For five years
now, Antwerp’s small and medium-size diamond companies have been struggling to survive
in an environment where just opening an account with a traditional bank is a
challenge. But an internet-based technology is offering them a financial
alternative.
Ebury Diamond Solutions,
which opened in Brussels in November 2017, acts as an online intermediary
between diamantaires and banks. The company — a subsidiary of UK-based fintech
company Ebury — is already providing accounts and other banking services (with
the exception of credit) to about 50 diamond firms.
“It didn’t take much for us
to be in touch with the diamond industry,” said Ebury Diamond Solutions head
Arnaud Penson. “We immediately realized that the sector was being neglected by
the traditional banks. For us, this was an opportunity, as this is the kind of
pattern we’ve been capitalizing on since [the company opened in] 2009.”
Banks
have historically viewed small and medium enterprises as next to worthless, he
continued, “given they’re the first ones to go bankrupt in case of crisis. And
that’s where we come into play with our technological competitive advantage.”
Because fintech companies
like Ebury operate online, they have lower costs and a reproducible model that
scales well economically, making it less risky for them to cater to smaller
businesses.
Working out the kinks
Many
diamantaires were initially reluctant to move to Ebury, recalled Charlie
Berkovic of Berkovic Diamonds. “We didn’t know what to expect and whether it’d
really be adapted to our needs. On the other hand, it was absolutely crucial
for us to be able to pay and receive money. Fortunately, the system proved to
be efficient, and we quickly managed to solve the major hiccups.”
Such hiccups included
due-diligence procedures for opening an account, which required some
fine-tuning. Feedback from diamantaires helped the company adapt its
theoretical model to the practical reality, Penson reported.
“We understood,
for example, that it wasn’t realistic to require that all transactions,
including those taking place [locally] among diamantaires, should
systematically be carried out through the Diamond Office,” he said, referring
to the state-run authority that checks the documentation of all diamonds
entering or exiting Belgium. As unfeasible as it would be for local traders to
have to export and reimport their diamonds in order to sell them domestically,
it would be even less practical to do so just to open a bank account.
Multiple advantages
Some
“teething problems” remain, commented Anuj Sahny of manufacturer and jeweler
Shamas BVBA, but Ebury is “addressing and settling them at an unprecedented
speed. And for us, the advantages of using fintech are multiple. As opposed to
any traditional bank, the paperwork load is far less cumbersome, as it’s all
online. This removes a lot of the burden from our shoulders, since we don’t have
to go in person to address countless issues.”
In addition, he went on, the
Ebury platform “is user-friendly, and they’re multi currency, which is
invaluable to us. Cherry on the cake, [you always deal with] the same contact
person, [and] they’re easy to reach and quick [to respond], be it orally or by
email.”
Cost-wise, the system is
competitive, affirmed diamond trader and broker Nico Van den Eynden. “There’s
no question that their services are cheaper than in the old banking system. And
the ease of reaching them when needed makes it a totally new banking experience
for us. [There’s] no doubt that this model will rule out standard banks.”
Backers that back out?
Still,
there’s a flip side to every coin. The recent experiences of fintechs like
Uphold and IBAN First — which lost the support of the banks that worked with
them — highlight the model’s intrinsic weaknesses. Behind any fintech solution,
there’s still a traditional bank, and should that bank decide the game is over,
so is the fintech company.
“Obviously nobody can control
a bank,” acknowledged Penson. “However, in the event any issue would arise with
one of our banks, we’re making sure there’s always an alternative solution.
This is why, unlike others, we don’t rely on just one, but on 14 banks to back
us. We want to maintain a strict compliance system adapted to the needs of the
sector, aligned with trust-based client relationships. We’re here to stay.”
In any case, for the sake of
competition, observed Sahny, there’s certainly room for more such services in
the diamond industry.
Article from the Rapaport Magazine - May 2018. To subscribe click here.