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The future of banking is modular

Just like a house built from Lego blocks, Modularbank can build you a bank with the exact bits and pieces (modules and features) you need.

Modularbank was set up by five Estonian banking technology pioneers who wanted to make banking technology simple and seamless. Its founders are not just experts in technology but also within the banking industry. Together they have over sixty years of experience in building transformative financial technology solutions for institutions, ranging from the Estonian Tax and Customs Board to Skype, Royal Bank of Scotland and OP Financial Services.

Founded in 2019 by a small group of Estonian financial IT pioneers and entrepreneurs, Modularbank is an API-first cloud-agnostic next-generation banking platform composed of flexible and independent modules that cover end-to-end everyday banking processes. It underpins the aims of both regulated banks and other businesses in meeting customer needs and aspirations by enabling the rapid rollout of new financial services. Current customers of Modularbank include one of the largest financial services group from Finland, a leading retail group in the Baltics and a Frankfurt stock exchange-listed financial services institution operating in 23 countries.

The career of Vilve Vene, co-founder and CEO of Modularbank, began in the 1990s when she joined Hansabank [the predecessor of Swedbank Estonia]. This young company in a newly-independent country did not have money to waste, and took the decision to build its own IT infrastructure well before the internet was in wide use. With no initial capital or experience in commercial banking, out of both necessity and ingenuity, they created a digital bank from the beginning. As early as 1993, Hansabank was offering PC [personal computer] banking services, allowing customers to perform real-time account activities without setting foot in the bank.

A few years later, as internet access became widespread, Hansabank brought its online banking system onto the market.  It was one of the first of its kind in the world.

“I am a builder by nature, I want to create things. When the bank became Swedbank, the developments kind of froze, but I didn’t want to leave them for someone else,” recalls Vene.

That inspired the founding of the IT company Icefire, built by her own team and greatly influencing the creation of Estonian national software systems. The majority of Icefire’s clientele were banks.

Rivo Uibo, another co-founder of Modularbank, also worked within the Icefire core team. He mentions that Icefire built tech services for approximately 15 banks in Europe.

In June Icefire was acquired by Europe’s largest unicorn and the world’s fourth largest FinTech company Consequently, Tallinn will become’s second-largest engineering hub, after its headquarters in London, and Icefire’s team will be at the heart of it, leveraging almost 20 years of experience in building complex end-to-end financial solutions to bolster’s growth.

In 2019, Vilve, Rivo and three other colleagues from Icefire founded their own company called Modularbank; a cloud-native next-generation core banking platform, consisting of various modules (capabilities) for building use cases in retail and business banking landscape. Today customers of the startup include traditional banks, FinTech startups and companies from other fields who wish to come out with innovative, customer-centred financial solutions for their customers quickly and easily. Modularbank currently has offices in Tallinn and Berlin.

The successful investment round

In December last year, the company announced that it has raised 4 million euro growth capital. The investment round was led by Karma Ventures and BlackFin Capital Partners. The extremely strong circle of investors enables Modularbank to strengthen its product development team and commercial units in European financial centres, to start with business activity in the United Kingdom and to take the next steps towards global expansion.

Vilve Vene explains the new company’s background, saying that “The difference between the previous company and the current one is that in Icefire we created tailor-made solutions according to the customer and, as a business model, it meant we could create as many products as we had people and clients. The business model of Modularbank is use-based, enabling the company to scale. The impetus for creating Modularbank came directly from clients. They said that ‘our speed is impressive, but we need to be even faster’.”

Clearly, customers no longer wanted to wait for custom solutions to be created for them.  Instead, they demanded a ready-made product generator to purchase off the shelf – now, if not sooner.

Interest in the services of Modularbank escalated during the Corona crisis. Vene elaborated, saying that “Large banks which have old IT systems are not able to immediately react in a changing situation and to changing needs. Therefore, they were suddenly unable to service their customers who asked for a grace period, or distribute support funds to companies fast enough. Services were lapsing. We witnessed how large organisations, who had only talked about change before, were suddenly forced to act.”

Both Vene and Uibo confirm that, in large traditional banks, change may be slow, but at least they have started to realise that adaptation is necessary. Crisis, they emphasise, has always been a good motivator for innovation.

Catching the big fish

Modularbank is not in a position to reveal their clients yet, but say that they gained their very first customer – a Frankfurt stock exchange-listed banking group active in 23 countries – within the first month of operating. “When such a huge corporation decides to activate their core business activity on your platform, it is a huge trust credit,” says Vene. “At first they took our banking core and payments module for their digital bank.  As the collaboration was good they decided to move their other service portfolios into our capacity.”

Catching that ‘big fish’ in the very beginning had a lot to do with important personal connections that have opened doors to the right people. Uibo recalls that, as they approached the first client, the product itself did not exist. There was only the prototype. Within the supply framework, in a record five-month period, they developed the product.

“You can take such a huge risk only when you really trust yourself, your team and your product. We worked like a special unit, in hour-and-a-half time slots that were more or less set in stone, outlining in detail what we needed to do, how fast we needed to do it and deadlines for specific stages of development,” says Uibo.

The creators of Modularbank are certain that, while financial services have been the sole territory of banks, in the future they will also become part of the services offered by companies active in other economic sectors. For example, a producer of solar panels may want to start offering consumer credit to their clients and that becomes part of their customer package – a credit offer hidden inside the main activity.

“Today we have the technology which enables such developments. Five years ago such technology didn’t exist,” claims Vene. “If we compare the way platforms were built in the past to how it is done today, the difference is in the fact that earlier one complete banking system was built which incorporated all services from loans, to payments and bank cards. Today the system is built from different modules – the loans are one module, accounts another, bank cards a third – which are independent but at the same time able to interact with each other. This is exactly what allows for all client-oriented companies to start offering financial services today and those are the capabilities we are providing at Modularbank.”

This September Enterprise Estonia will arrange a joint stand at Money 20/20 Europe where Modularbank along with eleven other Estonian FinTech companies will be represented. Money 20/20 is Europe’s largest financial technology event focusing on innovation in payments and financial services. You can meet some of the brilliant Estonian FinTech companies at the dedicated area on September 21-23 in Amsterdam, the Netherlands.

Wish to know more about the opportunities in Estonian FinTech? Read more here or send us a request for e-Consulting.

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