By Tom Alford, Deputy Editor, TMI

AAZZUR provides a wide selection of third-party fintech applications for embedded finance via a single ready-to-connect platform. Philipp Buschmann, Co-Founder and CEO, AAZZUR, talks to TMI about the genesis and evolution of this intriguing approach to service delivery.

There must be thousands of fintech providers around the world, all vying for the attention of financial professionals in banks and corporates. Each has a specialised proposition, and no doubt many are extremely good at what they do.

But for the end user, such as the corporate treasurer, navigating their way through the good, the bad and ugly, is a daunting prospect. Not least of their concerns is that even if a best-of-breed solution has been detected and selected, there is still a matter of connecting it to all the others in the company’s technology stack. And as anyone who has tried this will attest, not all applications will readily talk to each other.

It could be argued that selection of a fintech product is a one-off, so the pain is short-lived. But in the embedded finance space, business models are necessarily changing to meet new demands – from the commercial to the regulatory – so the need to adopt new tools is gathering pace. Self-build is a commitment too far for many, but if taking the fintech pathway is fraught with challenges, how does a business balance the need to progress against the pain of implementing and managing multiple applications?

This is where TMI Innovation Lab entrant, AAZZUR – a London- and Berlin-based microservices, cloud-based, containerised API aggregation platform provider – has the answer. It sounds complicated, but rather than being an app builder or a service company, the firm is an integrator of multiple embedded finance components, as well as a systems administrator.

It achieves this by offering existing third-party specialist-built products and services – selected as best-of-breed – and rebundling them as scalable front-end modules to which clients can connect, on an as-needed basis, via the firm’s single platform.

AAZZUR is described as a platform-as-a service (PaaS) offering. This means that the integration and front-end layer within its architecture enables banks, for example, to offer their corporate clients banking-as-a-service (BaaS) options, or for corporates themselves to embed selected financial services to offer to their own clients. In both cases, AAZZUR’s data warehouse and business intelligence layer spans all connected applications, enabling users to extract and present a range of end-customer insights from a single point of access.

Opportunity spotted

The trio of AAZZUR founders, CEO Philipp Buschmann, COO/CFO Martin Damaske, and CTO Richard Unger, bring together a range and depth of experience. Buschmann is a former programmer, MBA graduate, strategy consultant, and a serial entrepreneur (he took one of his businesses, Ignis Petroleum, forward for public listing in the US and Germany). Damaske has strong banking credentials and among other entrepreneurial activities was a founder at Hypoport, a B2B network of technology companies aimed at the German credit, real-estate and insurance industries.

And Unger, who prefers to focus on his role as CTO rather than be the commercial face of the business, is a confirmed ‘tech geek’ with a great depth of experience in the banking, government, and telecoms sectors. He and Buschmann have been working on and off together in various capacities since their teens.

The basic premise of AAZZUR focuses on the way fintechs commonly sell embedded finance tools to corporates, where the likelihood of the customer knowing how to build out a wider set of embedded financial services from a set of individual suppliers’ components is often limited.

“It’s not the corporates’ core competency,” states Buschmann. “They can see the business case for a proposition such as embedded finance – and there are some great examples of success such as Lufthansa’s Miles & More credit card and loyalty programme – but to achieve it, a business would have to build a team, hiring or upskilling the right people.”

But while he acknowledges that embedded finance is now open to more than just the largest corporates simply because its price and accessibility has improved considerably, he warns that there is “still a need to know what you are doing technically to make it work”.

A simple analogy offered by Buschmann for the current state of affairs versus what is AAZZUR is trying to achieve is that of an imagined restaurant, where the customer orders a dish but is then brought all the ingredients and told to put it together and cook it themselves. How many customers either know how or want to do this, he asks? “But this is how it is in the fintech world; no one has yet built the ‘kitchen’, so customers are often on their own. That’s why we are curating the different components, combining these in ways that make most sense for our customers, and then delivering them through a single, connected platform.”

Design and build

Upon pooling resources for the project that was to become AAZZUR, it was evident to the trio that building a platform-based service would require the pulling together of several niche fintech suppliers. For each, there would have to be a contract, a technical middleware layer to connect their various solutions, and a well-designed front-end to ensure the best possible UX.

“The problem we saw immediately was that it can take up to two years to piece together all the components, and the effort required to do that absorbs a huge amount of investor money before anything has even been launched,” notes Buschmann.

And there is a common issue for platform builders, he continues. While the construction and deployment of front-end technology is generally well-understood, he says the connectivity and the means of orchestrating the different application providers for a platform approach is rarely easy, and the importance of getting it right often underestimated.

Indeed, Buschmann cites anecdotal evidence of a number of established fintechs having to rebuild their own middleware repeatedly – a task that he admits was forced upon AAZZUR’s initial offering – to contend with a number of issues. These included ongoing data protection and other regulatory updates, vital security and platform scalability revisions, and, crucially, ensuring the technical independence of supplier solutions.

Of the latter in particular, he stresses the need to guarantee that if one key element of the platform ceases to function, it does not bring the whole operation to a standstill. “Worse still, if every component has been hardwired, and a core solution provider fails, you have just killed your company.”

The apparent degree of difficulty in merging variously provided technologies surprised the trio. The lack of an existing solution in the market to do so astonished them even more. “So we wondered if we could make a product that could build a layer across multiple solutions and, if we could, were we then able to intelligently access data from them to help our users upsell or make better decisions.”

