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Episode 2 – What does it cost to start a FinTech?

The second episode of “Casual and very sporadic FinTech talks”.

Speakers

Carl-Johan Larsson (https://www.linkedin.com/in/carljohanl/): Experienced FinTech professional with insights dating back to 2010. Carl leads the discussion, offering expertise on financial technology, compliance, and strategic planning for startups.

Julia Prus (https://www.linkedin.com/in/juliaprus/): Specialist in launching FinTechs, focusing on legal, operational, and product development aspects. Julia emphasizes practical solutions and discusses challenges startups face.

Jordan Pasternak (https://www.linkedin.com/in/jordanpasternak/): FinTech expert with experience in the sector since 2014, focusing on blockchain, payments, and investing. Jordan brings a U.S. market perspective, particularly on innovation and growth within the industry.

Alaine Bernadette Joson (https://www.linkedin.com/in/alaine-joson/): The behind-the-scenes technical expert ensuring the webcast’s smooth operation and handling technical aspects during the discussion.

Summary

This webcast episode focused on FinTech, particularly discussing the costs, challenges, and strategies involved in launching a FinTech startup. The conversation features Carl, Julia, and Jordan, who bring expertise from various facets of FinTech. Topics include licensing, budgeting, the integration of middleware like Plaid, and financial technology trends such as AI in wealth management. The participants also explore the advantages of collaboration between business and tech professionals and discuss market-specific issues, such as working with BAAS providers and compliance requirements. The discussion concludes with a proposal to develop a detailed breakdown of costs for FinTech startups in a future episode.

Transcript

Carl: There we go. Now we are live.

Julia: Hi.

Jordan: Hi.

Carl: How is everybody feeling today? It’s Friday.

Julia: It is. It is.

Jordan: It is. Ready for the weekend. We have a long weekend in the United States.

Carl: Sorry, we’re having an echo here.

Julia: What is the weekend about? Sorry, I missed that.

Jordan: Martin Luther King Jr. Day.

Julia: Okay. That’s why you need to leave earlier?

Carl: End of year.

Jordan: What’s that?

Carl: I thought that was end of year.

Jordan: No, it’s on Monday.

Carl: Ah, okay. Cool. So, how’s your week been?

Jordan: Julia?

Julia: Well, me? Great. Like, I started that on the south of France, and now I’m back to Vilnius, Lithuania.

Yeah. So, it was good in terms of being in between, you know, two worlds. Like, work-wise?

Good. I think everyone is getting, like, it’s getting again busy. So, yeah. The week was great. Yours? How are things?

Carl: Doesn’t change. I haven’t been able to be out flying, but Jordan, have you been able to do something fun?

Jordan: No, I’m stuck in New York. It’s cold and cloudy, but I’m looking forward to the long weekend. So, cool.

Carl: Hey, should we get cracking?

Jordan: Yes.

Carl: Cool.

Let me work my magic tech here, and let’s see if we can… There we go. So, topic of today is, what does it cost to start a FinTech?

Two segments, as per usual. First news, then we go into the topic. So, what do you guys want to start with?

The news? Because it’s actually happened quite a lot of fun stuff.

Julia: Let’s start with the news, I think.

Carl: Okay, cool. Let’s do that. Let me see if I can use my magic pointer here, and change the slides.

Yay.

Julia: Oh, my God.

Carl: This is us. Small intro. We did that last week, and we haven’t really figured out how to do this, since we’re going to do these things weekly.

But who wants to start? Julia, and just do it ad hoc for now.

Julia: Again? What do we do?

Carl: Yeah. I mean, take 10 seconds.

Julia: Well, well, well, well, well, well. Okay. So, basically, I am in charge of making things happen when it comes to FinTechs.

Starting with the, let’s say, if you just need an advice, what is that? Like, what do you need from the legal perspective? the actual product launch, and finding the right team.

And, again, it’s all about making things happen within the FinTechs field. That’s what I do.

Carl: Okay, cool. Jordan, you.

Jordan: Yeah. I’m similar to Julia, making things happen.

