As part of its growth, Spendesk had to rethink its banking infrastructure and operations to overcome critical limitations and continue to scale.
Moving funds is core to Spendesk’s business. Spendesk operates three bank payment flows to enable its customers to:
credit their customer accounts and cards via SEPA credit transfer or SEPA direct debit payments
pay their invoices from their Spendesk accounts via SEPA credit transfers
reimburse their company expenses from their Spendesk accounts via SEPA instant credit transfer or SEPA credit transfer
Spendesk launched its operations using a Banking-as-a-Service provider. It allowed the company to rely on its BaaS provider’s license, partner banks, access to SEPA and card networks, core banking system, and compliance services to quickly take its product to market.
As Spendesk scaled and acquired more customers, it encountered limitations that slowed its operations, constrained its product and limited its customer experience.
“As a BaaS customer, we didn’t have our own BIC and IBANs. So when a transfer was sent or received by our clients, they would see the name of our partner, which was very confusing for them,” says Axel Catetand, CEO at Spendesk Financial Services.
Spendesk was limited to the payment capabilities offered by its Banking-as-a-Service provider, which prevented the fintech from allowing customers to pay its providers with SEPA instant payments instantly or to use their Spendesk card with Apple Pay.
Spendesk’s operation teams also experienced instabilities, or even unavailabilities from their provider, leading to the impossibility for their customers to pay via bank payments for a prolonged period of time.
But the biggest challenge for Spendesk was its dependence on its BaaS provider’s compliance rules and KYC requirements. BaaS providers dealing with various customers are challenged to adapt their KYC process to each customer, and those customers’ end-users, leading to inadequate KYC requirements.
It created friction and delays in the onboarding process for its customers and even prevented Spendesk from onboarding some companies.
As much value as their BaaS provider enabled them to deliver to their customers, being 100% on a single partner became a strategic dependency risk.
Spendesk decided to obtain its own payment institution license to overcome these limitations and integrate a more significant part of the value chain into its operations. It chose the SEPA indirect participant model to do so.
Becoming a SEPA indirect participant means connecting to SEPA CSMs through a sponsor bank, BPCE and its processing operator, BPCE Payment Services. After evaluating several banks in France and Europe, Spendesk chose to work with BPCE Payment Services.
“We needed to work with a banking partner we trusted, who had done it before with numerous SEPA indirect participants. When selecting our sponsor bank, we didn’t only look at their safeguarding account and SEPA payment offers, but also key value added services such as fraud detection or BIC reachability. BPCE Payment Services offered these services and had this extensive experience we were looking for” - Axel Catetand, CEO at Spendesk Financial Services
Building bank integrations takes time and requires to build-up internal expertise. In addition, bank integrations have to be complemented with a number of payment automation features to send, receive, and reconcile payments at scale with the appropriate level of visibility and controls.
As much as it brings multiple advantages to fintech companies, the SEPA indirect participant model introduces additional technical and functional complexities, including managing R-transactions, incoming payments, and confirmation or rejection of incoming instant credit transfers.
While various solutions exist to send and receive bank payments at scale, the options to connect with banks as a SEPA indirect participant are limited. For Spendesk, it went down to building their bank integration and payment automation capabilities in-house, using legacy vendors servicing traditional banks, or using Numeral.
Because they wanted to focus their engineering resources on their core product, including card issuing capabilities, Spendesk chose Numeral to connect to BPCE Payment Services and manage their SEPA indirect participant payment flows.
"Becoming a SEPA indirect participant and completely revamping our payment operations and banking infrastructure was critical to our ability to grow Spendesk. Connecting to your sponsor bank and managing SEPA payment flows is a very large project if you don’t have a pre-built solution like Numeral. Numeral has enabled us to connect to BPCE Payment Services with a single, elegant API. They have supported us throughout our implementation project with our partner bank, up until our go-live.” - Axel Catetand, CEO at Spendesk Financial Services
Spendesk now benefits from Numeral’s direct integration with their SEPA sponsor bank and its overlaying payment automation capabilities to send and receive billions of euros of SEPA payments per year for their 3,500+ customers.
“Being a SEPA indirect participant, the technical chain is shortened. We are closer to what is happening in the clearing and settlement mechanisms, allowing us to get more detailed information about the payments we send and receive. It enables us to provide a far superior customer experience by giving our customers detailed status on their payments extremely quickly,” says Axel Catetand.
By working with Numeral instead of building in-house, Spendesk saved valuable product and engineering resources to accelerate the development of their platform. In the meantime, its banking operations team now benefits from automated management of incoming and outgoing SEPA payments at scale, allowing it to spend more time improving its processes and supporting its customers, while significantly reducing costs
“By becoming a SEPA indirect participant with BPCE Payment Services and Numeral, we divided the cost of each and every single payment by eight to ten.” - Axel Catetand, CEO at Spendesk Financial Services