Sun, sea, and… fintech?

Financial services probably isn’t the first (or even the second) thing that comes to mind when you think about the Mediterranean island of Malta.

But, with 2000+ licensed firms, including 30 payment institutions, 36 electronic money institutions, and 8 crypto firms (with several others exercising EU passporting rights), Malta is one of the most active fintech hubs in Europe. And also one of the most attractive.

Here’s a look at what makes Malta such a compelling proposition if you’re thinking of setting up a payments or crypto services business in the EU, and a rundown of the licensing process.

Why Malta?

There are three key features that make Malta stand out as an EU fintech jurisdiction: a pioneering regulatory framework, a knowledgeable and highly experienced English-speaking workforce, and extremely attractive tax rates.

Of course, the weather — 300 days of sunshine a year, on average — doesn’t hurt, either. But that’s a whole other blog post for another day.

Let’s take a closer look at each of the three elements that make Malta such an attractive place to set up and do business as a payments or crypto firm.

Leading the way: Malta’s pioneering regulatory framework

In 2018, Malta became the first country in the world to enact a comprehensive regulatory framework for crypto assets.

The clarity and legal certainty this brought about attracted the likes of Foris DAX, which operates crypto.com, OKX and other leading industry players to the island. The legislation also significantly influenced the EU’s Markets in Crypto-Assets regulation (MiCA), which came into force in June 2023.

With a standardised EU-wide framework now in place, you’d think that, if not identical, the regulatory environment would be highly similar across the bloc. But the reality is that, regulation or no regulation, many member states — and, indeed, many countries around the world — are still grappling with the basics.

Meanwhile, Malta has racked up almost a decade of industry experience, and the knowledge, skills, and track-record to go with them.

When it comes to the payments sector, Malta has also been a pioneer.

The likes of eToro, Moneybase, and embedded finance pioneers Weavr are licensed in Malta. The country was also one of the first in the EU to launch a regulatory framework for standalone electronic money institutions. And, in 2024, it was tied with Germany as the most popular EU jurisdiction for payment and e-money institutions, with 12 licences issued.

The Maltese regulator operates a sandbox which enables early-stage startups to test their products and refine their approach before going through the full licensing process (and the time, effort, and cost this involves).

Malta is also a hub for industries, such as e-commerce and igaming, that create a high demand for payment services. iGaming is a particularly significant industry, with Malta hosting the annual SiGMA Summit — an event that hosts over 1000 exhibitors, expert speakers, and the prestigious Euro-Med Gaming Awards.

Staff that speaks your language

Because of the attractive regulatory environment and thriving fintech community, Malta has developed a highly-skilled workforce.

According to the MFSA — the Malta Financial Services Authority  — around 12,200 of Malta’s 500,000-strong population work in the financial services industry. This includes a network of lawyers, accountants, compliance specialists, IT specialists, and other specialised financial services practitioners.

At 312 square kilometres — the size of a small city — the country also has a close-knit business community. This means it’s relatively straightforward to find skilled partners to work with, as everybody knows each other and the ecosystem is highly interconnected.

More significantly, though, while Malta has its own language — Maltese — English is both an official language and the language of business.

This means you can pick up the phone or email anyone feeling confident there won’t be miscommunications — a considerable advantage over other jurisdictions where, while English might be widely understood, it isn’t the main language businesses use to communicate.

The bottom line: What’s the tax situation like?

So far, so promising. But, when all is said and done, how big a cut of your profits will the Maltese tax authorities take?

Malta’s standard corporate tax rate is 35%. But, provided certain conditions are met, your shareholders get 30% of that tax back when you pay out dividends.

This brings down the effective tax rate — that is, the amount your business is actually out of pocket — to 5%. To put that in perspective, Ireland’s corporate tax rate is 12.5% and Luxembourg’s is 24.9%.

This unique tax structure complies with ‘subject to tax’ regulations in double tax treaties. Malta has over 80 double taxation treaties in force. If your firm’s shareholders are resident in one of these countries, Maltese tax law applies, and they won’t be taxed again in the country where they are based.

How it works

To benefit from the 5% effective tax rate, the company’s beneficial owners must:

• Not be Maltese residents for tax purposes
• Not be domiciled in Malta. That is, they don’t consider Malta their permanent home
• Be neither resident nor domiciled in Malta

If the beneficial owners fulfil one of these conditions, the company pays 35% on its profits, and dividend recipients receive a refund of 30%, or 6/7.

Say you’re a Maltese-licensed payment institution, owned by a holding company based in the Netherlands, which has a double taxation treaty with Malta.

In 2023, your gross profit is €25 million.

This puts your tax bill at €8.75 million. But, your holding company will receive a €7.5 million refund when you pay out dividends.

Setting up as a financial institution or crypto-asset service provider (CASP) in Malta: what you need to know

While the regulatory environment is extremely favourable, the licensing process is still comprehensive and robust. That said, as long as you’re prepared, the process should be fairly straightforward.

Whether you’re applying for a payment institution, e-money institution, or crypto asset licence, three overarching principles apply.

First, qualifying shareholders — individuals who directly or indirectly hold 10% or more of the firm’s shares or voting rights — have to go through a fit and proper test.

Similarly, corporate shareholders with qualifying holdings have to complete a detailed questionnaire, and their directors, senior managers (the CFO, for instance), and key officers such as the compliance officer and the money laundering reporting officer will also have to go through a fit and proper test.

Second, at least two individuals must effectively direct the financial institution’s or CASP’s business in Malta — the so-called ‘four eyes principle‘. This ensures control isn’t concentrated in the hands of one single person, which keeps risk in check.

Third, you’ll need a physical presence in Malta, with locally-based staff. This ensures you’re a legitimate firm carrying out substantial economic activity.

The licensing process for financial institutions (including payment and e-money institutions) and crypto asset service providers is broadly similar:

1. The first step is to submit a statement of intent: a high-level overview of your proposed activities, organisational structure, and business plan. The MFSA will review, give feedback, and may also ask for further information.
2. Once the MFSA is happy, the next step is to submit a full application, together with the required documentation. This is when KYC checks, fit and proper tests, and other due diligence procedures take place. The MFSA will also make recommendations and flag any potential issues that must be resolved before the licence is approved.
3. If you resolve the issues to the MFSA’s satisfaction, you’ll receive an approval in principle. This comes with a list of conditions you must fulfill before the licence is granted and you can start operations.

The specific requirements, however, vary depending on whether you’re applying for a financial institution licence or a CASP licence.

What are the requirements for a payment institution / e-money licence in Malta?

Unless they provide account information services only, the minimum initial capital requirements to set up as a payment institution range from €20,000 to €125,000, depending on the services you intend to offer. E-money institutions in Malta need at least €350,000 in own funds.

Once licensed, own funds must never fall below the higher of:

• The initial capital requirement
• If you’re a payment institution, between 0.25% and 4% of your annual transaction volume
• If you’re an e-money institution, 2% of your average outstanding e-money liabilities

The goal is to make sure the money you have in reserve is proportionate to your company’s size, complexity, and risk exposure.

If you’re an e-money institution and you also provide payment services that aren’t related to e-money, payment institutions’ own funds requirements apply.

What documents must you submit with your payment institution / e-money licence application?

To prove they’re fit and proper, every controller, officer, and shareholder with qualifying holdings has to provide evidence of their competence, financial standing, and reputation.

As a firm, you’ll also need to submit documentation that proves your organisation is sound, and well-equipped to meet its regulatory obligations.

There are six main categories of documents you’ll need to submit:

1) Mandatory forms and assessments

These include:

• The application form and corporate questionnaire
  • A personal questionnaire for every individual that has to go through a fit and proper assessment
  • An Involvement Suitability Assessment
  • A Digital Operational Resilience Assessment
  • A Source of Wealth and Source of Funds Self-Declaration Form

In some cases, you may also need to fill out additional forms. These include a third-party outsourcing assessment, a trusts and fiduciaries additional questionnaire, and an ICT third-party arrangement form.