Julia: Okay.

Jordan: That’s it. But I don’t make as much happen as Julia. But, yeah.

In New York, I’ve been in the FinTech space since 2014 and see a lot of growth and interesting innovation from crypto, blockchain, to payments, to investing and equity crowdfunding. So, I’ve had my ear to the space for a while, and it’s super interesting, and it’s getting more exciting.

Carl: How does east side differs from west side in the U.S.?

Jordan: I would say east coast, you know, is the…

Julia: They drink more? What do you think?

Jordan: I don’t know. Well, yeah, they drink more. West coast, they smoke more marijuana.

Although, we’re leveling the playing field on the east coast. But east coast primarily is the center of finance, you know, Wall Street, financial, banking. West coast, obviously, Silicon Valley, center of innovative tech and VC and investors.

And obviously, the start of legendary companies like Apple. And so, I guess FinTech is more prominent on the east coast. But I think the west coast has some interesting things going on as well.

Carl: Okay, cool. My turn. Carl-Johan Larsson, been doing FinTech since, well, the Stone Age, it feels like, 2010-something. I’m going to cut in something interesting here, because we don’t have this every week.

But let’s do a video that we can just roll around. Perfect. With us, we also have Alaine.

People can’t hear her, but she is the one that’s handling the tech. Okay, news. Oh, Jordan, you got a hard stop later on, right?

Jordan: I have to jump in 22 minutes.

Carl: I hope you get lots of frequent flyer miles. News. So, this week, what’s happened? Who wants to start? Sure.

Jordan: I pulled this article out this week, as Plaid was potentially gearing up for an IPO, I think. And so, what they were telling investors was that actually half of U.S. consumers have used Plaid’s payment technology at some point, which is a mind-boggling stat that’s over 100 million users. And so, what does that say about FinTech and the growth of the space in general?

That’s a conversation we could have, but it’s interesting. Obviously, Plaid is the middleware between FinTech apps and pulling banking information and that layer. And so, it says that more people are interacting with FinTech solutions, whatever that might be.

Carl: Do you think that’s because of the ease of use, or is it more of the width? Because with Plaid, of course, you can reach so many, let’s call it endpoint services. Or do you think that it’s easy because you can access it everywhere?

Jordan: I think it’s the ease of use. I think it’s also, sometimes you don’t even know you’re using Plaid when you’re interacting with a FinTech. So, that being embedded in all these FinTech apps, it’s just getting ubiquitous at this point.

Carl: And I mean, we spoke about that last week, and I think that’s the big thing, that everybody will do one thing that they do well, and then it’s going to be embedded everywhere. Now, Plaid, of course, being the middle layer, but they can manage so much more. Julia, you built this into other FinTech apps, right?

Julia: Yeah, yeah, yeah. It’s one of the requests, actually, to get integrated.

Carl: Yeah.

Julia: That’s right.

Carl: Why do they request that?

Julia: First, they really don’t actually know why. If it’s like, hey, we want to see the blockchain, just because they heard about that. And then later on, while we are talking about the roadmap and actually why they want to integrate this, they don’t need to.

So it’s interesting, kind of. It’s an interesting thing. But yeah, like some FinTechs, they want to see that for whatever reason.

Carl: Yeah, but I mean, money in, money out. If you do it account-wise, it’s a good argument, especially when it comes to marketing. I think card to card, when we get that to work properly, that’s going to take over a lot of these things.

Julia: Yeah, yeah, yeah.

Carl: Yeah, which is lucky because, I mean, these MasterCard, they don’t make enough money, so they have to make some more money, of course.

Julia: Yeah, right now, with all this, I mean, while growing. Okay, so yeah, let’s go. Sorry.

Carl: No problem. JP Morgan returned to the office. This is actually kind of fun.

When all of this started, I mean, when COVID happened and everybody worked from home, I thought that we’ve kind of seen the last office for, like, tech companies or consultants. But banks, I never thought that banks really were going to do work from home. And I mean, of course, JP Morgan, they have a lot of positions that, you know, never need to meet clients, things like that.

