Join the conversation with Esge Räder, Chief Commercial Officer at AQRisk.
He talks about the challenges and opportunities in the credit and loan market. Learn how to upgrade your core banking system with proven technology from the Nordics.
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Welcome to the connector podcast, an ongoing conversation connecting fintechs banks and regulators worldwide. Join CEO and founder toe and Vander Heiden as you learn more about the latest available trends and solutions in the markets.
Koen Vanderhoydonk 0:17
Welcome to another connector podcast. And today I have a special guest all the way from Denmark Esge. Can you tell us a little bit more about AQRisk? What's your story?
Esge Räder 0:31
Thank you so much grown, I'm very pleased to be here, thanks for the invite. So AQRisk is really an abbreviation of applied quantitative risk, to the fundamentals of our platform and services. So the company was founded in 2015, by our CEO, Morten Virenfeldt, who wanted to address key media challenges within the core banking industry. And basically through a, if you think about it, a more holistic utilization of vital datasets that the banks have available. And along that or combine that with an application of more, you know, sophisticated quantitative risk modeling that we are some of us otherwise know from the capital market space. And so yeah, in the Solution Suite that we've comprised, or that that's been built over the time, we're offering the market, it's basically a suite Solution Suite comprising of three main solutions. All address functional guests within the wider core banking space, and within the domain of pricing, exposure Analytics offers and, and regulatory compliance. How nice.
Koen Vanderhoydonk 1:40
And now I'm very curious to know, what is your role within the company? And maybe also, we now right before Christmas, what are your ambitions for 2023?
Esge Räder 1:52
Yeah, I mean, my role as Chief Commercial Officer is essential to lay out and also get set to execute strategy that allows us to seize the full potential, we are a scale up like said, within the FinTech space. And we see so many interesting dynamics, there's a lot of competition out there as well, we don't have our own brain so to speak. And from an international perspective, we are in Northern Europe, predominantly. And we are scaling throughout Europe. So so as to set the right strategy and be able to execute on that through partnerships, etc. It not just for now, of course, but also that will allow us to secure our goals for the three and five year term becoming one of the most relevant solution and service provider for for progressive banks in the media. So that's the focus and the build up of in early days of 2023. At least
Koen Vanderhoydonk 2:52
Yeah, exciting times ahead. Now, and maybe not agreeing with some of the things you say, especially on the fact that you say not all well known brands, when I looked that up, you guys, I mean, you're all over the place in Denmark, I mean, you have a large client set already in Denmark, is that correct?
Esge Räder 3:10
That is correct. That is correct. And we are scaling outside of Denmark. That's the first year in 2022. And we already see a good organic growth with our existing client base, and also through some of the partnerships we have in the Nordics with data centers that serve as progressive medium sized banks, for sure. And smaller things. So we were able to, to service. Valley Valley widely within the industry. Yeah.
Koen Vanderhoydonk 3:43
And that one thing is very typical about the scaling company is that you actually are solving a real problem. So what are you solving for who?
Esge Räder 3:53
Yeah, I mean, we we support progressive banks of all sizes, like I said, so if you think about where the banks were earlier question, and what we're looking into, there is roughly 5000 Plus financial institutions across the Europe. And we have plus 1000 of these that is falling within our suite. But because like I said, it's it's pretty much of all sizes. So we've support progressive banks of all sizes to secure more profitable growth, and ultimately, help them become more solvent and sustainable. And if you think about it, the challenge for most banks is to balance that drive to maximize shareholder value. That doesn't sound so great sometimes but but that's the that's, you know, the purpose of most businesses and which is of course, significantly more challenging in times with extremely unpress borrows rate regimes is the balance at home was that important systemic role within the wider society which, which is to secure the The financial health and strength of businesses and households. And in order to solve this challenge, banks need to optimize the core business beyond automation and the digitization agenda, which has really taken up a lot of focus, of course, for good reasons over the past decade. Now, there's a bit more to it, and the need for greater transparency and ability to provide to properly comprehend and allocate cost drivers and risk exposures by banking product and client level that really calls for more sophisticated powerful tools that most banks than most banks have available to them today. So we're Yeah,
Koen Vanderhoydonk 5:44
no. Okay. I want to bring you back to the introduction. Because when you said there are a couple of products, and one of them was regulations, and now in what you just explained, I hear strongly profitability. But how do you bring both together? Because Are they not two completely different objectives? Not sorry, difficult questions today.
