Launching a UK Payments Business
The hardest part of launching a payments business in the UK today is not building the product. It is building a model that can get through regulation, win distribution and make money over time.
A lot has changed over the last few years. Regulation has become more demanding. The market has become more crowded. Customer expectations are higher. And the cost of getting to scale is often far greater than new entrants expect.
That matters because many businesses still approach payments as if a good idea and a good brand will be enough. In most cases, they will not.
Exevion’s Managing Partner, Darren Schindler, recently shared his perspective on what it takes to set up a payments business in the UK , and we’ve captured his key views in a short Q&A below
What is the hardest part of launching a payments business in the UK right now, and why?
Regulation: This has increased over the last few years, and finding the right regulatory path or partner is difficult when businesses are entering the UK payments space from abroad
Cut through: It is difficult to create a unique offering in a highly crowded market, and the distribution strategy needs to be very clear to differentiate against competitors
Profitability: It's very hard to make profits purely in a payments business. Normally, you need to have other products or offerings which are fee-generative in order to really drive profitability over time
Where do new entrants get it wrong early on, and what does it cost them?
They underestimate how much work is involved in either picking the right regulatory partner or getting the right regulatory approval to be able to trade
They assume that a strong idea and a good brand will be enough to attract customers. It is not. In a crowded market, they need a clear point of difference and a simple, compelling message that reaches enough customers to generate meaningful volume
They underestimate the economics. Payments on their own are often low margin, while the cost of building the infrastructure is high. Many business don't fully account for the size of the investment curve, how long it takes to reach scale, or how much capital is needed before the business becomes profitable
How should businesses think about regulations from day one?
At its core, regulation exists to protect customers and reduce the risk of bad actors entering the market. Any legitimate business should see regulation as a normal and necessary part of operating day to day, not as something to work around.
There is a cost to securing the right permissions and running a regulated business properly. But when it's done well, it builds trust and credibility. That can create a platform for introducing customers to other products and services, particularly those with higher margins.
Good examples include trading businesses, where the core proposition can be highly profitable, and retailers, where lending and insurance products alongside the main financial services offering can generate attractive returns.
If you were launching again today, what would you do in the first six months?
I would focus on a specific use case:
Find something which drives incredible loyalty or generates customers that are incredibly loyal
Then introduce a payments or card offering to that customer base. Once customers are already using your financial services, it becomes easier to add other products around them, particularly those with stronger margins
The large banks still dominate mainstream banking in the UK. The businesses that have shown real growth tend to be the ones with a clear point of difference and a defined use case. I expect that to remain true going forward.
Where do consultancies add most value?
There are a number of ways consultancies can help, including:
Setting the strategic direction, bringing external perspective and challenge that internal teams are often too close to provide
Shaping documents for fundraising and regulatory applications, using experience from all sides of the table to give investors, regulators and partners what they expect to see
Managing vendor selection processes, applying a more objective and structured approach than an internal team with limited market exposure
Designing target operating models and organisation structures, drawing on patterns and lessons from similar businesses rather than building from scratch
Running the programmes needed to build and launch a financial services business, adding delivery capacity and specialist expertise without needing to hire a full team upfront