But I always thought that it was tight there, so that they kind of require people to be in the office.

Julia: Yeah, they do. They had, like, still you had to go, like, at least two days, but you need to show that you go there.

Jordan: I mean, obviously, it’s a more conservative culture, the banking industry.

Carl: Yeah.

Jordan: And also highly regulated, right?

So they don’t want people around the world without a lot of oversight on what they’re doing, even though there’s infrastructure to create that oversight. But I think the leadership there, they’re from a more old school mentality. They saw how they were running things before COVID, and they just want to get back to that reality.

Carl: Yeah. I mean, I’m just really surprised. I never thought that, you know, JP Morgan, Chase, you know, the big players, that they had a big part of their employees working from home.

I thought as soon as COVID was over, they forced everybody back. I completely missed that they were still, well, a lot of them working from home.

Jordan: You know, my friend who works for Capital One, they require him to come in two days a week, but it’s basically tracked by badging in to the office. And so he badges in and leaves right away. And I think, I won’t say his name, you know, but I think a lot of people do that.

It’s just-

Julia: But, like, why? Like, why? My question is, like, why? It doesn’t, like, make sense for efficiency if you go to the office?

Like, what’s the reason of actually go there? So I don’t understand.

Jordan: I think it’s this idea that if you’re all together, there’s more collaboration, there’s more relationship building, innovation. There’s some truth to that.

Carl: Oh, definitely.

Jordan: Yeah. And I can see as a young person with just starting their career, it would be tough to do just remote because just think about maybe you guys didn’t have this experience, but think about the relationships you build and the kind of fun, happy hours you go to in your 20s. I mean, that’s missing. If you’re remote.

Carl: Yeah. I really don’t like to work in- I hate work from home. So this office here, I think it’s great. A lot of people and, of course, other companies as well that do other things. You kind of meet people and network. So follow up. Cool.

What else do we have? Oh, this was fun. Just a short thing here.

Financial wellness products, everybody build them in. I have never seen one that I think is good. They are all sales funnels. Have any one of you seen any of these products that you think actually works?

Jordan: No, but it’s interesting to like certain tools, like see your net worth, things like that, where you can integrate all of your accounts or all of your investment accounts. But in terms of following advice according to these tools, I don’t. I stop there.

I don’t really do that.

Carl: No, I mean, I use. So I just switched. Let me check what mine is called here.

It’s called Bucks for something new that I am testing. I mean, it does what everything else does. But in this one, I don’t get the advice that I have in other apps that I’ve tried for this.

Because the advice, I always want to shoot myself after I read that. Because they’re so bad. But do you think, AI can change that?

Julia: Yeah, I think so. They can actually do the calculations, give you the advice, consider your goals. I think so, yeah.

And this is one of the directions, like it’s pretty popular right now as well within the fintechs to build this wealth management system. So I guess so within AI, it should make a change.

Carl: We should actually talk about that. I should look into that. Alaine, make a note for me.

Thank you. Okay, cool. Next one.

This is fun. Sorry, I need to pull up a reference here. Because this is one of the best news I’ve seen, actually, in a long time.

Because a lot of what we see, I think, in our business is, you know, a lot of surface, not so much content. Let me see how I can pull this up. Sorry, tech issues.

Jordan: I was, when I read about Klearly, and them being the first firm selected by Apple as launching a tap to pay. I mean, isn’t that, does it, I just know Apple has their Apple wallet, right? So is Klearly competing with Apple pay?

Carl: Point of sale systems. So, I mean, when you go into any smaller store, they have their point of sale system. And they have this machine that, you know, Oracle or whatever system they’re using, gave them, and they’re renting them for a gazillion bucks.

And then there’s fees and blah, blah. Which is insane, because for like the past, I’d say, five years, you can buy a stupid Android phone, root it, now you have a point of sale machine. So that’s kind of what Klearly’s doing.

