Uldis Tēraudkalns, CEO of Nexpay: Fintech Veteran Comments on Implications of MiCA Regulation for European Fintechs

Uldis Tēraudkalns, CEO of Nexpay, a fintech scale-up providing business banking solutions for digital companies, recently shared his views and insights with CI.

Licensed by the Bank of Lithuania and operating across Europe, Nexpay reportedly processes over €2.5 billion annually and has helped over 600 businesses build the future of money.

Uldis, an established Fintech authority, has discussed payment trends, the regulatory landscape, and the evolution of supporting technologies. He delved into pertinent subjects, such as the implications of the new EU MiCA regulation [Markets in Crypto Assets] for European Fintech.

He also touched on strategizing in the hybrid landscape between traditional fiat and crypto in the Web3 era. In addition to this, he commented on the comparative advantage of banks and EMIs for fintech startups in the context of the decline of US banks.

He also pointed out key considerations for businesses accepting crypto payments.

Our conversation with Uldis Teraudkalns is shared below.

Crowdfund Insider: Uldis, could you briefly describe Nexpay’s journey and what distinguishes your company from other fintechs?

Uldis Teraudkalns: Nexpay began as a Fintech venture committed to delivering top-tier banking services tailored for the digital business landscape. Our core offering centers around business payment accounts. We’ve developed an API that offers businesses an effortless bridge between our platform and their systems, giving them access to a diverse suite of payment, account, and other financial tools crafted by our expert team. With a blend of banking veterans and digital asset professionals on board, our vision is to empower digital businesses to craft novel solutions, presenting a robust and user-friendly alternative to traditional banks.

We offer businesses IBAN accounts with SEPA transfers. To further our reach and adapt to the global demands of digital businesses, we’ve recently expanded our services to include SWIFT payments across 23 currencies. This isn’t just about broadening our services; it’s a testament to Nexpay’s commitment to pioneering safe, efficient, and ground-breaking financial solutions.

In essence, our philosophy revolves around transactional banking. We believe digital businesses deserve a platform where the primary focus is on facilitating secure, cost-effective, and straightforward payments. As the dynamics of cross-border payments evolve, our integration of SWIFT payments solidifies our pledge to a banking model that celebrates simplicity and security, ensuring digital businesses thrive without being bogged down by extra complexities and threats.

Crowdfund Insider: With the rapid ascent of digital financial platforms, defining a fintech’s role can be challenging. How does Nexpay see itself in this ecosystem, particularly compared to traditional banking?

Uldis Teraudkalns: We consciously avoid labels like ‘bank’ and ‘neobank’ to prevent misconceptions. There’s a nuanced difference between ‘being a bank’ and ‘offering banking services’. We are licensed to provide bank accounts (IBANs) to facilitate everyday payments for businesses. Unlike traditional banks, Nexpay doesn’t provide payment cards, savings accounts, or credit. Instead, we focus on API integration, facilitating substantial payment volumes for businesses. Today, we assist over 400 businesses in shaping the future of finance.

Nexpay UAB is a licensed Electronic Money Institution (EMI) with the Bank of Lithuania, adhering to stringent regulations. All client funds are maintained in segregated accounts within the European Central Bank system, guaranteeing top-notch security. Our overarching ambition is to be Europe’s premier B2B payment provider for digital businesses and eventually expand globally.

Crowdfund Insider: Given the burgeoning transactional banking model, how does it fare against traditional banking?

Uldis Teraudkalns: Recent events, like the decline of prominent US banks such as SVB and Signature Bank, starkly highlight the vulnerabilities rooted in conventional banking systems. These traditional models grapple with challenges ranging from operational inefficiencies and escalating regulatory costs to high-risk endeavors for profit. Conversely, this volatility creates a significant window of opportunity for fintech startups, particularly for Electronic Money Institutions (EMIs).

Recent events, like the decline of prominent US banks such as SVB and Signature Bank, starkly highlight the vulnerabilities rooted in conventional banking systems Click to Tweet

The core advantage of the emerging transactional banking model lies in its simplicity and cost-effectiveness. It eschews the complications of traditional banks and focuses purely on transactional services, minus any unnecessary frills. In essence, this streamlined approach to banking emphasizes pure transactions: it empowers businesses to both receive and dispatch payments with ease.

The setbacks faced by US banks might have rattled the sector, but they also paved the way for fintech pioneers. By championing safety, simplicity, and value, fintech startups are poised to redefine the banking paradigm and align with the requisites of our burgeoning digital economy.

