Analysis

Multi-currency lending for SMEs – a natural evolution from remittance

Ebury has been providing Small and Medium Enterprises  (SMEs) with multi-currency remittance, risk management, payment processing, FX Risk management and forward contracts in a simple and intuitive way. With about 10,000+ customers, Ebury latest step was to naturally add multicurrency invoice financing.

Ebury started up as a payments business, is now offering multiple products to its clients, but its focus is on lending, cash management and risk management services. It believes that traditional banks with their suite of products are the principal competition as compared to other startups. The company has embarked on a unique business model which is focused on acquiring customers and then offering them a full bouquet of services, similar to a brick and mortar bank. The difference is that Ebury is leveraging technology to keep its unit economics positive in serving SME customers who individually might not be remunerative, but as a collective, is too big a market to ignore. Ebury seems to have cracked the puzzle of offering bespoke services to SMEs & NGOs and still create a profitable relationship.

London-based Ebury is a multi-faceted fintech company. The 2009 incorporated company is focusing on importers and exporters in the SMEs segment; catering to their enhanced funding requirements and solving their foreign exchange issues. It has offices in Amsterdam, Madrid and Warsaw and is looking to expand in the U.S. Ebury has raised equity funding of $119.24 million in 5 rounds from 5 investors. It raised a monster round of $ 83 million in November 2015.  The round was led by Vitruvian Partners and existing investor, 83 North also participated in the round. Ebury’s volume of foreign exchange transactions amounted to £7.5 billion over the past 3 years. It has won FinTech 50, FinTech 100 and Technology Fast 500 awards. Ebury’s clients include Dyrhoff, Fred Balls Fastenings, United Nations and Save the Children. The company has carved a niche with its singular focus on SME & NGOs, which have been traditionally ignored by the big banks.  The company is working with over 10,000 businesses and organizations; executes around 6000 transactions every month in 140 currencies and even contributes to Bloomberg’s FXFC forecasting.

Top Management

Salvador Garcia and Juan Labato jointly founded Ebury and are presently Co-CEOs. Salvador was previously a director at Rabobank and ABN AMRO and Labato was CEO of Beam.Tv, a Digital Media Distribution Platform and a senior consultant at McKinsey. The company has added Andrew Burley to the management team as Head of UK Business. He was previously the Managing Director of Bank of Tokyo- Mitsubishi UFJ in London.

Modus-Operandi

Ebury is an I2B i.e. Institutional to Business Lending. Ebury is governed under the money service business and is regulated by Financial Conduct Authority (FCA).

Ebury’s driving philosophy is simplicity. Ebury primarily lends in GBP, but multi-currency loan drawings are also facilitated to the borrowers as per their choice because the startup has the infrastructural base of dealing in 140+ foreign currencies. It provides liquidity window facility to its customers enabling them to draw the loan amount and repay any day through that window for the tenure of 30 to 150 days. Daily interest is charged for the number of days the funds are actually utilized and the customers can be hedged against currency fluctuations. Interest rates charged by Ebury vary from 50 basis points to 200 basis points per month varying on the creditability of the borrower. No processing fees, no swapping charges, no maintenance charges, and no pre-payment fees are levied on the borrowers. Ebury usually sanctions loans to its borrowers within a short span of 48 hours unlike weeks of lag time with the traditional banks.  Sanctioning time gets further reduced if the SME supplier is based in U.K. and the buyer is also based in U.K. and the invoice is made in GBP.

Ebury offers multi-payment and card solutions to the NGOs which significantly lessens the pressure on them regarding timely payment disbursals. Ebury also offers “White Label” services and products through brokerage houses and accountancy firms.

Methodology of Fund Raising

Ebury does not accept direct deposits from customers as per FCA regulations. The U.K. Government is very supportive of alternative funding for SMEs and this has translated into regulators being very understanding of their business model. The Company gets its lending funds via a unique Special Purpose Vehicle through which sophisticated investors and institutional investors deploy their funds via Ebury.

Regulation

Presently the operational areas are limited by the regulatory licenses Ebury holds to Holland, U.K. and Ireland. While FX and cash management services can be passported from the UK to other EU countries, this does not apply to lending. In many European countries, a banking license is required for lending. Each country has its own distinctive banking regulations, the company is actively planning to expand its operational areas in various other countries including the USA and various countries in Europe shortly – strictly adhering to the regulations of those countries as well as of the parent country –UK.

The scope of expansion of Ebury is greatly enhanced because the three major banking institutions – Barclays, DB, and Uni Credit are still struggling to recover from balance sheet damages incurred during the aftermath of the 2008 recession. Fintech is aggressively on Investors radar with $901 million of fintech deals in the UK in 2015. Other major deals in the European fintech space in 2015 were Funding Circle ($150 million), WorldRemit ($100 million) and Transferwise ($60 million).

Market view

Negative interest rates in the EU are a good indicator that majority of banks still need to repair their own balance sheets. This can be confirmed by the public statements of Barclays, Deutsche Bank and Unicredit for example. But when the yield curve is negative over multiple tenors it is very hard for traditional banks to repair and rebuild their balance sheets. This opens up possibilities for traditional lenders.

Ebury is mobilizing a different piece of capital then the banking sector. Ebury is an alternative to banks regardless if they are robust or not. Capital exists in the world, it’s all about accessing it via the right vehicle.

Author: George Popescu and Heena Dhir

About the author

George Popescu

Serial entrepreneur.

George sold and exited his most successful company, Boston Technologies (BT) group, in 2014. BT was a technology, market maker, high-frequency trading and inter-broker broker-dealer in the FX Spot, precious metals and CFDs space company. George was the Founder and CEO and he boot-strapped from $0 to a $20+ million in revenue without any equity investment. BT has been #1 fastest growing company in Boston in 2011 according to the Boston Business Journal and the only company being in top 10 fastest in 2012-13 as it was #5 in 2012. BT has been on the Inc. 500/5000 list of fastest growing companies in the US for 4 years in a row ( #143, #373, #897 and #1270). After the company sale in July 2014 until February 2015 George was Head-of-Strategy for Currency Mountain ( www.currencymountain.com ), a USD 100 million+ holding company focused on retail and medium institutional currencies, precious metals, stocks, fixed income and commodities businesses.

• Over the last 10 years, George founded 10 companies in online lending, craft beer brewery, exotic sports car rental space, hedge funds, peer-reviewed scientific journal ( Journal of Cellular and Molecular medicine…) and more. George advised 30+ early stage start-ups in different fields. George was also a mentor at MIT’s Venture Mentoring Services and Techstar Fintech in NY.

• Previously George obtained 3 Master's Degrees: a Master's of Science from MIT working on 3D printing, a Master’s in Electrical Engineering and Computer Science from Supelec, France and a Master's in Nanosciences from Paris XI University. Previously he worked as a visiting scientist at MIT in Bio-engineering for 2 years. George had 3 undergrad majors: Maths, Physics and Chemistry. His scientific career led to about 10 publications and patents.

• On the business side, Boston Business Journal has named me in the top 40 under 40 in 2012 in recognition of his business achievements.

• George is originally from Romania and grew up in Paris, France.

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