And I was so happy to see that they’re raising more capital so that they can expand, because in this business, we see a lot of solutions that it’s not real solutions. They’re just doing what other people have been doing in the past, and they’re repackaging it. But this, this is why I love FinTech, because they’re changing something with technology that can give huge savings for both extremely small businesses and large businesses as well.

I mean, if you have a thousand outlets, and you need to buy point of sales machines, if you instead can buy either an Android phone or whatever, it’s just night and day. So I love these things.

Jordan: I see like in the United States, there’s an integration with the iPad. And there’s a credit card, little credit card integration where you could swipe on a little machine. I don’t know what technology that is, but it seems pretty straightforward.

Carl: Yeah, no, it’s kind of like the same thing. And if you want to be able to swipe the card, not just tap it, you can buy, well, it’s a small thing, just basically attach it to the phone, it’s Bluetooth, and then you’ve got a card reader. So really, this is a new thing.

Let’s award Captain Obvious to journalists. So stable coin could rival cards. If you say that in 2025, should you be embarrassed?

It feels like that’s me saying that I actually think that the mobile phone is a great idea.

Julia: Pretty outdated to me, but again, probably because we’re within the field, you know what I mean?

Carl: This is the payments expert that said this.

Julia: All right.

Carl: I love them. I think this is yours, Julia.

Julia: Yeah, that’s pretty interesting, actually. And it’s Jordan. So since you’re in the US, how do you feel about that actually because Trump is getting to power again?

So the venture cryptoists, they are trying to shift the direction in terms of the investments, and they are looking into, of course, AI and crypto and skipping, let’s say, this green energy investments and forgetting or whatever, you know, just kind of vanishing that part, betting on crypto and AI. So what do you think about it? Yeah, of course, there is a connection between, you know, the elections and the investment direction.

But how do you feel about that, that we are no longer interested in green energy?

Jordan: I think there’s an obvious shift due to the Trump administration, Elon Musk cozying up with Trump, and then you saw Zuckerberg with his weird hair and gold chain now.

Julia: Gold chain. Oh, my God. I miss that.

We should have actually put that. I miss that.

Carl: And the perm? I mean, seriously.

Jordan: He’s trying to be a bro now because he’s attaching to Trump, attaching to Elon Musk, but also the Joe Rogans and that culture because that’s where the countries, that’s where they voted for in the election. And you saw Zuckerberg’s announcement around, I mean, I’m a little fuzzy on what he actually said, but it was around cutting DEI initiatives and also letting go of all of the fact-checking on meta and just stopping that completely.

And so Meta will look more like X or Twitter, and it’s going to be a wild west. So it’s going to be fun.

Carl: I mean, I think it’s good that he’s doing what he’s doing. I just think he’s doing it really weird.

Jordan: Well, he might be AI.

Carl: Well, let’s see what happens with it, but it’s interesting. But the perm that he had, I’ve never seen that before. It was like when you were watching the Muppets when you were a kid.

I actually thought, oh, this one Muppet, a small one, not Kermit, the other one who lives in the trash and got hair up. I thought about that one.

Julia: And it’s sad, you know? It’s sad, actually.

Jordan: Well, you know the cool haircut for young men? It’s that, like, broccoli hair. Do you know what I’m talking about?

Carl: Oh, you mean straight up or?

Jordan: No, no. It looks like what Zuckerberg has. That’s why he has that hair, yeah.

Carl: Ah, okay.

So it’s a new thing. I also missed that.

Jordan: I guess you’re not, you know.

Maybe Julia with her TikTok watched it.

Julia: Oh, my God. What’s that? Yeah, I used TikTok. No, I didn’t see that. I didn’t see that. It’s still, it was not. Basically, it’s on my interest, I guess, because I didn’t see that popping up within my pills.

Jordan: All right.

Carl: Cool. Let’s see. There we go.

Next thing. So this is the topic.

Julia: Yeah. Jordan needs to run it for minutes. So how are we going to do that? What do you think?

