Business Leader recently spoke with Nigel Verdon, the co-founder and CEO of Railsbank, about how he founded and led three start-ups as CEO through three different international crises – Evolution (.com crash in 2000 – now part of FTSE 100 company BAE Systems), Currency Cloud (credit crunch 2008/9), Railsbank (current COVID-19 crisis).
Can you give an overview of Railsbank?
Railsbank’s mission is to enable any business or brand to be a fintech. We achieve this within the banking industry, by being a platform that has all the technology, operational and licensing capabilities to make this possible.
Our customers are fintech companies, brands and old-school financial institutions, that want to transform to be truly digital. This includes major supermarkets, such as Sainsbury’s, and then more tech companies that are looking to extend their product offering to their customers.
We are a platform that enables anyone to move into offering financial service to consumers and SMEs across the world.
What are the future goals of the company?
Currently, we are focused on expanding our footprint in South East Asia. We are expanding into Singapore and Indonesia. Then we will be working out how we can then expand into Australia, Thailand, Vietnam and Japan.
We have a US offering that is set to go live in a few weeks, which will be primarily available to European and South East Asia customers looking to get into the US market.
At the moment, we are offering core banking services, card issuing capabilities and then towards the end of this year and into the future, we will be going into credit and insurance products.
You have now managed three major businesses through a crisis. Can you tell me about your first experience with Evolution?
It was originally founded in 1996, and worked on the first foreign exchange trades over the internet. I founded the business with three other colleagues, who were leading figures in the industry – and we worked with the top businesses within the industry – Goldman Sachs and UBS for example. We were ‘fintech 1.0’! We grew that to a business with over 100 people. It is now part of BA Systems in the FTSE 100. In 2000, there was the dot com crash, and we had to manage the business through it.
People stopped buying technology and there were a ton of flawed business models collapsing all over the world. At the time Goldman Sachs and UBS were our two biggest customers.
We sat down and worked out a new pricing structure to get us both through it. Our customers said that if we reduced our prices, that they would work with our teams to come out of the crash stronger.
So, the first key lesson is, to work with your top customers. And work with all of your customers! This is because you are both in the same situation.
The second lesson I learnt in this situation was that we needed to dramatically cut costs fast. When you have an order book going out for three months – and then business starts drying up – you can end up spiralling out of control. On one day, we had to fire 50 people – just under half of all our employees. If you let them go – let them go with dignity and to the letter of the law. Explain the reason for doing it is to save the company.
The business recovered, we grew it and then sold it in 2006. We had some very tough times between 2000 and 2006. If you act like an ostrich in these situations and don’t act fast, then the situation will only get worse. This is how too many businesses react – just hoping that it will get better. That won’t work.
What lessons did you learn at Currency Cloud?
That was a business I founded in 2007, just as the credit crunch and financial crisis was about to begin. I founded the business as there were too many people ripping off customers and consumers with overpriced foreign exchange. I believed there must be a way of tackling this!
There was also a low level of automation within the consumer money-transfer market – it was still far too heavily paper-based. I was previously in the equities business at an investment bank, where a business I had oversight of did 14,000 trades a day on the London Stock Exchange and was fully automated end to end. And that was for the equity side of business, which is a lot more complicated than foreign exchange. We thought we could apply this tech and idea to the money transferring world. That’s what we did.
Between 2008 and 20009, it was very difficult as there was a lack of customers and people were not sending a lot of money abroad. People weren’t investing or buying property, so the market had dried up.
The lesson I learnt at this time was to concentrate on your product and capital. We raised money from the City London Group, which was floated on the London Stock Exchange, an investment fund, and some colleagues and I who all put some money into it. This meant that we had capital to make it through the downturn. This allowed us to have a platform to grow in 2010, 2011 and beyond.
In 2012, the whole ‘fintech 2.0’ kicked off and we had a successful Series A funding round. By keeping an eye on cost and overheads, as well as capital – money on offices, for example – we were prepared for the future.
During the downturn we focused on our product, so that after we had something that leading businesses were interested in, and wanted to have to grow their own businesses.
How do you plan on guiding Railsbank through the current crisis?
Well, after my previous experiences, I now have an acronym that I use! CCCP – Customer, Capital. Cost and Product. We are lucky as we have a good size customer base. However, in downturns marketing budgets are cut in half as customer acquisition isn’t a top priority. You need to concentrate on making sure that your current customers are happy, their businesses are safe and in a position to keep offering their products and services. By heavily focusing on our current customer base, we are ensuring they can survive. In some cases, we are introducing them to investors. We are focusing on making our customers successful.
We recently just raised capital from Visa and a Japanese fund, meaning we have enough money in the bank for a rainy day – such as the current crisis. If this recovery takes two years, we have plenty of capital to get us through it.
Early on we focused on cutting costs – both office space and unfortunately, staff as well. We also put a stop on hiring. After that we started financially controlling all areas of the business to reduce cost.
To get through this, we will focus on our own and our customer’s products. By focusing on your own products, you can perfect them and see how you can develop them, to aid your customers further – or even enter new markets where they can be used.
Out of all your businesses you’ve led through a crisis, what has been the biggest challenge you have overcome?
The biggest challenge – no matter the business – is letting people go. You have got people that have joined your team, who enjoy the company and have the same belief and values. You mutually plan for a great future – so to then have to let them go is an incredible challenge.
However, in order for the business to survive, you have to make the hard decision, because the future of your business is also incredibly important. Unfortunately, some will need to leave in order to secure the future of other employees within the business. You need to make it clear to people why they have been let go and explain the legal guidelines they are following.
What advice would you give to a business leader who is experiencing a crisis like this for the first time?
My first bit of advice is that there are some fantastic online resources that can help leaders through a crisis, but my main bit of advice is to not put off making decisions. You need to make hard decisions – and make them quick!
By doing this, you will get your business in a state where you are in complete control of it – whether it be costs and revenues, or the relationship with yourself, staff and customers.
However, the best advice I can give is to plan ahead for a scenario such as this. Have a two year plan of the downside impact on your business, a plan of some small upside following this – and then a plan for knocking the ball out of the park!
Run those scenarios in your head, then put it together on a spreadsheet – this will give you an intuitive plan and feel for the numbers and the future of your business as the market fluctuates.
However, in times like this, once a plan is written it is already out of date. If you have your spreadsheet of numbers, you can then make tactical decisions a lot quicker and with more confidence. This all goes back to making the smart decision as quickly as possible.
Be pragmatic – having ‘nice to haves’ are irrelevant in times like these. You need to be brutal with yourself – these are important attributes to have if you wish to succeed through a crisis.
Procrastination will lead you to chasing money and into a spiral you will not get out of.
If you make the wrong decision, it doesn’t matter. You can change wrong decisions. Procrastination is a lot worse than making the wrong decision.