2) Clear evidence of the source of funds and proof of good financial standing

3) Corporate and legal documents

These include:

• The company’s memorandum and articles of association and incorporation certificate
  • A group structure chart and organigram
  • Draft service agreements and outsourcing contracts
  • Proposed agreements with banks

If your company is already active, you’ll also need to provide the last three years’ audited financial statements and your auditors’ engagement letter, as well as the audit firm’s details. 

4) Financials

The documents in this category include:

• Proof of paid up share capital
• A statement of proposed capitalisation
• A detailed breakdown of how you’ll meet own funds requirements
• Financial projections for the first three years, in line with MFSA Guidance Note FIR/032001/01
• Your professional indemnity insurance certificate

5) Programme of operations

The goal here is to describe which services you’ll be offering in detail, how you’ll operate in practice, and a business plan.

The business plan should cover:

• Your organisational structure and governance arrangements
• Audit and internal controls
• Which critical functions, if any, you’ll outsource

6) Compliance, risk, and anti-money laundering / funding of terrorism

These documents include your:

• Compliance monitoring programme
• Internal audit programme
• Risk management manual
• Anti-money laundering and funding of terrorism manual
• Policies on outsourcing, IT security, safeguarding client assets, and business continuity
• Systems auditor report. This must confirm your IT infrastructure is suitably robust.

What are the requirements for a crypto asset licence?

To obtain a crypto asset licence, the own funds requirement depends on whether you’ll be offering class 1, class 2, or class 3 services.

Class 1 services include the reception and transmission of orders, execution of orders, advice, and placing crypto assets. The minimum capital requirement for this type of licence is €50,000.

Class 2, which, alongside class 1 services, includes custody, administration, and exchange (for fiat currency or other crypto assets), has a minimum capital requirement of €125,000.

Class 3 includes class 1 and class 2 services together with the ability to operate a trading platform. This higher breadth of activities is reflected in the higher minimum capital requirement: €150,000.

You’ll need to meet these minimum requirements — or an amount equivalent to 25% of your fixed overheads, if this is higher than the minimum capital requirements — on an ongoing basis.

What documents do you need to submit for crypto asset licence?

Similarly to the process of applying for a payment institution or e-money licence, you’ll need to submit a licence application together with documents that prove your firm is organisationally sound and suitably prepared to meet its regulatory obligations.

Alongside personal questionnaires for all beneficial owners, people with qualifying holdings, senior managers, and administrators, you’ll also have to submit the following documents:

• Corporate questionnaire
• Involvement suitability assessment
• Digital operational resilience assessment
• Incorporation documents, evidence of paid up capital or own funds, financial projections, and own funds forecasts
• Financial statements
• Group structure, organigram and transaction flow diagram
• Programme of operations, setting out the types of crypto-asset services the applicant intends to provide, including how and where those services will be marketed
• Description of Internal Control Mechanisms
• Policies, procedures and internal frameworks, including ones that cover:
  • Anti-money laundering and funding of terrorism
  • Segregation of clients’ crypto-assets and funds
  • Conflicts of interest
  • Outsourcing
  • Record-keeping
  • Accounting
  • Business Continuity Planning
• IT and operational resilience, including:
  • Technical IT documentation and an extended IT questionnaire
  • Technical IT documentation of ICT systems and security arrangements, accompanied by a non-technical description
  • Extended IT questionnaire
  • Where applicable, third-party outsourcing assessment and arrangement form
• Where applicable, policies covering:
  • Placement and execution
  • Commercial policy
  • Custody and administration
  • Advisory services
  • Portfolio management
  • Transfer services
  • Case evidence, an SME self-declaration, and an assessment of the level of protection afforded to third parties
  • Reception and transmission of orders
  • Market abuse
  • Trading platform operating rules
  • Case evidence, an SME self-declaration, and an assessment of the level of protection afforded to third parties

Picking the right jurisdiction to do business from is make or break. Choose wisely.

While licensing requirements are broadly similar across the EU — and a licence from any EU member state can be passported across the rest of the bloc — not all jurisdictions are created equal.

Setting up a payments or crypto assets business is a huge investment, and not just in terms of money. You need time, effort, resources, and vision. So it’s critical to choose a jurisdiction that:

• Has a deep understanding of the industry, and a skilled workforce you can draw on to deliver a high standard of service
• Has a crystal clear regulatory framework that will support your long-term plans

With its forward-looking laws, knowledgeable and hard-working staff, ease of doing business, and attractive tax incentives, Malta has a lot to offer to both new and established businesses.

Want to learn more about the licensing process and what the fintech industry in Malta is like?

Book a free, no-obligation chat with our local expert

Advapay at stake:

How can Advapay can assist you in launching your fintech business?

• Assistance in EMI/PI licencing in the EEA/UK
• Registration of MSB company in Canada
• Delivery of a comprehensive Core banking system encompassing back-office and white-label applications for end-users
• Assistance in payment infrastructure development
• BaaS-solutions in collaboration with our partners – EEA/UK licenced EMIs and PIs

Welcome to our coffee Q&A series, where we sit down with Advapay team members for a conversation and insights from the field of digital banking. If you’re joining us for the first time, we spoke with our Product Owner Evgenii Zelenskyi and our COO Natalia Suurtee-Pavlova for our last interviews. Today, we’re with Hamid Najafi, Head of Partnerships at Advapay, to discuss industry trends, Advapay partnerships and the future of fintech.

HOST: Great to have you – thanks for taking time out of your day to chat so our readers can get to know you and what you do. Since this is a coffee break series, we always love asking interviewees what kind of coffee they’re drinking. What’s in your cup?

HAMID: Hi there! I’m Hamid and I’m the Head of Partnerships over here at Advapay.
Now, to answer your question, I’m actually more of a tea drinker. I’m Persian and being that I’m from a tea-loving country, tea is a big part of my culture. Green tea’s my personal favourite.

HOST: Tea’s wonderful too – lots of antioxidants, right? Moving on to the next question…could you tell us more about yourself? I’d love to hear about your professional journey and what you do outside of work. What are your interests and passions?

HAMID: Sure. First and foremost, I’m a team player: I’m a former soccer/football player. In terms of my career, I’ve spent the majority of my work in fintech—my passion is driving fintech innovation globally. The opportunity to make a positive impact in the world of payments inspires and motivates me everyday: a big reason why I’m at Advapay.

HOST: Could you walk us through your experiences and how they shaped your career path on your way to Advapay?

HAMID: Yes. Really, all my experiences ultimately converged and brought me here. I’ve worked at a Swiss bank, software houses, and with alternative payment methods and merchant acquisition. I’ve also spent a few years working with crypto products. These all gave me insight and first-hand knowledge I use working at Advapay.

HOST: How do you approach building these long-term, mutually beneficial partnerships?

HAMID: First, we identify fintech and digital banking partners that need our solutions and have customers or clients that align with Advapay. We typically partner with organizations who have clients looking for a core banking system provider or connection to a digital core banking platform. We also advise on the technical side of setting up fintech businesses on behalf of our partners.

If the majority of their audience, whether they’re a technology company, entrepreneur or advisory firm, could use digital banking solutions, that’s the key – that means we could work together long-term.

HOST: What are the key challenges in partnership development, and how do you navigate them?

HAMID: Sometimes partnerships become very passive because the communications slow down. But ongoing, regular meetings keep a partnership in active mode and keep it alive. Otherwise, it’s just really easy for partnerships to fall out of sync and get out of alignment.

HOST: How do you measure the success of a partnership?

HAMID: A successful partnership should offer financial benefit to both sides and should bring complex solutions to market successfully without any major issues. Managing complexity and developing a solution that’s a clear winner in the marketplace is a great feeling for all involved.

HOST: That makes sense. Our next question is: how you work with correspondent banks and payment systems to open accounts for your clients? Could you walk us through how this works in practice.