Jordan: You guys can continue speaking, but I could start it off here. And obviously, a lot of our expertise revolves around working with entrepreneurs, understanding their use case around wanting to build a solution, whether it’s a neobank or some sort of verticals related to banking. And so today we’ll talk about realistically what this could potentially cost in the market.

And first example is when we get entrepreneurs talking about, we want to start a neobank in the U.S., we want to supply bank accounts and cards. What is the first step that they should be thinking about? And how can they build this product strategically?

So with that being said, what can they think about regarding the tech or how to start thinking about it?

Carl: Let’s go through it one by one. I’m sorry. I mean, it’s not like we’re going to get a definite answer, but we’re going to go somewhere.

Definitely. Julia, do you want to start? Where do you see the most, like when people come to you and they say, I have budget ABC, where do they miss?

Julia: Well, sometimes where do you miss? You mean in terms of the, what’s the costly part, the most costly?

Carl: So for example, do they think that, oh, tech’s going to cost 10 million, but it’s way less, but the prototype is going to cost two bucks. But in reality.

Julia: Yeah. Yeah. Actually, yeah.

They are missing like, well, first and not to start, I think that was the first question. Of course you need to figure like it’s going to be a license or sub-license. I guess if you’re already settled that, yeah, of course it’s cheaper to be sub-licensed from the very beginning, but the fees that you’re going to apply to your customer is going to be higher.

Yeah. Because you are sub-licensed. So where are they missed?

I think here within these prototype thing, right. And kind of value propositions. So they think that it’s very, it’s not going to cost much in order to bring the prototype.

And this is the, the first point where they’re actually missing. And what about your experience? Like when they come to you, like what’s their expectations?

Carl: So there’s two types of people. First you have the ones that they’ve been doing this for a while. And I’m actually really surprised that normally they know, they kind of know what things cost.

So they can come and say, I want a prototype of X. It’s fairly advanced. Can you do it in less than six months?

And when I hear that, I’m kind of happy because normally it doesn’t take six months, regardless of how complex it is, which means that they’ve been around. So they say, okay, it’s going to take one month and then you add, you know, risk. And then you add X, Y, Z, and then they say, okay, six months.

It’s good. Then you have the other people that, that think that starting a FinTech is all plug and play. Everything is done and they can basically run, you know, three, four software as a service solution, no upfront costs.

They will never be happy because you’re so far away from their expectations. What does it then cost? Well, I mean, let’s, let’s break it down.

Let’s take this simple case. So Neobank in the U.S.

Julia: Bye Jordan

Jordan: See you next week.

Carl: See you next week. Have a good one. Let’s say that, let’s keep it simple. If you have a, let’s see. 

Oh, I have to do something with Jordan. No, let’s just keep him dark. Let’s take a simple case.

You can have one, you know, boss provider that will handle basically all of the cards, all of the accounts. You don’t need anything else. You’re going to be limited, but you know, it’s fairly easy.

Cost for that. My guess is a hundred thousand of your own fees for lawyers. Expect a 50,000.

Yeah. The bill should be 50, 50 grand to sign up. And then that’s the only cost I would say you need another 200,000 to put in there so that you’re liquid, but that’s not a cost.

So say 150 for that tech 250. So tech is actually fairly cheap. Then you can be up and running tech support.

This is where people, they don’t –

Julia: They don’t actually come that really. They don’t think about that actually. Well, yeah. Yeah. So they miss that part.

Carl: I would add for tech support. I would add between five and $10 per end user and year. That should be, that should be okay.

Standard support a bit less. If you have a simple case, otherwise increase compliance. If you’re only doing these things.

So like it’s not complex, maybe 25,000 a month. If you outsource that marketing, of course, depending on what you want to do. But if somebody comes to me and say that, would you like to be part of this project?

Our marketing budget is X. If X is lower than a million a year, I would never do that. Because it’s not going to happen.

Julia: Yeah. Yeah. Because there’s so many players, like why people should go with you.

So you need to have really good strategy.

Carl: Yeah. And also I’d add here a million, a million five minimum for C-level people. And maybe not C-level people then, but compliance people.

