Azimo is stripping high streets and denting the universe: Fintech interview part 18
Azimo, was the creation of a serial fintech entrepreneur with the aim of replacing a mainstay of high streets across the UK, with a smartphone app.
The cross border money transfer fintech enables people to make cross border transactions in seconds via a smart phone app at a considerably lower cost than traditional high street money transfer shops.
In the 7 to 15 seconds it typically takes for a transfer to go through the Azimo time and complexity is removed by automating a number of steps. Put simply these are: initiate the payment – take the money – trade the money – check the compliance – terminate the payment.
The customer instructs a payment and pay Azimo with a debit card, credit card or bank transfer. The currency is then changed with one of the tier one banks (Azimo partners RBS, Barclays and ING), then comes one of the clever bits when the platform checks who the sender is, where the money is being sent from, and where it is going. With the need to be compliant with regulations such as Know Your Customer (KYC) this is a core piece of functionality. Then finally there is API integration with banks who do the last mile. All this happens in under 15 seconds, unless of course it is rejected.
There are 1.3 million people customers registered and in any given month about 250,000 send money. The Average transfer is around US $500. The minimum transfer permitted is $5 and the maximum is $1m.
Traditional money transfer suppliers have retail branches on high streets, which customers need to visit and go through manual processes. The costs are much higher. After all high street money transfer companies need expensive high street premises and people. Nor can they compete with a sub 15 second transfer journey, where the sender can even do it from the comfort of wherever they want to be.
Michael Kent set up Azimo in 2012 with business partner Ricky Knox. This is their second major fintech project. The two set up challenger bank Tandem, which Knox is CEO of and Kent a major shareholder
Kent is a seasoned entrepreneur and not your traditional fintech founder, he said. “I wasn’t at the coal face and had an epiphany. I had been doing fintech entrepreneurship stuff since 2005
He has been involved in about 15 fintechs as either a cofounder or investor.
It was one of his previous endeavors that led him to Azimo. He set up Small World Financial Services, where he raised venture capital to buy up smaller money transfer shops. The company acquired about 15 in five years. “These were like Western Union and MoneyGram, but a bit smaller,” he said. These were put on a common IT platform and the company became one of the top five businesses of its kind globally.
But it was the inadequacies of the Small World Financial Services business model that led to the idea behind Azimo. Kent said: “We saw that the business model was a bit broken. In 2011 I left the business because I saw a lot of pain in the consumer experience.”
Recognising that the business model is broken and being prepared to let go and move on is a strength that successful entrepreneurs possess. He said the founders started with a clean sheet of paper and asked themselves, knowing what they know, what would they do if they wanted to make this painless for customers.
“It was expensive, due to high street network and agent business models, and rather like Amazon has made it cheaper to buy stuff Azimo make it cheaper to transfer money,” said Kent.
“The silver bullet was tech. A scalable, modular tech stack that you could then deploy in the cloud against lots of different financial institutions across the world,” he added.
It all started with a minimum viable product that offered transfers between UK and Poland. A good place to start given the large communities of Polish citizens in the UK.
The business was incorporated in January 2012 and by October the same year the first transfers through the platform were made. “We were beta testing it with friends and family before that but for the first customers we had never met coming through the stack was October 2012.”
Azimo is headquartered in London and has its development and compliance teams in Krakow, Poland.
Kent said being in the UK and European markets it is quite difficult to set up a company doing money transfers and as a result there is not a lot of competition. This is because in the UK there is a need to have multi-language services and multiple transfer corridors. “In the UK there are lots of different communities sending to lots of different places. This is the case across Europe.”
He said in contrast in the US most cross boarder transfers are to Mexico so there is less need for multi-language and multi corridors
The company pushed out into Europe in the first 12 months and started handling lots of different currencies. This involved connecting to financial services companies on different countries to do the last mile. Experience gained through setting up Small World Financial Service made finding good partners easier.
“We very rapidly turned on lots of other financial institutions at the other end. Because we bought businesses previously for a roll up we got to benchmark everyone globally so we knew who was good and who was bad.”
While that was made easier by past experience there are other hurdles that never seem lower.
One major challenge, according to Kent, is constantly “convincing everyone that you are making a dent in the universe.”
This is necessary to attract the right talent as well as investment.
Kent said it is almost a cliché but getting the right staff is the biggest challenge. “Getting high quality, hungry and well trained people in the UK and in Poland is never easy. You are competing with the likes of Google and Facebook. In Krakow you have Uber, Goldman Sachs and UBS that all have development capabilities.”
“You can’t always compete on salary alone so you have to explain the mission, articulate people will be part of something and will have the chance of changing something.”
Something which helped Azimo find technical staff was its choice of Poland as a tested for its platform. While doing the project the founders discovered the wealth of tech talent in Poland. “In the end we set up our own engineering team in Krakow in Poland where there are now 45 engineers, including our chief technology officer,” said Kent. Azimo also has a team of 12 working in compliance in Krakow
Azimo has about 150 people in total but according to Kent this is unlikely to grow much as it is a platform business.
“We are a product driven business if I had an extra million quid I would hire ten developers rather than spend it on marketing.”
When I sat down with Kent in the company’s Islington headquarters I didn’t bring up Brexit until the end. “I can’t believe we have been talking half an hour and you haven’t mentioned Brexit,” he said.
So I finally did and it turns out, unsurprisingly, the company’s Polish operations could become more significant however following the UK’s exit from the EU.
“Brexit was a bad idea to start with and is now a worse idea because of how it has panned out. We have another location that we will operationalise when we need to. This will negate the impact and allow us to continue to server customers in Germany, France etc.”
Kent joked he has a red button ready to press to operationalise Poland. He is an entrepreneur and any increased focus on Poland will be the UK’s loss.
Read the previous fintech interviews
Part 17 Yoyo, Part 16 Bud, Part 15 Previse, Part 14 Finastra, Part 13 InstaReM, Part 12 Eucaps, Part 11 AimBrain, Part 10 Meniga, Part 9 TrueLayer, Part 8 InvestCloud, Part 7 ClauseMatch, Part 6 Rebuilding Society, Part 5 Honcho, Part 4 Akoni, Part 3 Wrisk, Part 2 CreditLadder, Part 1 Taina Technology