HAMID: Great question. First off, this is a particularly complex and critical aspect of my role. I work closely with payment institutions regulated in the UK, EU, Middle East, and Asia to understand their risk appetite, compliance requirements, and onboarding processes. Most of our clients require that the payment provider is capable of issuing named Virtual IBANs in multiple currencies. To address this, I have developed a comprehensive database of payment institutions, detailing their geographic coverage and supported currencies. Based on the client’s profile and needs, we facilitate introductions to the most suitable providers.

Typically, working with banks is more challenging due to stricter compliance standards and longer onboarding timelines. I often attend fintech and banking events to engage with bank representatives in person, as I believe this is the most effective way to build trust and establish strong relationships. During these meetings, I gather detailed information on the bank’s onboarding criteria and coverage. Once we’re aligned, we can then introduce clients whose profiles match the bank’s parameters. We have to manage expectations accordingly and provide the right client support because banks typically require more extensive documentation and due diligence compared to Electronic Money Institutions (EMIs). That’s another piece of this.

HOST: Ok, so that’s how you work with your banking and payment partnerships, but let’s talk about consultant and lawyer relationships. How you work with local consultants and lawyers so that they recommend your company to their clients?

HAMID: We collaborate closely with local consultants, including fintech lawyers, to support their clients with regulatory-compliant core banking software. Additionally, we assist in preparing IT documentation that meets regulatory requirements. Beyond technology, we also provide fintech advisory services and licensing support, helping clients obtain licenses or registrations outside their home jurisdictions—for example, in Canada—MSB registration. This comprehensive approach ensures that consultants and lawyers can confidently recommend us as a trusted partner for their clients’ regulatory and operational needs.

HOST: Can you share an example of a particularly successful partnership you’ve built?

HAMID: Partnering with software houses is particularly rewarding to me. With these partnerships, they become our local representatives and use our core banking to develop payment products for their clients. They can also help our customers with custom development, so they get a banking solution that fits their unique requirements.

HOST: What are the biggest trends shaping the fintech and payments industry right now?

HAMID: There’s a few notable trends I’d like to mention here: open banking and data sharing, real-time payments and crypto adoption, embedded finance and BaaS. The industry is rapidly changing and that’s a huge opportunity.

Staying ahead of the curve and up-to-date on these trends is a big part of what we do at Advapay, so I have to be in the know and follow change constantly.

HOST: How do you see partnerships evolving in the digital banking ecosystem?

HAMID: Partnerships in digital banking are becoming more integrated and ecosystem-driven, with banks, fintechs, and tech firms collaborating through APIs, open banking, and embedded finance to enhance customer experiences, drive innovation, and scale faster

HOST: How do regulations impact partnerships in the financial sector?

HAMID: Regulations play a crucial role in shaping partnerships in the financial sector. For example, with the recent regulatory changes in Canada, we are working closely with our clients and partners—such as other payment systems where our clients hold accounts—to ensure a smooth adaptation. Since fintechs operate within an interconnected ecosystem rather than in isolation, regulatory updates often require collaboration between both clients and partners to stay compliant and maintain seamless operations.

HOST: What industries or markets do you see as untapped opportunities for partnerships?

HAMID: I can think of several right away. These are untapped frontiers that really offer a lot of promise: embedded finance in retail and e-commerce, fintech solutions for SMEs and the gig economy, and cross-border payments in emerging markets.

HOST: How does Advapay differentiate itself in building partnerships?

HAMID: We look for partnerships that can offer more complex solutions to the market, it can help up us to have a better position and long-term partnership.

HOST: What are some key partnership goals for Advapay this year?

HAMID: We want to expand our software house partnership networks, so we are open to have local fintech advisory, software integrators and fintech transformation firms as our new partners. We also plan to do integrations with many new providers that can add new features to our software.

HOST: What’s the best way for different teams (sales, operations, support) to collaborate with the partnerships team?

HAMID: I see four distinct aspects to collaboration with the partnerships team: these are alignment on value propositions, integration with the folks on the operations team, compliance and risk management coordination, and knowledge sharing with the support team. Without any of these in place, your partnerships team is too siloed away from what’s going on in the rest of the organization and you ultimately won’t succeed collectively.

Let’s take a step back and look at how these work in practice. There’s some nuance here that I don’t want to miss. First off, sales teams need to understand partnership benefits if they’re going to position them effectively with clients.

With your operations team, you need seamless integration so onboarding happens without interruptions or issues. In a similar vein, you need coordination with regulatory and security for risk management and compliance purposes.

Finally, your support teams need up-to-date information on partner products so they can help your customers effectively.

Partnerships pull all of these together.

HOST: How can we, as a team, contribute to making partnerships more effective?

HAMID: Good communication is paramount. Before we even get started, we need really clear communication and goal alignment that brings everyone onto shared expectations. And your teams have to collaborate seamlessly.

From there, strong feedback loops give stakeholders plenty of opportunities to voice their concerns and highlight opportunities. This is how we continue to drive value.

HOST: Cool. Thanks, Hamid. It’s been a pleasure. That’s all for now – I know you’re busy so thanks a lot for sharing with us and our readership.

HAMID: Glad to help!

Thanks for joining us – tune in next time for more coffee with Advapay to get an insider’s view of who we are, what we do, and what we’re doing next.

Learn more about our solutions and how they align with your needs by contacting our consultants for a live demo and interactive session.

Advapay at stake:

How can Advapay can assist you in launching your fintech business?

• Assistance in EMI/PI licencing in the EEA/UK
• Registration of MSB company in Canada
• Delivery of a comprehensive Core banking system encompassing back-office and white-label applications for end-users
• Assistance in payment infrastructure development
• BaaS-solutions in collaboration with our partners – EEA/UK licenced EMIs and PIs

As the implementation date for the Retail Payment Activities Act (RPAA) approaches, Payment Service Providers (PSPs) in Canada face new challenges in safeguarding end-user funds. These stringent requirements, designed to protect consumer interests and maintain the integrity of the retail payment ecosystem, are set to take effect on September 8, 2025.

Safeguarding requirements under RPAA Regulations (Bank of Canada)

The PSP updates to safeguarding requirements under the RPAA (Bank of Canada) Regulations will come into effect in September 2025.

These requirements ensure that FIAT funds or other secure and liquid assets held on behalf of an end user are segregated from the PSP’s own funds and placed in trust, insured, and/or guaranteed. As such, insolvency or gross mismanagement by the PSP has no bearing on the ability of the end user to recover their funds.

Previously, the Bank of Canada stipulated that safeguarding measures applied only to end-user funds held with the PSP longer than intraday. The Bank of Canada has relaxed the threshold to the following:
“Where a PSP receives end-user funds with concurrent instructions for the funds to be immediately transferred, those funds are not considered to be at rest, and, as such, are not held.”

How RPAA Safeguarding Requirements Impact Different Business Models

If companies only transmit or remit payment instructions without offering to store FIAT funds or other secure and liquid assets on behalf of end-users (such as an e-wallet), these safeguarding measures may not apply. This is because all transactions on behalf of the end-users always have concurrent instructions for the funds to be immediately transferred. However, these companies must still explain in their RPAA Policy and report why these safeguarding measures do not apply to their operations.

For companies offering e-wallets or other accounts (such as virtual IBANs) where an end-user can hold/store FIAT funds or other secure and liquid assets for future payment instructions, the safeguarding requirements come into effect.

Key Safeguarding Requirements

The RPAA mandates that PSPs holding end-user funds implement robust safeguarding measures:

1. Segregation of Funds: PSPs must separate end-user funds from operational funds, either through dedicated trust accounts or insurance/guarantee mechanisms.
2. Timely Fund Placement: End-user funds must be placed in a safeguarding account as soon as practical and no later than the end of the next business day after receipt.
3. Comprehensive Framework: PSPs need to establish, implement, and maintain a framework outlining their approach to mitigating legal and operational risks.
4. Detailed Record-Keeping: Maintaining accurate records of end-user information and a ledger of held funds is crucial.