Esge Räder 6:08
And it is a challenge for most. So it's a it's a really good question. Our clients and banks in general, they have, over the past decade been forced to rethink business models in order to comply with new regulation, as we have seen from former crisises, going back to seven, eight, and other good, good ones, there's been a steady increase of new regulation in the pursuit of stronger, stronger and healthier banking sector. And we believe that the path to become more solid and secure profitable growth is really for the banks to get a better understanding of their own business through better exploration, and utilization of that data.
Koen Vanderhoydonk 6:56
Data is a new gold, right? Yeah.
Esge Räder 6:59
Most banks have a lot of data available to them today. So it's really around how do we explore and diverge that the best way. And one of the key aspects addressed by our AQ optimizer solution, for instance, which is really an add on to the core banking platforms, is this a somatic repricing or miss pricing of core banking products, particularly in the the retail space, and the effects this have on overall profitability and risk exposure? So so it's more evident, and you can say this is medic mispricing, that that's potential here in the in the in the retail space than in the corporate space. But we do obviously handle both they're both sectors if you like. So through the improved risk based pricing, exposure analytics, our clients experience, on average, an improvement by roughly 12% in overall profitability. That's very significant. Yeah. And if you think about it, it's about ensuring that you are setting the right pricing, incorporating the cost and risk elements into that. And at the same time that they achieve a better relationship and standing with regulators through their improved understanding of of the overall risk appetite and angst. broken down by product and by client.
Koen Vanderhoydonk 8:27
Well, interesting. So you're basically in the credits and loan department, I would say. I mean, that's what the niches I think there's an overall view and profitability if I understand well, well, but if you look at loans and credits, going into 2023, what would be your forward looking view? What's the future? What does the future hold?
Esge Räder 8:51
As I've commented a bit already, of course, but But if we take a big step deeper into into the some of these elements that are highlighted, if you think about it, the banking sector, have over the past decades undergone huge transformations affected by various financial crisis and following intervention from regulators. That's right and really impacting the cost of capital for the banks to this, these higher capital requirements. Also, the increasing demands from vital society for greater transparency digitization, which highly influenced by developments and dynamics within the E commerce space, products and solutions, they have to be super intuitive, always available self service, and fully automate the process with with limited touch points. So three
Koen Vanderhoydonk 9:42
clicks to go if you like maximum,
Esge Räder 9:44
which will facilitate these domains and precious banks have had to make huge investments in replacing the earlier monitor with wall to old black box core banking platforms, with more advanced platforms based on newer tech stacks and service oriented architecture. Aside of these direct investments, the banks have transformed operations and business models in corporate culture, etc. And, and some may today will be more classified as a tech companies with a banking license rather than the opposite. It's a highly competitive industry requiring banks to rethink traditional models, but also to ensure that they are extremely lean and beltram. And this goes all the way into the offering of loans and credits, and the tools they have available to them. But also like said, some of the effects of and what links into it around proper exposure analytics and cost assessments, so that they can make sure they are competitive and offering the right price to the market. We see top tier regional banks, they've made significant investments in these regards. We also see a lot of potential then with the more if you like pro gressive Midsize and smaller banks to improve improves or these capabilities, and particularly within the domain of differentiated and importantly, a risk and cost based pricing methodology, which aren't even the banking license, if you think about it to offering the loans and credit, allowing them to gain a much more dynamic and better understanding of the profitability down to the product level. And on on a customer by customer basis across their entire commercial operation. So that is that is really important.