People with extremely good knowledge in whatever they do. That can be compliance, legal, or whatever.

Julia: You mean like to hire the advisor, right? So the part of the team. Okay, cool.

Carl: And you need those on board from scratch. If you don’t have that boss, players, they’re not going to talk to you. Neither do tech consultants, because you don’t kind of show that you’re serious.

All in all, I’d say for year one, you need a minimum of four, but hopefully more.

Julia: What about companies that promise you that they could just onboard you for 2K and then you run the solution? Since we’re within the field, and you’ve been working for quite long with the clients, is it realistic? Why do they still do this?

Why do they still overpromise? What do you think? Or it’s realistically when it’s already all prebuilt and you can just cover the fees?

Carl: Well, technically you can actually, I mean, you can do that, but you’re not going to be a fintech. So there’s a lot of companies that say that, for example, you can be your mittens company, blah, blah, blah, and it’s 500 bucks a month. Now, what you get for that is you basically get a webpage with your domain, maybe your colors and your logo, but everything is of course done by a third party and you have absolutely zero control over that.

Now, I would say for some people that would actually work, because let’s say that you have a unique case that nobody’s thought about before. Let’s say, you know, Corridor, you’re going to send money from US to Canada and your target audience is, I don’t know, left-handed people. Nobody have thought of that.

Then this is a perfect way to test the market for like hardly no cost, because you technically can do something and I’m sure you can convince this company that whatever fees they take, you can cover those yourself. So, if you look at that as an exercise in, I don’t know, like a market survey or whatever, perfect. And then, when you then have proven that your case works, then you’ll have all the funding in the world to kind of do it for real.

But you will never, ever make any money by using that.

Julia: That’s true. Yeah, yeah, yeah. You see, that’s absolutely right, sir.

There is no… And the point is that, you know, they usually come and say, hey, we’re going to rent, like we’re going to rent the solution right now, but then when we are going to do better, we’re going to build something on our own. And usually, it never happens.

And like, you know, I’m seeing many cases than when their best vendor, or whatever vendor that actually overpromised that it’s going to be fine, they do not perform. So, they are building the solution that we just spoke about after, I don’t know, just like, you know, after spending already funds on that rent. And I’m seeing that pretty, you know, that case pretty often.

Carl: Yeah, and I agree. And people that do that, they really don’t succeed. I really can’t say why, but when looking at all the projects that I’ve been a part of, like none of those really succeed.

Now, if that is because it’s wrong to build or rent a cheap solution first and then try something more complex. I actually don’t think so, because I think this is about the people. And if you look at the projects that I’ve been a part of, when somebody comes, let’s say, they come to, you know, a company like WellMe, and they say, here’s a big bag of money, build X, call me when it’s done.

Those projects, they succeed in such a way that they’re up and running, but then within a year, they disappear. Then, on the other hand, when people come and say, we would like to build X, but, you know, the tech, it’s going to live in our environment. We are ready for that.

We will be part of the journey every step. So please advise us, but we will have the final say, and we will be involved. And these are the projects that…

Julia: This is the best.

Carl: Yeah, I mean, success rate, almost 100%. But of course, I don’t think that’s about what they actually do. I just think that they’re prepared in a better way, and they know what they’re doing.

Well, maybe they don’t even know what they’re doing, but they’re smart enough to understand that the company we hired to do this can help us, but we kind of have to decide. So that just works. Now, luckily, in today’s market, you don’t get many people that come with a bag of money and say, just build.

I mean, back in the crypto days, that happens all the time. Luckily, people are better prepared today. But if you’re going to run a project, if you have a clear idea of what you want to do, I would urge people not to try to start cheap.

Do it properly, because if you have a good idea, and you feel that, oh, I don’t have funding to build this, well, that’s kind of weird, because if you have a good idea, you’ll get the funding.

Julia: Yeah, you’re going to get funds from crypto.