Challenges and Considerations

Implementing these safeguarding measures presents several challenges:

• The requirements are intricate and resource-intensive, posing difficulties for startups and smaller organisations.
• PSPs may need to overhaul their existing systems and processes to ensure compliance.
• Identifying and mitigating all potential risks to end-user funds requires expertise and continuous vigilance.
• Regular reviews and reporting are necessary to ensure ongoing compliance.

How Advapay Helps MSB Businesses Stay Compliant

Navigating the safeguarding requirements under the Retail Payment Activities Act (RPAA) can be daunting. Advapay simplifies the process, offering expert guidance and tailored solutions to keep your MSB compliant and competitive.

List of services Advapay provides

• RPAA Registration Services
• Compliance Program Review and Development to meet current FINTRAC and upcoming RPAA Regulations
• Account Opening Consultations and Guidance including safeguarding accounts
• Ongoing Compliance Guidance through Compliance as a Service

Why Choose Advapay for Your Compliance Needs?

Regulatory Expertise

We are a team of experienced compliance specialists who consistently stay at the forefront of regulatory updates, ensuring our knowledge aligns with RPAA regulations.

Tailored Compliance Solutions

Every payment service provider (PSP) is different. We offer customised solutions designed specifically for the operational models of MSBs — whether crypto, remittances, currency exchanges, or digital payments.

Spotting Risks Before They Become Problems

Compliance mistakes can cost time and money. Our experts conduct thorough compliance assessments to identify potential gaps before they turn into expensive issues.

Save Time and Money

We help you set up efficient processes that save time and reduce costs, allowing you to focus on growing your business. Our compliance-as-a-service solution lets you fully outsource compliance expertise while we support all your compliance needs.

Don’t Wait, Act Now

The RPAA implementation date is fast approaching. Proactive preparation is key to guaranteeing smooth compliance and avoiding potential penalties. Preparing documents and submitting them to the Bank of Canada can take up to 2 months – don’t wait until the last minute.

Contact Advapay Canada’s team of experienced compliance consultants today. We’ll help you develop a robust safeguarding framework, implement effective controls, and stay ahead of regulatory requirements.

✨👏 Join Us for a demo of Our Core Banking Back-Office Application!

Discover the powerful functionalities designed to streamline operations for digital banks and fintech companies. During this demo session of our Core Banking Back-Office Application, we’ll explore how the application enables operators to efficiently manage daily tasks, including:

✔️ Managing customer profiles and data
✔️ Processing and approving applications and transactions
✔️ Communicating effectively with customers
✔️ Overseeing accounting operations
✔️ Generating comprehensive and actionable reports

✨ Gain insights into how this solution can enhance your operational efficiency and support your business growth.

💡Read more about Core Banking Software Macrobank

Overview of Demo of Core Banking Back-Office Application

Core Banking Back-Office Application is a comprehensive back-office solution designed to support digital banks and fintech companies in managing daily operations efficiently. This demo showcases its key functionalities, including customer management, transaction processing, accounting, and reporting.

The system features a customizable Main Dashboard, where operators can monitor key activities such as customer onboarding, transfers, currency exchange, and reconciliation. The Customer Management module provides access to detailed customer profiles, allowing operators to handle applications, accounts, and compliance tasks with ease.

In the Transfers and Conversions section, users can initiate, track, and manage various payment and currency exchange transactions. The platform also includes an Accounting module with a full chart of accounts, ledger entries, and financial statements, ensuring seamless financial management. Additionally, the Reports section offers extensive reporting capabilities, including trial balances, profit and loss statements, and reconciliation reports.

The Upper Menu provides quick access to essential settings and communication tools. In the Settings section, operators can manage their personal data, change passwords, and enable two-factor authentication for enhanced security. Additionally, the Conversations feature allows operators to communicate with customers seamlessly, including reading and responding to messages, requesting information, and attaching files for efficient support.

Core Banking software Macrobank by Advapay: Empowering Continuous Evolution in Core Banking

Macrobank, an innovative Core Banking software, enhances efficiency across multiple areas. Tailored to address current and future challenges in financial institutions, it represents cutting-edge solutions.

At stake:

• Robust Back Office Functionality
• Ready Integrations for Seamless Implementation
• White-Label Web and Mobile Banking Apps
• BaaS and Embedded Finance Capabilities
• Modern Back-Office Application Interface
• Startup-Friendly Design
• Compliance with the Security and Regulatory Standards
• Built-In Accounting System
• Diverse Deployment and Purchase Options

Our solution offers access to various functionalities, technology, and partner ecosystems that prioritise security and compliance. Macrobank empowers you to design personalised offerings within your chosen ecosystems, facilitating efficient product launches. Contact us to explore your product possibilities and schedule a demo!

As we reflect on 2024, we recognise it as a transformative year for Advapay. From expanding our global footprint with new offices and welcoming talented team members to forging impactful partnerships, we have strengthened our foundation for long-term success.

Our Macrobank core banking software experienced significant advancements, with innovative developments and integrations enhancing its functionality and adaptability. These milestones underscore our commitment to delivering cutting-edge solutions to our clients while cultivating a culture of growth, Advapay’s innovation, and collaboration.

Here’s a closer look at the achievements that defined Advapay in 2024.

Opened office in Amsterdam, Netherlands

Advapay reached a significant milestone in 2024 with the opening of our new office in Amsterdam, Netherlands. This strategic expansion strengthens our presence in the European market and brings new talent to our growing team.

The Amsterdam office is led by Hamid Najafi, Head of Partnerships, who drives our collaborative initiatives. Karlo Soltic, Sales Executive, focuses on client acquisition and relationship management, while Nikita Egorov ensures smooth office operations and provides essential day-to-day support to the team.

Together, this dynamic trio plays a key role in solidifying Advapay’s reputation as a leader in the fintech industry.

Strengthening Partnerships Globally

In 2024, Advapay expanded its partnership network to create greater value for our clients and reinforce our global footprint. We significantly grew our roster of banking partners, providing broader access to essential financial services.

Additionally, we formed strategic collaborations with software houses across Latin America, the Middle East, and the EU, enabling us to deliver more tailored fintech solutions. Advapay also partnered with reputable law firms and consulting agencies in key regions, offering clients seamless access to legal and advisory expertise.

These achievements were spearheaded by Hamid Najafi, our Head of Partnerships, whose strategic vision and leadership have been instrumental in establishing these critical alliances.

The Latest Features of our Macrobank’s Core Banking Back-Office Application and Innovation

In 2024, Advapay introduced several powerful new features to enhance the functionality and user experience of Macrobank’s Core Banking Back-Office application:

1. Widget Management: Personalise Your Dashboard

• Customise the Overview page by adding, removing, reordering, and resizing widgets.
• Toggle between table and chart views for a more intuitive user experience.
• Edit widget grids to tailor fields to your specific needs.

2. Transfers & Conversions: Streamline Fund Movements

• Nostro Transfer: Seamlessly transfer funds between your own correspondent accounts.
• Nostro Currency Exchange: Simplify currency conversions across accounts.
• Transfer Duplication: Save time by copying existing transfers to create new ones with pre-filled fields.
• Attach documents to SEPA and SWIFT transfers for improved transparency and record-keeping.

3. Reconciliation Report: Ensure Balance Accuracy

• Easily compare balances across correspondent and customer accounts for improved financial oversight.

4. Event History: Simplified Activity Tracking

• View event and document histories for transactions, conversions, customer applications, and management activities.

5. Session Log: Monitor User Activity

• Access detailed user login information, including session activities and platform usage.

6. Correspondent Accounts Management

• Effortlessly view, create, and maintain correspondent accounts.

7. Currency Rates Management

• Load currency rates and set priorities for exchange rate providers with ease.

Expanding Horizons with New Integrations

In 2024, Advapay focused on innovating and enhancing the functionality of our Macrobank core banking software by partnering with a diverse range of innovative companies. These integrations are designed to empower our clients with solutions for compliance, payments, risk management, and crypto operations:

• Shufti Pro: A global leader in identity verification and KYC technology, enabling seamless compliance processes.