Koen Vanderhoydonk 11:32
It almost sounds like it takes two to tango. It's like a combination of players within the bank that make it possible to gain in different fronts. It almost sounds like a missed potential. It's something that maybe it's not the future, but it's more than now.
Esge Räder 11:49
That is, that is very true. We believe, or we can see from most of the clients that engage with that, as I referenced earlier, some of that loss potential in revenues, but also just in ensuring that they got a good understanding and capturing of the exposure they're actually taking and pricing that into the products they're offering. So I think it's in everybody's interest from a societal perspective that takes that we have that they are given out but also in the future. And if the bank isn't able to catch up and understand this, then it makes it's likely that that they are consistently mispricing their portfolio which impacts the profitability and solvency and whilst we on the corporate banking side, see large amounts only being repriced annually think about the high, huge volumes of retail clients. So as private individuals that are much more frequently being repriced, with the potential of being systemic systemically, mispriced, if you like, and consider consequently, how to say consequently, leading to these lost potential, so the inability for bank advisors to perform intraday and simulation based What If analysis is really prohibiting them to better capture unprofitable business, and either refrain from conducting the service or at least the real cost and secure or risk adjusted prices or pricing. And as I said before, from a societal perspective, it is systemically vital that the banks are well driven, and able to service and growth for businesses in the in the local communities equally able to drive more profitable growth themselves, and continuously be able to improve the services that they may offer an ending, ever changing domains from from U and E and their overall clients. That is whether they are a whether it's a retail business client, our expectations for the banks are to offer relevant services when we need it in an intuitive way easily accessible. And that is at the lowest cost rate. Of course, when when we need the credit and the highest yield when we deposited or invest and to balance and orchestrate all of this, the banks really need reliable, yet sophisticated engines that that can can support them. And that that is why at risk often is the preferred, trusted partner and solution provider for many of these banks in Northern Europe that we we serve study.
Koen Vanderhoydonk 14:32
Yeah, cool. I like it that you bring it back to the fundaments of being a bank, which is somehow serving society. So I like that twist. Now talking about twists. You are a scaling miracle. You're scaling at light lightning speeds. So can I ask what is your secret sauce? If you're allowed to tell us the audience?
Esge Räder 14:57
Yeah, I like to think that There's no secret sauce, so to speak, it's just, it's, it's a multitude of different things that we've pulled together and carefully thought through. And other than it's not much more than the principles, I think that we found. We are indeed we are seeing good skill in the market. But at the same time, we are not paced by a third party investor looking for for quick buck. We are in bootstrapping mode, we are very diligent about what we invest in the clients we engage which domains and challenges that we seek to address. So we have a pretty good idea of the the market dynamics where we can add value to the to the banks, and and replace or complement investments and often these legacy in house solutions. So ultimately, when you're able to deliver a direct, measurable double digit, million euro impact, with the sounds good ROI in two or three months and strengthen Net Promoter Score, it of course makes it easier to get to market and scale a bit faster than usual. So by then, a multitude of different things, but not really a secret sauce.
Koen Vanderhoydonk 16:18
Damnit, no secret sauce for the users, but but a good story about how you guys doing it. And there's also a sort of best practice. So thank you very much for sharing that. We almost at the end of our podcast of today. And I have only one last question is Where can people contact you?
Esge Räder 16:36
So people can contact me through the site where we're posting this podcast of your for sure. And we have a a website, you can scan the QR code listed on this promotion of the podcast, of course, and you'll be directed to a website where you can book an introduction with with me directly.
Koen Vanderhoydonk 16:59
What will be the what will be the website?
Esge Räder 17:01
The website is AQrisk.com.
Koen Vanderhoydonk 17:06
Very simple. Very good. A Esge many, many, many, many thanks for joining me in this podcast right before Christmas. We should obviously Merry Christmas and a Happy New Year. And thanks again also for the audience for tuning in. And stay tuned because more news will come from more fintechs for more innovation in the markets along 2023. Thank you very much.
Esge Räder 17:30
Thank you happy holidays.
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