Crowdfund Insider: Let’s discuss the new MiCA regulation. How do you view its implications for European fintech?

Uldis Teraudkalns: The European Parliament’s endorsement of the Markets in Crypto-Assets Act (MiCA) marks a pivotal shift. Slated for implementation between mid-2024 and early 2025, MiCA aims to formulate a holistic regulatory landscape for digital-asset issuers, nudging the industry towards greater legitimacy. Despite certain ambiguities in areas like DeFi, NFTs, and crypto lending, its overall trajectory is encouraging. MiCA’s hallmark is that it provides licensed European crypto enterprises a pathway to the expansive single market, encompassing nearly 450 million consumers.

The European Parliament's endorsement of the Markets in Crypto-Assets Act (MiCA) marks a pivotal shift Click to Tweet

Post-ratification, firms will have 18 months to conform to MiCA. This demands readiness, considering the potential discrepancies between current norms and MiCA’s stipulations. MiCA’s uniform approach across EU member states introduces a ‘passporting’ mechanism for businesses, allowing streamlined services throughout Europe. However, MiCA also intensifies disclosure mandates. For instance, it necessitates a more rigorous white paper standard for public crypto-asset offerings, potentially elevating market quality.

While detailed implementation awaits, it’s indisputably a long-desired regulation. By enhancing legal clarity and transparency, MiCA aims to bolster institutional trust in digital currencies, promoting innovation and safeguarding both consumers and investors.

Crowdfund Insider: With the fusion of traditional fiat and crypto in the evolving Web3 domain, how are businesses navigating this terrain and identifying prime opportunities?

Uldis Teraudkalns: The crypto versus fiat debate is ongoing, but it’s likely they’ll coexist. Both traditional finance and crypto present distinct strengths and challenges.

Data from the European Central Bank highlights that a mere 10% of households in key EU countries own digital assets. Yet, an evident chasm exists between the present adoption and future potential. Bridging the divide between these financial realms offers immense potential. Companies capable of offering a seamless shift between crypto and fiat are positioned for leadership. Currently, transitioning between these realms can be complex, but modern technological capabilities promise a more cohesive system.

Crypto brings advantages like swift and economical global transactions, but challenges like volatility persist. Thus, businesses gravitate towards stablecoins, to mitigate volatility risks. In essence, the future isn’t about picking between traditional finance and crypto but integrating them. Businesses focused on enhancing user experiences in this combined space will herald the forthcoming finance epoch.

In essence, the future isn't about picking between traditional finance and crypto but integrating them Click to Tweet

Crowdfund Insider: Given your expertise in payment trends, where do you see cross-border payments headed in the upcoming years?

Uldis Teraudkalns: The cross-border payment landscape is evolving rapidly, driven by emerging technologies like blockchain, digital wallets, and the rise of cryptocurrencies. These innovations promise to boost cross-border transactions’ speed, efficiency, and affordability, benefiting a broad spectrum of users, from individual consumers to businesses.

Pioneering fintech solutions such as Revolut, Wise, and Stripe challenge traditional banking models by offering quicker transactions, reduced fees, and smooth API integrations with existing systems. This tech-forward approach positions them as attractive alternatives to conventional banks, which might lack the agility to implement these solutions.

Additionally, Artificial Intelligence (AI) is poised to revolutionise payment processes, from invoicing to compliance checks, slashing the costs and duration of cross-border transactions. Blockchain’s role is particularly significant. A Juniper Research report forecasts that by 2024, cross-border payments will surge beyond $240 trillion, with blockchain adoption potentially cutting transaction costs by a staggering 60%. Notably, Ripple’s partnership with MoneyGram and Visa’s collaboration with Crypto.com exemplify how blockchain and cryptocurrencies are being integrated into mainstream financial systems.

Evolving regulations will push fintechs to optimise their structures, especially regarding compliance areas like AML, KYC, and counter-terrorism financing measures. This will drive the adoption of cutting-edge technology and streamlined processes to deliver efficient and cost-effective solutions.

Looking towards 2024, there’s a palpable demand for safer, streamlined banking alternatives. Given conventional banks’ challenges, Fintechs are moving towards models emphasising core transactional functions over additional features. In essence, the future of cross-border payments is leaning towards safety, affordability, and efficiency, positioning fintechs as key players in a digitally-driven economy.

Looking towards 2024, there's a palpable demand for safer, streamlined banking alternatives Click to Tweet

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