• Xplorisk: A sophisticated risk management platform that streamlines credit scoring and risk assessment.

• Huntli: A compliance powerhouse offering advanced PEP and sanctions screening solutions.

• AMLbot: A robust anti-money laundering tool that simplifies transaction monitoring and ensures regulatory compliance.

• Intergiro: A next-generation banking platform delivering innovative payment processing solutions.

• ManoBank: A digital bank offering specialised services for both private and corporate clients.

• Fireblocks: A secure platform for managing digital asset operations and transactions.

• Apaylo: A payment orchestration provider that streamlines payment workflows and gateway management.

• IFX Payments: A financial institution specialising in cross-border payment solutions and multi-currency accounts.

---

As we wrap up 2024, it’s clear that Advapay has made remarkable strides in innovation, collaboration, and growth. Explore the full range of solutions Advapay offers to help you launch and scale your fintech business:

• Expert assistance with EMI/PI licensing in the EEA/UK
• MSB company registration in Canada
• Delivery of a comprehensive Core banking system, including back-office and white-label applications
• Support in developing robust payment infrastructure
• BaaS solutions through partnerships with EEA/UK-licensed EMIs and PIs

Want to learn how Advapay can support your fintech journey? Contact us today!

Efficient accounting and General Ledger is crucial for financial service providers, including banks, electronic money institutions (EMIs), payment institutions (PIs), and other payment service providers (PSPs). These institutions operate under strict compliance and reporting requirements. In today’s fast-evolving financial landscape, they rely on advanced technology to streamline operations, improve accuracy, and enhance decision-making processes.

Among the core components of modern banking software, the General Ledger (GL) and Accounting Module stand out as critical tools for financial management, reporting, and regulatory compliance. This article explores the features, benefits, and advantages the GL and Accounting Module offers financial entities, accountants, and end users.

What is the General Ledger and Accounting Module?

The General Ledger and Accounting Module is a crucial component of core banking software. It is designed to manage all financial transactions, records, and reporting within a banking institution. Serving as the backbone of a financial institution’s management system, it ensures that every transaction—whether customer deposits and withdrawals, inter-bank transfers, or fee calculations—is accurately recorded and systematically organised.

At its core, the General Ledger is the master record where all financial data flows and accumulates. It consolidates transactions from various core banking modules, including current accounts, payments, currency exchange, and cards, into a single, unified ledger. This enables digital bank executives and accountants to access accurate, up-to-date financial information.

This module is essential for banks and fintech companies. It gives them a comprehensive view of their finances, ensures compliance with accounting standards and regulatory requirements, and supports strategic financial decision-making.

Key Functionalities and Features of the General Ledger and Accounting Module

The General Ledger and Accounting Module offers several key functionalities and features designed to streamline financial management and ensure accurate record-keeping.

Centralised Financial Management

This module centralises financial data from various banking operations and sub-modules, such as current accounts, payments, and currency exchange. By consolidating all transactions into a single ledger, it provides a holistic view of the financial entity’s activities. Seamless integration with other modules ensures that the General Ledger receives accurate transaction data from every operational area.

Real-Time Transaction Posting

Real-time transaction processing is vital in today’s fast-paced digital banking environment. The General Ledger module captures transactions as they occur, ensuring records are instantly updated and readily available for review, analysis, and reporting.

Flexible Chart of Accounts

Core banking software like Macrobank by Advapay includes a customisable chart of accounts within its General Ledger module. This allows financial institutions to structure their financial records to align with their unique accounting needs. This ensures accurate categorisation of income, expenses, assets, liabilities, and equity accounts.

Multi-Currency Support

Multi-currency functionality is essential for institutions operating internationally. This feature enables the General Ledger to process transactions in various currencies, calculate exchange rates, and consolidate data, simplifying cross-border financial management.

Automated Reconciliation

The module includes automated reconciliation features that compare and match transactions across different accounts and systems. This reduces manual effort, improves accuracy, and ensures consistent financial records for banks and fintech companies.

Financial Reporting and Statements

A standout feature of the General Ledger module is its robust reporting capability. Financial entities can generate comprehensive financial statements such as balance sheets, income statements, and cash flow statements. Additionally, Macrobank by Advapay offers highly customisable report settings tailored to specific management or regulatory requirements.

Business Process Automation

The General Ledger and Accounting Module facilitates seamless automation of business processes by allowing users to define rules for the automatic calculation, execution, and recording of transactions. This functionality ensures efficient workflow management, reduces manual intervention, and enhances the accuracy and consistency of financial operations.

Accounting Standards, Regulatory Compliance and Audit Trail

Compliance with accounting standards and regulatory frameworks is crucial for every financial institution. This module includes features designed to support adherence to standards such as IFRS and other regulatory requirements. It also provides a comprehensive audit trail for every transaction, simplifying internal and external audits.

Data Security and Access Control

The General Ledger module within the core banking system incorporates advanced security measures to safeguard sensitive financial information. It includes robust access controls that restrict data visibility and transaction permissions based on user roles, ensuring enhanced data security and compliance with regulatory mandates.

Benefits of the Built-in General Ledger and Accounting Module in Core Banking Software

The built-in General Ledger (GL) and Accounting Module in core banking software eliminates the need for external accounting tools, streamlining operations, enhancing data accuracy, and delivering real-time financial insights. It empowers better decision-making, greater operational efficiency, and numerous additional advantages.

Enhanced Financial Accuracy

The Accounting and GL module ensures all financial transactions are recorded accurately and consistently. Automated data capture from other modules minimises the risk of human error, helping maintain reliable and precise financial records.

Streamlined Operations

The GL module automates various accounting tasks, such as transaction posting, reconciliation, and report generation. This reduces the workload on accounting teams, enabling bank staff to focus on higher-value activities and significantly improving overall efficiency.

Improved Decision-Making

With real-time financial data at their fingertips, bank executives and managers can make more informed decisions based on accurate insights. Access to key performance indicators, financial ratios, and trends in a timely manner allows for agile and strategic responses to market changes.

Better Compliance and Audit Readiness

The GL module ensures compliance with local and international accounting standards and regulations. Its built-in audit trail helps banks prepare for regulatory audits, reducing compliance risks and fostering trust with regulatory authorities. Additionally, the module can be customised to meet the specific regulatory requirements of different countries or regions.

Scalability for Business Growth

As banks and fintech companies expand, the volume and complexity of financial transactions also grow. A robust Accounting and GL module is designed to scale alongside the institution, efficiently handling increased transaction volumes and more complex reporting needs without compromising performance.

Enabling Robust Financial Analysis

A well-maintained chart of accounts allows financial organisations to conduct detailed trend analysis, identify high- and low-performing areas, and optimise resource allocation. By benchmarking operations against industry standards, the Accounting and General Ledger module reveals financial nuances, provides foresight into future trends, and enhances risk management. This fosters sustainable and profitable operations in dynamic markets.

Built-in functionality without the need to integrate with third-party services

This built-in module seamlessly connects with other core banking modules, ensuring the General Ledger receives accurate transaction data from all areas of the bank or financial institution. By eliminating the need for complex integrations with third-party accounting services, the module reduces system complexity and prevents data inconsistencies.

Enhanced Data Security

The module incorporates role-based access controls, restricting data visibility to authorised personnel only. This ensures the secure protection of sensitive financial information, enhances data security, and maintains regulatory compliance.

The Operator Interface of the General Ledger and Accounting Module in Core Banking Software

The “Accounting” section provides operators with access to the complete chart of accounts, organised into six classes: Assets, Liabilities, Equity, Income, Expenses, and Off-Balance Sheet items (e.g., currency exchange transit accounts). The chart of accounts is fully customisable, allowing operators to open new accounts manually, assign account types (active or passive), define balance groups, apply currency schemes (multi-currency or single-currency accounts), and evaluate specific accounts.

