iZettle CEO talks data, looking beyond payments and Stockholm FinTech

iZettle_Jacob de Geer

iZettle made a name for itself as a mobile payments company that lets micro businesses like cafes, bakeries and salons accept card from customers, but CEO and co-founder Jacob de Geer says it doesn’t see itself as just a payments company.

Speaking in an interview, he tells PaymentEye that while payments is the core of the business, the bigger picture is a “multi-product scenario” of services built for merchants that are poorly served by traditional financial services. The firm launched the first product outside its core payments offering last summer with Advance, which offers cash advances to small businesses, and it sounds like it won’t be the last.

“Payments is still the core but with the launch of Advance we’re moving into a new multi-product scenario,” says de Geer. “We see so many other adjacent products we could offer on top of payments that are in high demand from these companies.”

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Offering more products would see the firm moving deeper into the territory traditionally offered by banks. iZettle’s key advantage? Data. But more importantly, the ability and agility to leverage it.

“With Advance, the reason we can decrease risk and judge quickly whether a merchant should have access or not is because we have the data,” he says. “If you compare us to a bank – they use typically less than 3% of the data they have they use to understand and help their customers. For us data is the core of what we do.”

“What is interesting about our business really is data. We see ourselves as a tech company rather than a payments company.”

iZettle at a glance
> HQ: Stockholm, Sweden
> Operating in 12 markets and offering cash advances to qualifying merchants in the UK and Sweden
> Investors include Hasso Plattner Ventures, Zouk Capital, Dawn Capital, Intel Capital, Greylock Partners, Index Ventures, Northzone, Creandum, SEB, American Express, MasterCard & Banco Santander

With more than 5m small businesses in the UK alone and the growing cultures of entrepreneurship and freelancing meaning more people are striking out on their own, the opportunity to target underserved small businesses remains massive. Now six years old, Stockholm-headquartered iZettle is one of Europe’s flagship fintech businesses. Here, de Geer talks data, banks and what’s ahead for payments this year.

What’s happening at iZettle right now?

Advance is the most recent product we launched but core for us still is growth. We’ve found a very lucrative businesses model addressing the segments previously underserved by the banks: sole traders up to micro merchants. They are so underserved by all type of financial services that what we’re doing is democratising financial services rather than just payments.

Will iZettle become a Swiss army knife of products?

It’s part of the strategy. I’ve said in some interviews that the vision of trying to become a next-generation small business bank is really compelling. You see what the current banks offer these companies and how much they lack services they really need to grow.

How is Advance going? Demand is massive. It’s available in the UK and Sweden and we’re launching it in the rest of Europe within the month. Even relatively big businesses, say turning over USD1m or USD1.5m, can’t get access to growth capital from the banks because they’re deemed too risky. If we offer them EUR50,000 and that gives them the opportunity to buy a second oven for their bakery for example, we see the impact almost instantly on their revenues since we follow them pretty closely. It’s pretty interesting to see the correlation.

Banks are sitting on so much data, it seems odd that they aren’t leveraging it?

It’s odd and then it’s not. It’s clear the banks are in maintenance mode. Look at what type of engineering talent banks are looking for in Europe: COBOL engineers, a programming language from the 1960s. They need to migrate to a new infrastructure and that takes time given how much data and how many customers they have. It’s like changing the engines on a Boeing 747 mid-flight.

Banks were created at a time when there was only pen and paper. Changing the mentality and processes to a new way where they see a new opportunity, bring in entrepreneurs and actually allow them to innovate and fail – that’s not very common within most banks.

Is the writing on the wall for banks? The financial industry is pretty much the same position as the music industry was 10 years ago – pre Spotify. Revenues are going down and tech companies are eating their lunch. Last year USD20bn was invested in fintech companies and all of them are focused on one small piece of financial services, whether it’s us for payments, Adyen for processing, TranferWise for forex. Banks try to offer all the solutions for any type of company or person from the day they’re born to the day they die. That’s won’t be possible in the future.

It’s not that I believe banks will die. They’re a core and critical part of the society and infrastructure. They’ll remain, but face more challenges.

iZettle

Do fintech startups need to be in London?

I don’t really agree with London being the fintech capital in Europe. London has been the finance capital of Europe, but if you look at fintech and some of the companies coming out of Stockholm they’re much more progressive. We’re coming up to an equal level of sharing the title of fintech capital of Europe. There’s Klarna, us, lots of companies round personal finance coming out of Sweden and just so many fintech companies coming out of there in the past couple of years.

You need UK presence and that presence should be in London for sure. But there are certain things that are more favourable being in Stockholm – it’s a smaller cluster and it’s easier to get access to talent in certain ways. Sweden is by far one of the most advanced internet societies in the world.

What can we expecting from the payments space in next year?

You’re going to see more of what we initiated last year – the expansion of services on top of payments. The continued growth of contactless and the access points where you can pay with contactless will drive consumer adoption when it comes to contactless outside the UK, where it’s becoming pretty much mature. That will continue across Europe. Given you see the decrease of cash in every market – obviously the use of electronic payments methods will increase and there will be a tighter connection between the online and offline.

On top of that there will be banking initiatives when it comes to accessing your direct debit account. Companies like Ping-it in the UK, similar in companies rising all over Europe. With new European money directives you’ll see an increase in those types of payments but they are very local and again consumers are looking for payment methods they can use across borders. So it will be interesting to see what market share those payment companies can take from traditional card payments.

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