're kind of time horizon is always like eighteen months.

00:49:08: You raise a bit money then the next twelve month's are super focused on delivering onto objectives that promise when he raised to money and after the twelve months or six months at least we were spending raising funds for the next round.

00:49:23: quite a pain in the ass.

00:49:25: It is fun, but it's of huge destruction.

00:49:27: all time you're spending raising money away from building business for customers.

00:49:33: so with BBVA we are looking at three to five year time horizons and everything that we do Of course doesn't mean strong growth objectives.

00:49:43: that wouldn't be building businesses aggressively But does means they really look okay.

00:49:50: What does it take to really transform a big bank into being a tech company?

00:49:55: And that doesn't happen overnight.

00:49:56: So there is much more of this long-term thinking, and the long term thinking also comes with new digital businesses such as Halloway.

00:50:03: That was really the rationale for great resourcing ability... ...to think about the long-terms and build a pan-European play.

00:50:11: Which countries do you serve by now and which are to follow?

00:50:15: We're in Finland Germany Austria and Estonian E residents.

00:50:19: So Estonia has this program where you can become a virtual citizen of Estonia.

00:50:24: And if your are a virtual Estonian citizen, then basically open an Estonian company and we can service you.

00:50:30: We have nice customer segments now growing especially in Ukraine and South Korea.

00:50:36: People who set up themselves as e-residents... ...and run a fully location independent business so called digital nomads.

00:50:43: Then after these countries it's actually the fastest growing e-resident segment is Germany.

00:50:49: It's actually much easier from a bureaucracy point of view to set up as an e-resident, and Estonian company which is fully digital.

00:50:57: You can do all the tax filings everything you don't need go to Estonia at all... ...you don't have to go to Notar at all.

00:51:04: it's fully digital.. ..you sign everything digitally.

00:51:06: so its'a much more streamlined efficient way to run your business And surprisingly enough there also attraction in markets where we can service local companies.

00:51:16: but people think that running as an e-resident, a digital nomad is what they want to do.

00:51:22: How about France?

00:51:23: Spain?

00:51:24: UK?

00:51:24: You know all the other European countries... As you said your willing to become a pan-European bank and I mean your mother sits in Spain.

00:51:31: so basically i would guess that Hovey's also serving Spain.

00:51:34: What it going to follow?

00:51:35: So we're not serving Spain because Spain of course very well served by BVVA as it is our task really expand the banks footprint within Europe.

00:51:44: but there are some number markets where working on right now.

00:51:48: Okay, how many?

00:51:50: Let's see.

00:51:52: What would you expect?

00:51:53: How long does it take to start the market for you guys now?

00:51:56: Define start a market like from a regulatory and technical point of view.

00:52:00: we can take any European economic area market tomorrow.

00:52:02: I mean that's not an issue but then is everything else around dad need to do.

00:52:08: Hmm

00:52:09: okay i see as i said one or two sentences about competitors.

00:52:14: I mean, i obviously compared you to the German NEO banks and twenty six contests.

00:52:18: or we also had direct banks in Diba which might make sense too.

00:52:22: take a look at our DKB.com Direct Consor's Bank.

00:52:26: You mentioned Monzo from UK.

00:52:27: whom do you consider your primary competition?

00:52:30: What do basically think of their different strategies?

00:52:33: how did you locate yourself?

00:52:35: We think as our competitors really are old ways doing stuff.

00:52:39: So if we look at our customers traditionally, they had to go a traditional bank.

00:52:45: They've had to take PC-based accounting software.

00:52:48: It's really these old ways of doing stuff that we compete against.

00:52:51: so people have the awareness That okay there is better way you can do this things.

00:52:56: You can't take tech company which actually provides good services and it can provide you with the banking service as well.

00:53:04: From our perspective whether it is ConDistory N-twenty six or other players on the market, I think we and everyone else were in the same mission of bringing this new way to service customers.

00:53:16: To really give customers another option.

00:53:19: that's not like one of the other Neobanks who gets a customer.

00:53:25: Customers understand there are options.

00:53:30: all fintechs effectively growing the market together.

00:53:33: And there is so much of that market to be grown outside of traditional players, but definitely space for us and other players.

00:53:41: I also had the impression that each one we just mentioned was slightly different.

00:53:46: N-twenty six focuses on customers who are private and tries to say they're banked.

00:53:51: cool.

00:53:52: Contest is focusing on freelancers.

00:53:54: you guys basically offering business services.

00:53:56: So... There's our use piece?

00:53:59: I would say.

00:54:00: So my last question is obviously on the future of Holvi, what will follow?

00:54:04: Because usually when you think in the banking sector, you'd say okay credits investments transferring money with be business models that take a look at.

00:54:14: it's this something to look for as well?

00:54:16: or do your other focus on the business part which might say we did this?

00:54:20: and then accounting?

00:54:21: let us know how could improve others stuff?

00:54:24: yeah works under business.

00:54:25: basically.

00:54:25: Well,

00:54:26: I mean if you look at like five years down the line what we would like to happen and what were working towards is that whenever someone within anywhere in Europe thinks about starting a business.

00:54:37: Thinks about entrepreneurship The first thing comes into their mind Is okay.

00:54:43: all of it's way to get that done.

00:54:45: All these are ways for you run your business.

00:54:47: so We'd like to bring entrepreneurship as service As a model And we would definitely like to be the number one provider in that space.

00:54:55: I once talked with a person who had been an early employee at Skype, when he just started at Skype and was meeting friends on the bar or whatever... ...and they asked okay so where do you work?

00:55:05: It's a work at Skype.

00:55:08: what is that?

00:55:09: and video conferencing?

00:55:12: But then like a year after, the whole thing had changed.

00:55:15: I said okay... ...I work at Skype and everyone was like wow!

00:55:18: Okay of course i know Skype.

00:55:20: my girlfriend is studying abroad.. ..I talk with her every day with Skype And even my grandma uses Skype.

00:55:26: That's what we would really like to happen that when you talk about entrepreneurship You will think of Halloween.

00:55:33: So if were not Youtube for money maybe we are this type of entrepreneurship.

00:55:39: That's a great final sentence.

00:55:41: I'm curious about the markets that are going to follow, how many of them and which?

00:55:46: Thanks for all your time in all the Insights!