All accounting entries are displayed under the “General Ledger Entries” tab. Operators can tailor the table view to meet their needs by rearranging or hiding columns, filtering data, and creating personalised views. They can also filter data using predefined criteria, search for specific information, or download detailed reports.

The “Statement” tab enables operators to generate statements for both client and internal accounts, providing essential documentation for financial management.

The accounting section includes exchange rates sourced from the European Central Bank, which are used for currency conversions and calculated against the base currency, ensuring accuracy in international transactions.

In the “Correspondent Accounts” tab, operators can view a comprehensive list of the company’s correspondent accounts. This section also allows operators to filter data based on various parameters and create new correspondent accounts as needed.

Advantages of the General Ledger and Accounting Module for the Business, Accountants, and Users

An accounting and general ledger (GL) module is a vital tool for efficient financial management, offering significant benefits to businesses, users, and accountants. Automating financial processes and providing accurate, real-time data supports informed decision-making, ensures compliance, and enhances overall operational efficiency. Whether you are a business owner looking to optimise resources, a user managing daily financial tasks, or an accountant focused on regulatory adherence, an accounting and GL module delivers targeted solutions to meet your specific needs.

Advantages for the Business

Holistic Financial Oversight

The GL module gives businesses a centralised view of all financial data, enhancing oversight and control over finances. This capability allows financial entities to identify trends quickly, monitor cash flow effectively, and easily assess their overall financial health.

Cost Savings

By automating accounting tasks and minimising manual work, the GL module significantly reduces labour costs associated with transaction posting, reconciliation, and report generation. These efficiencies contribute directly to improving the institution’s bottom line.

Enhanced Competitiveness

A well-organised GL and accounting system gives banks and fintech companies a competitive edge. It enables rapid decision-making, enhances customer service, and streamlines operational efficiency, positioning institutions to thrive in a competitive financial landscape.

Strengthen Risk Management

Risk is an inherent aspect of the financial industry, making effective risk management critical. A robust GL module, supported by a detailed chart of accounts, provides clear financial insights that uncover trends and patterns. These insights offer a comprehensive view of an institution’s financial health, helping to identify potential risk areas. Beyond analysing the current financial landscape, the module also enables institutions to forecast future scenarios, proactively address challenges and support strategic planning.

Advantages for Accountants

Simplified Accounting Processes

Say goodbye to Excel and third-party accounting tools! Accountants benefit from automated transaction posting, reconciliation, and effortless financial statement generation. This automation allows them to focus on strategic analysis rather than tedious manual tasks.

Full Control of Transactions

Macrobank’s General Ledger and Accounting Module in the Core Banking Software allows accountants to create transactions manually and roll back or cancel transactions at any stage of execution. This ensures unmatched control and adaptability in managing accounting records.

Accounting Management for Daily Operations and Tax Periods

The module offers essential accounting functionalities, including the closing and opening of operational days, revaluation procedures, and seamless tax period closings. These features simplify routine and periodic financial tasks.

Data Integrity and Reduced Errors

Automated data processing minimises the risk of errors and ensures that financial records are consistent and accurate. Accountants can rely on the system’s data integrity, enhancing their confidence in both reporting and analysis.

Audit Preparedness

The module’s audit trail and compliance features make it easy for accountants to access and present necessary information during audits. This reduces stress and workload during audit periods while ensuring adherence to regulatory standards.

Precision in Financial Management

The General Ledger and Accounting Module provides a centralised, accurate record of all financial activities, serving as the single source of truth for an institution’s financial data. Paired with the chart of accounts, it enables precise financial tracking, offering a clear picture of current financial health and valuable insights into historical trends.

Management of nostro and vostro accounts

The module effectively manages your financial institution’s nostro and vostro accounts while supporting robust reconciliation processes. It enables the consolidation and reporting of account data, supports liquidity management and cash flow forecasting, and ensures accurate accounting for funds held in correspondent accounts.

Advantages for general users

Comprehensive Financial Overview
The module offers a centralised and transparent view of all financial data related to banking operations. This ensures complete clarity, enabling users to analyse performance, identify trends, and make informed decisions quickly and confidently.

Streamlined Financial Operations
The module significantly reduces manual effort and boosts efficiency by automating complex accounting processes and fully integrating transaction and operational accounting. This automation not only saves time but also ensures accuracy, making day-to-day financial management seamless and error-free.

User-Friendly Interface
Designed with simplicity in mind, the module enables even non-expert users to navigate and manage financial tasks effortlessly. Its intuitive features and clear layouts enhance the user experience, reducing the need for extensive training and improving overall productivity.

Conclusion

The General Ledger and Accounting Module is a vital component of core banking software, serving as the foundation for accurate financial management, streamlined operations, and regulatory compliance. Its extensive features—such as real-time transaction posting, multi-currency support, automated reconciliation, and comprehensive reporting—empower banks and financial entities to manage their finances precisely and efficiently.

For businesses, the module provides a centralised view of financial health, enabling improved oversight and informed decision-making. Accountants benefit from simplified, automated processes that reduce errors and ensure compliance, while users enjoy easy access to accurate financial data. In today’s competitive financial environment, investing in a robust General Ledger and Accounting Module is essential for banks and financial institutions striving to remain agile, compliant, and customer-focused.

At Advapay, we designed Macrobank with these considerations in mind, delivering an exceptional banking software solution that ensures complete visibility and control over financial operations.

Core Banking software Macrobank by Advapay: Empowering Continuous Evolution in Core Banking

Macrobank, an innovative Core Banking software, enhances efficiency across multiple areas. Tailored to address current and future challenges in financial institutions, it represents cutting-edge solutions.

At stake:

• Robust Back Office Functionality
• Ready Integrations for Seamless Implementation
• White-Label Web and Mobile Banking Apps
• BaaS and Embedded Finance Capabilities
• Modern Back-Office Application Interface
• Startup-Friendly Design
• Compliance with the Security and Regulatory Standards
• Built-In Accounting System
• Diverse Deployment and Purchase Options

Our solution offers access to various functionalities, technology, and partner ecosystems that prioritise security and compliance. Macrobank empowers you to design personalised offerings within your chosen ecosystems, facilitating efficient product launches. Contact us to explore your product possibilities and schedule a demo!

In an era where technology is reshaping the financial landscape, selecting core banking solutions has never been more critical for banks and financial institutions. As the fintech landscape continues to evolve, institutions face increasing pressure to adopt solutions that meet current demands and are equipped to adapt to future challenges.

Choosing a core banking system is a strategic decision that can determine an organisation’s long-term success. With customer expectations shifting rapidly and regulatory environments becoming more complex, financial institutions need a solution that is scalable, flexible, and capable of seamlessly integrating new technologies. This adaptability ensures that banks and financial institutions can continue to grow, innovate, and provide exceptional service as market conditions change.

1. Scalability in Core Banking Solutions: Supporting Growth

Scalability is essential for banks and financial institutions as growth brings increased demand on systems due to higher transaction volumes, expanding customer bases, and adding new services and products. A core banking solution that cannot scale efficiently risks service delays, technical bottlenecks, and operational inefficiencies, which could lead to customer dissatisfaction and potential revenue loss.

In a globalised world where banking operates 24/7, customers expect instant access to financial services. A core banking system that fails to keep pace with growing demand can negatively impact a financial institution’s reputation and its ability to compete in a crowded marketplace. Additionally, new product launches, geographic expansions, and regulatory changes often require financial institutions to scale quickly. If the technology cannot support this growth, the institution’s ability to adapt and innovate is hindered.

Scalability extends beyond handling higher transaction volumes; it also includes the system’s capacity to integrate with new technologies, expand infrastructure, and support innovative digital banking services. A scalable solution ensures that a financial institution can meet today’s demands and remain well-positioned for future growth.

When evaluating vendors, consider asking about the system’s maximum transaction load capacity and how easily additional resources, such as servers or storage, can be added without disrupting operations.

