Building a Regtech Company - The Case of b-Fine
For a change, we didn’t talk about banking that much. Instead, we invited Klaas Van Imschoot, co-founder of b-Fine, to share some insights on his life as an entrepreneur. b-Fine is a Regtech company founded around the same time as The Banking Scene, in 2017, and was sold in late 2022 to Regnology, “A Global Leader in Financial and Tax Regulatory Reporting Solutions for Regulators and Regulated firms”.
How it all started
As a freelance consultant in banking compliance and regulatory reporting, Klaas understood the bottlenecks and had entrepreneurial blood running in his veins. A logical next step was to found f-Fine, together with Bert De Vriendt, first as a consulting company and adding a product line later in the journey.
They built a team of experienced professionals in regulatory reporting technology who understood the impacted processes within financial institutions and combined this with experienced users of these processes.
Klaas: “We had a perfect overview of the pains in those processes and how we could solve those. At the same time, if you want to build software solutions, you need to have the guts to jump.”
The decision to jump doesn’t come overnight… it never does. In the case of Klaas and Bert, it was a 3-year discussion to jump. The first step was to build a solid servicing arm with consultants. The clients they had, like Euroclear, as freelancers, became b-Fine customers. Quickly more financial institutions followed.
Klaas: “We had the idea of starting to build a solution from the beginning. But we first wanted to start easily, without burning much cash since we didn't have that cash at the beginning.”
The consulting assignments were an opportunity to evaluate the appetite in the market and retrieve additional feedback for product development. Klaas: “The fact that we got similar assignments and found the same pain points at different banks supported us in coming up with a solution. We wanted to modernise how banks produce their regulatory reports because they were using the tools already there for more than 20-25 years.”
From startup to scaleup
As strong as the initial team was in compliance and regulatory reporting, as grateful they still are to organisations like Vlaio and Start it @KBC, but also their investors in supporting them in building better commercial skills and funding for further development of the company and its products.
Human resource management was one of the biggest challenges that they faced. Klaas: “A good decision that we made early in the process was to have an HR manager, who took care of recruitment, onboarding, that felt the temperature in the organisation, evaluated how happy everyone was.”
Organisationally they did a clear split between consulting and product development, although there are arguments that both can augment each other. The main reason is, according to Klaas: “if you can place a consultant, you have an immediate return on your investment. The development of a product requires expensive staff before you can even see a return and will there be any return.”
He continued: “Every time, we had many discussions at b-Fine about whether we hire a consultant or a developer. That is why we said, let's completely segregate the development team from the consulting team, and only in very exceptional cases we deviated from the principle that the development team was completely managed separately from the consulting division, and that model worked quite well.”
“We realised that from the moment you start to mingle, you will probably go for a consulting mission that just pops up because it will trigger an immediate short-term return.”
You and I know that the regulatory space is a trusted business and that change feels evil. As a startup, b-Fine faced challenges in building a client portfolio for its solutions. They talked to many financial institutions, but it was a challenge to make them sign a deal with b-Fine. B-Fine is a young company, and these financial institutions were reluctant to collaborate, fearing the company would still exist in 5 years. This hesitance from prospects was one of the main reasons for finding a solution to scale.
Next, they also realised that the biggest opportunities in regulatory compliance solutions come with unexpected shifts in the market that require more, or a change in, regulation. The financial crisis was a good example, COVID-19 is another of those shifts, as well as the current turmoil in crypto. Acting fast is elementary in gasping those opportunities, which is not always easy for a small player.
One option was a buy-and-build strategy, and the second best option, the less risky scenario, was to partner or to be acquired.
When Regnology opened the conversation, the team of b-Fine sat down and listened. They understood that there were enormous synergies and that a clash of cultures was unlikely. Being part of a bigger player opens many more doors, also internationally.
They are now part of a group of just below 1,000, which is enough to demonstrate reliability and trust but small enough to breathe entrepreneurship.
Klaas is extremely proud of the path they walked the past five years, and rightfully so. What started with a consulting business and regulatory reporting solution now became a platform being deployed by a multinational Regtech company, Regnology.
Klaas: “Even with Regnology, we will become the leading platform for a lot more banks. That's something I think that we can be proud of at b-Fine.”