Carl: Yeah, and I mean, if someone has a great idea, and they’re missing some money, I mean, heck, I can call some friends of mine, and they’ll be happy to put up the money. I mean, they’re going to take your business away, but that’s how it goes. So if you have a good idea, don’t let money issue lure you into building something that you don’t want.

Julia: I think it’s just because there are people that are into business, either into tech, and there are not many stakeholders that have both expertise, business and tech. So probably that lack of funding comes that they just have that tech expertise, an idea, why they want to build that. I think it’s coming from that.

Carl: Yeah, I mean, I talk to all kinds of people. I talk to, you know, techies who want to build a fintech, and they’re, sorry, give me one second. So, I mean, techies that have a great idea on how to do something, and they then, like, from a techie point of view, want to build a fintech.

Then the other way around, you know, you meet business people who got no idea what a computer is, and they want to build it. I would urge both of these to partner up with someone from the other side. I watched a podcast from, oh, I can’t remember what it’s called.

Oh, I’ll put a note under this in the comments when I come up with that. They work with a lot of startups, and they actually have a program to match techies with business people and business people with techies, so kind of get that. In my experience, when you get that, you get the best of two worlds, in fintech, of course, because you need those.

I’m curious of one thing. I said four million. Is that your experience as well, or would you up that number or take it down?

Julia: Well, I mean, you can actually, I don’t remember the names, but recently, fintech startups, they’ve been raising 10 million, et cetera. Four million, I think for already, if we’re looking into the project itself, long-term, two, three years, so it depends. We need to actually break the cost first, the prototype itself, for whatever reason you build that.

If you just want to have a prototype, then do the fundraising. So it depends. In overall, four million, yeah, sounds reasonable.

I mean, it does.

Carl: Last year, no, sorry, two years ago now, this was 20, yeah, 2023, I called a lot of boss providers, both in the US and in Europe, and I asked them, for you to take on a client, I mean, let’s disregard that they have to be compliant and all of that. Let’s just look at the money. What would you require?

Most of them that I think is like a serious actor, they would require you to have access to more than 10 million to run the business the first year. I think that’s a bit over the top, but I get it. It makes it easier for them to kind of pick and choose who they want to deal with.

So I do think that you can do it for four, but if you have more, great.

Julia: Yeah, like for instance, like the shift within the licensing, for instance, recently, Central Bank of Lithuania, they do require you to have five million reserved in order to get the license before it was 300K.

Carl: Yeah, I think all of that’s going to increase because money is so cheap today. So if you have a good idea, you can easily get all the funding you need. I mean, when it comes to the funds that Bank of Lithuania requires or your boss provider or remittance provider, whoever, the amount of cash that they require you to have, there are companies that issue credits for that.

It’s a bit of a pain in the ass to kind of write the paperwork because there are so many edge cases that can happen, but there are companies that will do that for you if you can show that you have a good idea. They’re going to kill you in the fees, but that’s just something you have to pay in the beginning unless you have the capital yourself, of course. I would say if you’re going to do your own license, in your experience, what’s the cost there?

I mean, think lawyers, consultants, all of that that you need. Take Lithuania, for example, because it’s the easiest in Europe. Take my license.

What do you think?

Julia: If you want to go for your own license, right now it’s increased, the cost itself, from 300k to 5 million. Then the advisors, they usually charge you around 30k in order to get all the results and things done.

Carl: I’ve seen some new consultants in Europe. They say that they will give you a fixed price on this. I actually don’t think so.

Julia: They don’t. At the moment, no, it’s not fixed.

Carl: I would say you need for lawyers, consultants, at least half a million euros to be on the safe side. It’s going to take you a year and those fees are going to kill you because the lawyers will just keep hammering on. It’s, of course, worth it in the long run if you have a good case, but otherwise I’d sublicense as much as possible because the fees for the sublicense is, of course, depending on the volume that you bring in, how secure it is.

If you have a case that’s not, that they add any risk to or things like that, you’re basically just, you’re not really renting a license. You’re renting the pipeline, so to speak. It makes sense.

I know a lot of companies that even though they have their own license, they still use a boss partner because they have it all set up and they pay half a percent per transaction. It’s just worth it.