Cloud-Based vs. On-Premises Scalability

One of the key decisions financial entities face when selecting a scalable core banking solution is choosing between cloud-based and on-premises systems. Cloud infrastructure enables banks and other financial institutions to scale resources up or down as needed, accommodating changes in customer demand or seasonal fluctuations. This on-demand scalability is cost-effective, as banks only pay for the resources they use, avoiding the need to invest in expensive hardware.

2. Flexibility in Core Banking Solutions: Adapting to Change

Flexibility in core banking solutions is essential for staying competitive and responsive to constant changes in the industry. A flexible system ensures long-term adaptability and success, from supporting new technologies to offering agile deployment options and customisable integrations.

The financial services industry is increasingly influenced by several key factors: evolving regulatory requirements, shifting customer expectations, and technological disruption. Each of these forces requires a flexible core banking system that can adapt without causing significant disruption to operations.

Regulatory changes are ongoing, with new laws introduced globally to enhance financial stability, combat money laundering, and ensure consumer protection. A core banking system that lacks flexibility may struggle to implement these changes efficiently, leading to costly delays and compliance risks. Additionally, consumers expect more personalised, seamless digital experiences from their financial institutions. A rigid system that cannot integrate with new technologies or adjust to changing customer needs could result in missed opportunities and a loss of competitiveness.

A significant aspect of flexibility in core banking systems is their ability to integrate with emerging technologies and other payment or business services. A flexible core banking system should support easy integration through application programming interfaces (APIs). The ability to integrate with new technologies and services not only enhances a bank’s operational capabilities but also opens doors to new revenue streams and innovative customer service models. Financial institutions can partner with fintech companies to offer customers cutting-edge services without the need for extensive internal development.

3. Customisation of Core Banking Solutions: Tailoring the Solution to Your Needs

One of the key advantages of customisable core banking solutions is the ability to configure the system to meet specific operational, regulatory, and market requirements. Each financial entity operates uniquely, influenced by its size, target customer base, regulatory environment, and product offerings. A customisable system allows institutions to adjust workflows, compliance settings, and transaction processes to align with their specific needs. For example, a financial institution operating in multiple jurisdictions may need to configure its system to comply with various regulatory standards, such as anti-money laundering (AML) and know-your-customer (KYC) regulations, while maintaining efficient internal processes. Additionally, the system can be customised to support multiple languages.

Customisable settings also enable financial institutions to respond quickly to changing business needs. Whether launching a new product, entering a new market, or adapting to new regulatory guidelines, a core banking system with flexible configuration options empowers banks to implement changes without costly overhauls or delays.

Key Areas for Customization

There are several essential areas within a core banking system that should be easily customisable to ensure flexibility and adaptability.

• Reporting Dashboards: Customisable dashboards allow different teams within the financial entity to track and analyse data relevant to their specific roles. For instance, executives may need high-level performance metrics, while compliance officers may focus on regulatory reports. Tailored dashboards ensure teams have the data they need to make informed decisions quickly.
• Transaction Workflows: Digital banks and other financial entities often have unique internal transaction processes. A customisable system enables these institutions to streamline workflows, ensuring appropriate approvals are in place and transactions are processed efficiently.
• Compliance Tools: Given the constantly evolving regulatory landscape, compliance tools must be adaptable. Customisable compliance settings allow institutions to remain compliant with local and international regulations by modifying processes, alert thresholds, and reporting standards as required.
• Security Protocols: Customisable security settings allow financial entities to tailor their security measures to meet specific regulatory requirements and adapt to evolving threats, providing enhanced protection for both the institution and its customers.

User Interface Customization: Enhancing Customer Experience

In addition to backend configurations, user interface (UI) customisation is becoming increasingly important, especially as customer experience becomes a key differentiator in the banking sector. Modern customers expect personalised and seamless interactions with their financial service providers, whether through a mobile app or web portal.

Core banking systems that allow for easy UI customisation enable financial institutions to offer a personalised experience while maintaining brand consistency. For example, a fintech company might want to customise its mobile banking app to reflect its unique branding, offering a user-friendly interface tailored to its customer demographics. Additionally, financial institutions may need to customise fields, adjust available features, set limits, and manage permissions. These changes should be made through the back-office interface and automatically reflected in the customer-facing application.

4. Upgrading from SaaS to Software License: Flexibility in Licensing Models

In today’s banking environment, institutions have several options when selecting core banking solutions, including flexible licensing models that allow banks to choose between Software-as-a-Service (SaaS), traditional software licenses, or even purchasing source code. While many fintechs start with a SaaS model due to its simplicity and cost-effectiveness, there may come a time when transitioning to a software license model offers greater benefits.

Benefits of SaaS in Core Banking Systems

SaaS models, where the core banking system is hosted and maintained by the vendor, offer several key advantages:

• Lower Upfront Costs: One of the most significant benefits of SaaS is its low upfront cost. Rather than making a substantial capital investment in hardware and software licenses, financial entities can pay a subscription fee that covers the core banking platform, hosting, maintenance, and updates. This appeals to smaller institutions or startups seeking to minimise initial expenditures while accessing robust technology.
• Regular Updates and Maintenance: SaaS models include continuous software updates, ensuring that fintechs always have the latest features and security patches without needing costly, time-consuming in-house IT interventions. This is particularly valuable in an era where digital banking innovations and cybersecurity threats evolve rapidly.
• Reduced IT Overhead: With a SaaS model, the vendor handles much of the technical maintenance—such as server management, data backups, and system troubleshooting—reducing the burden on the financial entity’s IT staff, allowing them to focus on more strategic tasks. It also simplifies compliance with regulatory updates, as the vendor is responsible for ensuring the system meets the necessary standards.
• Scalability: SaaS solutions are inherently scalable, allowing fintech companies to add resources on demand as they grow. This flexibility is essential for entities anticipating rapid expansion or changing market conditions, as they can scale their services without significant additional infrastructure investment.

Transition to a Software License Model

While SaaS offers many benefits, there are scenarios where a financial institution might choose to transition to a traditional software license model. Some of these scenarios include:

• Data Control and Privacy: As financial entities grow or face stricter regulatory environments; they may prefer to keep sensitive customer data in-house rather than relying on a third-party provider. A software license model gives fintech companies full control over their data, including where it is stored, how it is accessed, and who has access to it. This is particularly important for institutions in highly regulated markets or those that manage a large volume of confidential transactions.
• Regulatory Requirements: In some jurisdictions, regulators may impose specific requirements on how data is handled, stored, and protected. A SaaS model might not always meet these requirements, especially in regions with stringent data sovereignty laws. Transitioning to a licensed software model allows fintechs and banks to comply with local regulations by hosting their core banking system on-premises or within a private cloud environment that meets those standards.
• Cost Management as the Fintech Scales: While SaaS is often the most cost-effective solution for smaller institutions or banks in the early stages of growth, the recurring subscription costs associated with SaaS can become significant as the financial entity scales. At a certain point, transitioning to a software license model may offer better long-term cost management, especially if the bank has the infrastructure and resources to manage the system internally.

Vendor Support for Licensing Flexibility

When evaluating core banking solutions, it’s essential to consider vendors that offer flexibility in licensing models. As a financial institution’s needs evolve, the ability to transition from a SaaS model to a software license—or vice versa—without significant disruption is crucial. Vendors that support seamless transitions between models enable fintech companies to adjust their core banking infrastructure to align with growth, regulatory changes, or cost management strategies.

Fintech companies should seek out core banking software vendors that provide:

• Clear Pathways for Transition: Vendors should offer well-documented processes for moving from a SaaS to a software license model, including support for data migration, configuration, and infrastructure setup.
• Hybrid Licensing Models: Some vendors offer hybrid models, allowing financial sector companies to use a combination of SaaS and licensed software. This approach is particularly useful for institutions that want to keep certain sensitive systems on-premises while leveraging the flexibility of SaaS for other services.
• Long-Term Licensing Options: Vendors that offer flexible licensing terms enable fintechs to better manage their operational and capital expenditures over time, providing both SaaS and perpetual licensing options.

