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Payment Components – Empowering Fintech for Banks and Corporates

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Company profile: Payment Components

Fintech predominantly has been focused on designing and delivering value to retail customers. However, the idea of technology impacting the current processes within core banking, is equally compelling. As the focus shifts to managing the process, risk, compliance and regulation, the upgrading of the core systems will take centre-stage. Payment Components with its suite of products is creating building blocks to solve the core banking and corporate problems.

Founded in 2014, with offices in London and Athens, Payment Components can be found under paymentcomponents.com. They currently have a team of 10, predominantly software developers and a couple of product visionaries at the helm with a view – ‘if it’s not simple, its wrong’.

The Business

Payment Components is a hybrid software development and consulting company. They have 2 active platforms. First is a Financial Messaging Library which when expanded translates to SWIFT MT, MX (ISO20022) and SEPA libraries. Second is a set of applications catering towards Treasury System, BankNotes Trading, Trade Finance and Payment Hub. They also undertake the full scope delivery of bespoke Fintech projects (example – API platform to enable Open Banking) as well as conduct their own R&D for future products like PSD2 ready PFM.

The Engine

Messaging is an integral part of financial infrastructure. The Financial messaging library enables the creation, parsing and validation of messages. The concept enables the client to instantly initiate the integration process with an industry grade solution.

The engine is designed to eliminate development and support costs for the added functionality of SWIFT MT, ISO20022 and SEPA messages by automatic updates according to the annual rulebook changes. These are essentially messaging libraries which can be deployed at the communication layer of the infrastructure.

The Treasury System is aimed to provide an aggregated, completely digitised and automated interface for a corporate across all the banks it utilises. It enables communication between multiple entities under the same umbrella, provisioning for same day payments, minimal inter-bank transaction under SEPA directives. This engine enables switch to digital transactions, optimise payment routing rules and streamline of the entire workflow to authorise and issue payments. It also provides an Advanced AI/Robo mechanism to match incoming payments against corporate documents (e.g. contracts, invoices), greatly reducing the time needed for reconciliation.

TMS

Treasury Management System (Source: Payment Components)

BankNotes Trading and Trade Finance are specialized applications, enabling the corporates to streamline the existing processes and optimise the account structure to efficiency.

Revenue is currently generated on the basis of a software licence and support fees, with a plan to initiate a move towards a SaaS model and subscriptions within the next 12 months.

The client base is diverse consisting of financial institutions (the likes of JPMorgan, Citigroup and Credit Suisse), large scale integrators (Computer Associates) as well as large corporates.

The Profitability Conundrum

Payment Components have a set of products that have long lead times in sales cycle and implementation. From 2015 to 2016 they have already seen close to 30% growth and 2016 isn’t over yet. The revenues are touching the seven-figure mark. It is a matter of time when their products stick to a couple of institutions already on their rooster for the growth to arrive.

The Intrinsic Value

Elias Gagas the Chief Digital Officer of Payment Components says ‘the biggest challenge today is to reduce friction in the existing incumbent’s infrastructure. We currently work with several forward thinking banks to fast track the adoption of APIs/Open Platform Banking, well ahead of the formal PSD2 adoption date. We firmly believe that this will be the catalyst to a wide spread FinTech (R)evolution’.

This is the intrinsic value of the of the products and services they offer. They act as an agent of automation in the core banking space and at the same time empower corporates to reap the benefits this automation enables.

The Messaging Library is out there to enhance interoperability, eliminate effort to implement and effortlessly follow annual rulebook changes. The Treasury Management system is a potential game changer whereby it can displace the existing one-to-one reconciliations process to real-time many-to-one infrastructure change.

The value Payment Components adds to the process is relatively straightforward where the concepts of efficiency merge with layering on the SaaS model on existing systems. Competition is strong, growing but is dispersed. There are two aspects that drive competitive advantage at the early stage when thinking through the institutional process, firstly, the network effect (considering the long lead times) and investor patience.

The Verdict

Payment Components has a set of offerings that is like being a toll collector. Their multiple offerings are interoperable and deliver value to the core processes. Their product suite appeals as a solid plug-n-play option to be layered on the legacy systems. They are uniquely positioned to both enable the Fintech revolution in Financial Institutions, as well as deliver its promise to corporates and consumers.

Regional play will enable them to test their products and pivot fast. The strength of their products is there to be seen but the challenge will be to engage in the change management projects currently ongoing in the institutional play.

Payment Components certainly possess the key ingredients to demonstrate change and value. This is about the efficiency play the critical questions are two aspects that drive competitive advantage at the early stage when thinking through the institutional process are the network effect (considering the long lead times) and investor patience. These visionaries have a compelling skill set and product line-up – is it just a matter of time?

Founder comments

Mr. Sotiris Nossis “It is my firm belief, that in the next 3 years nothing in FinServ & FinTech will be the same! Payment Components positions itself as a key agent, which empowers this FinTech Innovation & Disruption to take place.”

Mr. Elias Gagas “SQUEX has been constantly providing a fresh & well rounded point of view, on the rapid evolution & change, sweeping across FinServ! It’s refreshing to see a proper consideration of the Technology underpinnings, in tandem with the true Business drivers, which both feed & are fed by, the FinTech (R)evolution. It’s exactly this kind of full scope approach that’s necessary, to demystify FinTech and set the stage for truly delivering on its promise!”

Disclaimer: This material is for informational purposes only and should not be construed as research or as investment advice, nor should it be considered information sufficient upon which to base an investment decision.  Further, this communication should not be deemed as a recommendation to invest or not to invest.

The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete in its accuracy and cannot be guaranteed.