Julia: It is. There is another room actually as well within Lithuania, for instance. You can purchase the company that got that license a long time ago, so you get the license, you get the company, and, of course, the fees are not going to be as high as five million, for instance.

Carl: Yeah.

Julia: There is a window.

Carl: Technically, it’s not a fee. It’s a capital requirement.

Julia: Yeah.

Carl: But still, you need it.

Julia: Yeah. There are ways. There are ways.

It depends. It depends what you want to do. It depends on the volume.

There are many things that you need to actually count in. It depends.

Carl: Can you… Let’s put it this way. If you have a hundred grand, can you be a fintech?

You want to call yourself a neobank. If you have a hundred grand, let’s see if we can fit this in because what we’re talking about is, of course, the good cases where we can see people thrive, things like that. But there are also other players that have a unique case.

They want to get started.

Julia: Yeah.

Carl: They say, okay, I can throw a hundred grand at this, and if it works, it works. Could you make it work for a hundred thousand?

Julia: Yeah, you can actually get the proof. In order to go fundraising, you can do that for 100k. That’s the first.

Secondly, if it’s a closed-loop system, it’s possible to do. Closed-loop system means that the funds are kind of not leaving the infrastructure. As well, it’s just your case.

You want to bring the fintech because you’ve got your own business and you want to just kind of make things automated. Potentially, yeah, but it’s not going to be something big. It’s not going to be Revolut.

It’s not one of the biggest references. If it’s a closed-loop system, either way, you’re building the prototype in order to go big. So 100k might work.

Carl: I’m actually thinking of another case where 100k would actually cut it, at least in the beginning, I would say for year one. Let’s say that you work in, I don’t know, marketing. You have a thousand clients.

They are all loyal to you. You want to enable them to, I don’t know, have IBAN accounts because it fits your model and you want to connect these accounts to your own solution that you’re offering them. In that case, I would actually say that it’s doable because if you can then do, let’s say, KYC on your side, you technically just need an extremely simple web application.

You just need to show accounts, holdings, and API to do transactions to. The BAAS provider in question, they wouldn’t charge you that much. They would charge you a high percentage.

But if you have this set up so that you have loyal clients, then you can charge that because it’s going to make their life easier. So if we look at those edge cases, then I would say that you can actually start a business for 100k.

Julia: Yeah.

Carl: But you need that unique thing and you need clients that you already know and a very simple case. But then I’d say it’s doable.

Julia: Yeah, it is. To start, as I mentioned, we’re talking about prototype and then go further, but usually you need at least two. It’s an ongoing process in general.

I think everyone should know that it’s an ongoing process. It’s not that you just build a thing and that’s it because you need to bring the value and the development should be running. But in order to build MVP, 100k, yeah, fine.

We can do that.

Carl: We’ve got to leave because I’ve got a call in like 10 minutes. This is actually quite interesting. And I mean, we’re on episode two, so we’re still kind of trying out the tech and the format and everything.

But let’s circle back to this in a couple of weeks because there’s a lot of things to be said. And I actually think that we should prep a bit better because this is really interesting because everybody I meet, this always comes up. So it would be interesting if we could write some kind of manual to this.

Like, what does it cost? And then…

Julia: And the breakdown.

Carl: Yeah, and we should actually break that down and see if we can make sense of it. It’s going to be messy, but let’s try. Cool.

That’s it from me today. You want to add anything?

Julia: No, I’m good. I’m good. Thank you so much.

Carl: Perfect. Alaine, thank you so much for handling the tech as per usual. See you all in one week.

Julia: In a week.

Carl: In a week.

Julia: What’s going to be the topic? What do you think? What are we going to talk about?

Carl: I can’t say that here. I can say that offline because we have some people that are eager to jump on as guests, but I can’t disclose that yet.

Julia: I see. Okay.

Carl: If I’m lucky, we can announce that perhaps Monday, but let’s see. Cool. 

Thank you so much.

Talk to you soon. 

Have a good one.

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