5. Opportunity to Build New Modules or make integrations Internally in Core Banking Solutions

If a financial services company has a strong internal IT team, the capability to develop and integrate new modules internally—alongside implementing other key developments, such as adding new services—allows it to swiftly adapt to changing market demands, regulatory requirements, and customer expectations. With custom-built modules and other in-house enhancements, a financial entity can tailor its services to address specific pain points or capitalise on new business opportunities that might otherwise be missed when relying solely on a third-party vendor for system updates.

For instance, if a financial institution wants to launch a new product—such as a specialised loan offering or a payment acquiring system—it can do so by building a module internally that integrates seamlessly with its existing core banking system. This approach reduces reliance on external providers, allowing the bank to maintain full control over its processes and ensure that the system evolves according to its strategic vision. On the other hand, the company can handle integrations with new service providers in-house, reducing product launch times by eliminating the need to wait for the vendor to fit it into their schedule.

Open Architecture: The Backbone of Internal Development

Choosing a core banking system that supports open architecture is essential for facilitating the development of new modules. Open architecture refers to a system design that allows seamless integration of new functionalities through open APIs (Application Programming Interfaces). APIs enable internal development teams to build or enhance specific features without disrupting the core system. Open architecture also simplifies integration with third-party solutions, such as payment methods, card issuing, AML/KYC services, etc.

Vendor Support for Development

While internal development provides financial entities with a high degree of control, vendor support remains crucial for ensuring that new modules and other enhancements are built, tested, and deployed effectively. A core banking vendor should offer robust tools and documentation to help internal teams understand how to create and implement new modules securely.

Many vendors provide development environments where financial institutions can build and test modules without impacting the live system. These sandbox environments allow new functionalities to be thoroughly vetted for compatibility, security, and performance before going live. Additionally, vendor-provided training and resources are invaluable for internal teams, helping them navigate the complexities of core system integration.

Collaboration with Fintech Startups

Building new modules does not mean financial entities will work in isolation. They should collaborate with other fintech companies to connect core banking systems with third-party service providers. By partnering with fintech startups, financial entities can co-create solutions that enhance their offerings, streamline operations, and deliver a more seamless customer experience. Additionally, these partnerships help financial institutions stay competitive by expanding their service portfolios and improving scalability without overburdening internal resources.

6. Compliance and Security for Core Banking Solutions: Ensuring Long-Term Viability

The regulatory environment for financial institutions is becoming increasingly stringent, with new laws and regulations designed to protect consumer rights, ensure financial stability, and combat financial crime. Compliance with these regulations is not only a legal requirement but also crucial for maintaining the reputation and operational continuity of a financial institution.

A core banking system must be adaptable to meet the demands of evolving regulations, such as the General Data Protection Regulation (GDPR), Anti-Money Laundering (AML) laws, the Second Payment Services Directive (PSD2), and other local regulations. For example, GDPR requires financial entities to implement strict data protection measures, ensuring customer data is securely stored and processed. Similarly, AML laws necessitate rigorous transaction monitoring to detect and prevent money laundering and other illicit activities. PSD2 mandates strong security measures and compliance with open banking standards.

Financial institutions that fail to comply with these regulations risk heavy fines, legal penalties, and reputational damage. Therefore, selecting a core banking system that can easily integrate with regulatory tools, automate compliance processes, and generate audit-ready reports is essential. The system should also be flexible enough to adapt to future regulatory changes, allowing the bank to remain compliant as new laws are introduced.

Security Considerations: Protecting Against Emerging Threats

With the rise of digital banking and online transactions, cybersecurity threats are at an all-time high. Financial entities are prime targets for cybercriminals due to the sensitive data they handle and the large volume of transactions they process daily. A core banking system must incorporate advanced security features to protect against these threats and safeguard customer information.

One of the most critical security features is encryption, which ensures that data is protected both in transit and at rest, making it difficult for unauthorised parties to access or alter sensitive information. Additionally, multi-factor authentication (MFA) adds an extra layer of security by requiring users to provide multiple forms of verification before accessing the system. This is especially important for preventing unauthorised access in the case of compromised passwords or other credentials.

Automated fraud detection is another essential feature. It uses machine learning algorithms to monitor transactions in real-time and identify suspicious patterns that could indicate fraudulent activity. By flagging unusual behaviour, financial entities can prevent fraud before it occurs, protecting both the institution and its customers.

Maintaining system security also involves regular penetration testing and vulnerability assessments. Financial entities should work closely with their core banking solution vendors to ensure these assessments are conducted regularly. This will help identify and address potential security weaknesses before they can be exploited.

Regular Updates: Staying Ahead of Threats and Regulations

As technology and regulations continually evolve, core banking systems must remain up-to-date to ensure security and compliance. Regular software updates are essential for patching vulnerabilities, improving system performance, and aligning with regulatory standards.

Vendors play a critical role in this process, as they are responsible for providing timely updates to address security flaws and integrate features required for compliance with the latest laws. Without these updates, financial entities risk lagging in security protocols and regulatory requirements, potentially leaving them vulnerable to cyberattacks or non-compliance penalties. Additionally, the update process should be seamless and minimally disruptive, allowing banks and fintech companies to maintain daily operations while ensuring the system stays secure and compliant.

7. Vendor Reputation and Support: Long-Term Partnership

Selecting the right core banking system is a critical decision for any financial institution, but the software itself is only part of the equation. Equally important is choosing a vendor with a strong reputation, stability, and a long-term commitment to supporting the institution’s evolving needs. A core banking system is not a one-time investment but an ongoing partnership where consistent support, training, and adaptability is essential.

Vendor stability is especially important for long-term success. A vendor with a proven track record of innovation and reliability is likelier to invest in research and development, ensuring that the core banking system remains competitive in a rapidly changing industry. Additionally, a reputable vendor typically has a loyal client base, reflecting strong customer satisfaction and trust.

When assessing a vendor’s reputation, consider its history in the industry: How long has it been in business? Is it known for delivering cutting-edge solutions? Has it effectively adapted to new trends, such as cloud-based banking or digital transformation? A well-regarded vendor known for innovation is more likely to help a financial institution stay competitive.

Customer Support and Training: Ensuring a Smooth Transition

Implementing a new core banking system is a complex process that requires extensive coordination and technical expertise. Therefore, the level of customer support and training the vendor provides is a crucial consideration. A vendor that offers robust support during implementation and beyond can significantly ease the transition and minimise disruptions to daily operations.

Customer support goes beyond merely troubleshooting issues. A reliable vendor will collaborate closely with the financial institution’s team to ensure that the system is customised to meet specific needs and will provide ongoing assistance as those needs evolve. This includes access to a dedicated support team, regular software updates, and comprehensive training resources for both IT staff and end users.

Training is essential to ensure the financial institution’s employees can use the system effectively. The best vendors offer various training options, such as on-site workshops, online courses, and detailed documentation. This variety ensures that staff can quickly become proficient with the new system, reducing the learning curve and enhancing operational efficiency.

Conclusion

In today’s dynamic financial environment, choosing the right core banking solution is essential for long-term success and resilience. Investing in a system that addresses both current needs and future challenges is critical. As the financial landscape continues to evolve, choosing a solution with robust capabilities will position financial institutions not only to survive but thrive. A forward-thinking approach to core banking will empower these entities to adapt, innovate, and remain competitive in an increasingly complex market, ensuring they can meet their customers’ needs both now and in the future.

Advapay at stake:

How can Advapay can assist you in launching your fintech business?

• Assistance in EMI/PI licencing in the EEA/UK
• Registration of MSB company in Canada
• Delivery of a comprehensive Core banking system encompassing back-office and white-label applications for end-users
• Assistance in payment infrastructure development
• BaaS-solutions and Embedded Payments solutions in collaboration with our partners – EEA/UK licenced EMIs and PIs