Yapeal, a digital banking startup, which became Switzerland’s first fintech banking licensee earlier this month, has spoken to Finextra Research about the task of breaking new ground in a market dominated by giants such as UBS and Credit Suisse.
Andy Waar, Yapeal's co-founder, believes Yapeal can bring meaningful innovation to Swiss retail banking, offering digital capabilities that the incumbents do not boast.
“The platform is purely cloud native, 100% digital and operates in real time, which no other banks in Switzerland does, so this is an absolute killer,” he states.
Yapeal is aiming to start a wave of digital disruption that has been seen in numerous other markets, but not been as prevalent in Switzerland.
This could be changing however with the introduction of fintech banking licences last year by the Financial Market Supervisory Authority (FINMA) to stimulate competition in the industry.
“Switzerland has a very lively fintech scene and many startups build up their success stories in international markets, sometimes neglecting their home country due to limited market size and rather risk-averse private equity investors,” says Enrico Bauer, Yapeal’s chief operating officer.
Yapeal was granted its licence by the Swiss regulator earlier this month and is looking to attract payday-to-payday customers in need of some help managing their money.
Switzerland’s tax system is entirely self-declarative, so citizens’ salaries are paid their gross salary, with the requirement that they save enough for when their taxes are due.
“This is a real issue for a lot of people,” Waar says.
“They get their money and put an amount to one side, but most of the time it’s not sufficient and they run into problems.”
Waar explains that Yapeal’s algorithm allows it to predict how much a customer need to account, based on their age, address, marital status and so on.
Therefore, far from specifically appealing to a particular demographic, Yapeal believes it can target customers of all backgrounds, as those that live payday to payday extends to all segments.
“This financial condition extends over all age groups,” Waar says. “Young people, students, the first home, living together with a partner, family, children, career, buying a home, pension, inheritance...”
Yapeal’s founders describe the platform as blockchain-inspired, but not blockchain-based. This means that the underlying data is stored on an electronic ledger by means of cryptography and hashing to confirm its veracity.
However, there is no distribution to the ledger, meaning Yapeal’s model cannot be seen as a true blockchain. This has the benefit of being able to settle transactions quicker, given the time it can take for a blockchain to verify new blocks on a distributed ledger.
“The underlying data scheme - the way it is logged and the means of going back and checking it is super blockchain-inspired,” co-founder of Yapeal, Andy Waar, says.
Waar explains that he envisages Yapeal’s unique selling-point to be its real-time operation, which is not compatible with a fully-distributed ledger.
“Blockchain and real-time are not friends. We need to do stuff instantaneously. When we use our debit cards, information is crossing the ocean four times in less than a second.”
This could change in the future, and Waar is leaving the door open to Yapeal’s operations becoming fully blockchain-based, which could extend to cryptocurrency services for transaction and custody.
“Our system is ‘cryptocurrency ready’, so it would not prove to be an issue as soon as we wish to open it up to that, but right now we think the customers we wish to attract have higher priorities than that.”
Caps and collabs
The fintech banking licence caps deposits at CHF 100 million, but Waar believes Yapeal’s total will be extremely variable, making this something of a regulatory grey area.
Assuming most customers use their Yapeal as an account for their salary, as is the bank’s intention, funds held under deposit will spike around the end of the month and then gradually diminish over the following weeks. It will depend if the bank’s compliance with the deposit cap is determined by its peak or average figure, which Waar says is something that will be determined before Yapeal launches.
The licence also means that deposits cannot be invested elsewhere, so lending is off limits.
Yapeal intends to charge a monthly fee for the use of its bank account, which will serve as its revenue stream.
The bank is currently considering numerous subscription models, whether it will charge a flat fee for all services, or offer numerous bundles with tiered prices.
Waar does not believe however that Yapeal will follow the freemium model that Revolut for example uses and Monzo intends to revisit.
“We believe that people are willing to pay for a service, if it makes sense and is delivered well,” he says.
Yapeal also sees opportunities in licensing its platforms to the Swiss incumbents looking to benefit from its digital capabilities.
The platform has also been built specifically to “be ready for B2B”, according to Waar, and conversations have begun with traditional banks interested in some of the things it can offer, such as a fully automated onboarding process.
Yapeal is currently offering access to its ALPHA program to prospective customers who wish to test the platform ahead of its full launch. The bank is not currently offering any clues as to when this will be.