High card payment fees, tons of paperwork, political barriers, government money controls and the unwritten rules of asking your bank to use your own money as you wish – these are just some of the problems people still face when it comes to sending money across borders.
Over a career spanning two decades in the financial services and banking industry, Mushegh Tovmasyan developed an idea.
Tovmasyan noticed the discrepancies that exist in making the same cross-border transactions – be it through wire transfer, an ACH transfer, a card payment or a merchant transaction. What bothered him most was that people couldn’t spend their hard-earned money the way they wanted to, with barriers thrown in at every step.
“People work hard, they earn a profit, they pay their taxes, then it should be up to them how they want to spend their money,” Tovmasyan tells FinTech Futures.
“I started Zenus Bank because in my mind, I had gathered all the right ingredients to build a solution to the challenges faced around the world.”
As its USP, Zenus Bank allows any foreigner to apply for a US bank account – no matter where they are in the world – with a simple click of a button. Customers from developing countries can access, send, receive and store money in the US, and in US dollars, from almost any part of the globe.
Additionally, the bank also allows real-time cross-border money transfers, free of charge for Zenus-to-Zenus bank accounts, and payments in more than 45 global currencies. Tovmasyan claims in 80% of cases, applications are automatically approved, with a bank account and a US Visa debit card issued to the applicant in about 10 minutes.
“Essentially, what we are offering is fast-track access to first-world banking services to anyone in this world,” Tovmasyan says.
With an international licence in hand, Zenus Bank employs close to 50 people and is based in Puerto Rico, with teams working out of Miami, USA, and London, UK. The bank was founded in 2019 with an initial focus on Latin America, which Tovmasyan describes as a “very organic” vertical for the new bank, owing to its geographic proximity to the region.
“We are a start-up after all, and we didn’t want to bite more than we could chew,” Tovmasyan explains.
However, the start-up has now expanded its reach, with customers from 94 countries. The firm also enables users to do business with more than 150 countries in the world, barring those on the sanctions list.
But how did Zenus manage to overcome the obstacles posed by global regulatory bodies and offer something that most banks usually don’t? Tovmasyan explains that they looked at what limits banks from operating cross-border, and realised it is the lending component.
“For most banks in the world, their primary business model is borrowing and lending, and there is a lot that goes into this.
“In some parts of the world, there is no such banking licence that does not include lending as part of their business model. So, you have to be a lender to be a bank.”
In the US, the deposit taker licence allows a company to be a bank without lending, which made it easier for Zenus Bank to configure its business model by choosing not to have any lending components.
And while the standard anti-money laundering (AML) and know your customer (KYC) regulations apply, most banks still require credit scores from their customers to offset the internal business risk of lending.
For customers in the US, that means divulging their social security number and credit score data in order to gain access to banking and lending services.
“With Zenus, we have completely removed the need for social security numbers because it’s actually not a regulatory request,” Tovmasyan says.
With the lending aspect removed, Zenus Bank’s way of generating revenue is then by offering membership plans directly to customers.
“Since we don’t invest the customer deposit or make loans, the only way for us to earn a profit is to charge a fee.”
However, Tovmasyan claims the fee Zenus charges doesn’t translate to a greater cost for the end customer.
“We don’t see ourselves as a challenger. We don’t see ourselves being the primary bank of any of our customers. We don’t envision anyone paying their electricity bill through our bank account, although it’s possible. What we are is essentially a premium add-on to anyone anywhere in the world, who has cross-border needs.”
In terms of funding, the neobank raised an undisclosed amount in seed funding from Tovmasyan himself, along with a private equity group as an investor.
The start-up is currently in the midst of raising fresh funds for its Series A equity round, which is also being led by the undisclosed PE firm.
As part of its long-term plans, Zenus Bank wants to pivot to a B2B2C model over time – developing a platform that enables other companies to offer US bank accounts, US cards and payments services locally in their parts of the world.
“We’re not trying to be a super-app and do everything ourselves. We realise we have a very ambitious plan, targeting the majority of the world at the same time.
“From that perspective, we’re not looking to expand our product base, we’re just trying to get more efficient,” Tovmasyan concludes. – Fintech Futures