Certain that this was feasible, the project ‘incubation’ period commenced in a remote house overlooking the Vienna Woods in Austria, the team was able to focus for four months solid on delivering a plan. Once that had been nailed down, the team emerged into the real world to start the funding and development work.

Relocation to Berlin followed, largely on the back of acceptance into the Techstars Berlin Accelerator Program. This granted access to the well-respected early-stage entrepreneurial ecosystem, through which the nascent AAZZUR concept could be formed into a working reality.

Sharpening the idea

As well as maintaining vendor technical independence, it was evident that rather than simply aggregating a number of single standalone tools for clients to ‘mix and match’, some components would need to be formed from multiple supplier products.

The AAZZUR platform would thus need to be able to recognise and communicate with each of the products it serves, and, within that overarching structure, would require the support of a microservices architecture and a data abstraction layer (DAL).

Microservices are well-suited in this context as each one has a separate codebase that can be managed individually by the platform development team. This enables updates to an existing service, or a new one to be added, simply by creating a new adaptor for it; there is no need to restructure the whole application every time. And by incorporating a DAL, APIs are able to simplify the connection and communication between the various applications and their databases.

The team decided to focus initially on card, account, onboarding, and wealth management services (this would later see lending and insurance) added to the roadmap. It was also decided that only two or three fintech suppliers covering each service would be sought, otherwise, comments Buschmann, “we felt it would create too much complexity, and then becomes more of a challenge for us to maintain connections as suppliers make changes to their applications”.

The limited-supplier approach stands today, at least for now. However, a necessary exception to that limit is made for payments and BaaS applications. Because the AAZZUR team recognises these as “multipliers of sales leads” – the more payments options made available to buyers, for instance, the more likely their purchases will be completed.

With multiple services being offered (just over 30 today), a single contract to cover all would be ideal, comments Buschmann. However, he acknowledges that this is not yet possible on the AAZZUR platform. “We have made something that dramatically reduces our customers’ time and cost to market because we make it technically as easy as possible, with a lot of standard processes, but separate agreements with each supplier are still required, for now.” Plans to address this are afoot.

Getting off the ground

Rewinding to early 2019, with the project well underway, the team’s prior experience of forming and developing challenger banks was able to shine a light on the difficulties of taking a project to the next level. It had studied a range of startups in this space, and the common issue of huge financial outlays (often around €2m) before achieving a minimum viable product (MVP) was plain to see.

“We couldn’t get that kind of money at that time, but we also couldn’t understand why it had to be so difficult anyway: take the same 20 providers and 50 front-end components and you have 80% of the current fintech market! It seemed to us so obvious that we had a better way to do it.”

And having already rejected a consumer-based use case for European citizens travelling internationally in favour of a pure B2B model, it was deemed more productive, and cheaper, to let other fintechs develop the specialist tools and markets, and for AAZZUR to bring them into “an ecosystem of fintechs”.

“But while our model was right, the language around it at that time was confusing. It was hard to describe what we were doing to investors and potential users,” admits Buschmann. “But as soon as the term ‘embedded finance’ had been coined [by Matt Harris of Bain Capital in a November 2019 Forbes article], it was suddenly so much easier and quicker to explain, and that’s when AAZZUR started to gain traction.”

Finding potential clients that want to deploy a solution that is yet to get off the ground is a challenge. But, says Buschmann, “we talked to a lot of fintech accelerators, thinking they would provide fertile ground for meeting banks and corporates for our first projects, and we were right”. Indeed, this was how AAZZUR found its first proof-of-concept and MVP project, with Alior Bank in Poland.

Although the bank eventually decided not to proceed beyond the initial work, it gave the AAZZUR team far deeper insight into how best to promote its proposition than it otherwise would have had. As Buschmann reveals, the platform gains greatest traction with potential users when leveraging the market position of its partners.

For those seeking a fintech solution, established players with a significant marketing presence are more of a magnet as their first port of call, he explains. However, when the potential client finds out that the product offered is not the full solution for their goals, they either have to go in search of the missing component, and then integrate that into their own stack, or build it themselves. “But now fintechs on AAZZUR can direct their clients to others on our platform, for a ready-integrated component, reducing project time and cost all round.”

It’s a set-up that Buschmann describes as “super-symbiotic”. AAZZUR piggybacks on the marketing and recommendations of its fintech partners, and the partners solve their clients’ challenges quickly and easily. Where those partners are operating in similar fields, he says AAZZUR does not involve itself in product selection. But, he adds, “almost without doubt, most of our clients know where they will end up anyway because all BaaS providers on the platform are differentiated to the extent that usually only one fits the end client’s needs”.

Forging ahead

Every system needs to progress both technically and commercially to survive, and development will inevitably see certain aspects change over time. This is likely to be more impactful in the early stages as each fintech finds its direction.

Indeed, after the pivot away from its early consumer-only vision, Buschmann says AAZZUR has revised its target market a couple of times. “First it was just banks, because they have huge user groups within which to embed their financial services. But our size often precluded us from their due diligence and contract approach,” he comments.

The team had noted this effect in other startups. A typical pathway out of this was to focus the sales drive on potential customers that could not afford to build the solution themselves but needed it, or on businesses for which the development know-how and risk appetite was simply absent. This saw AAZZUR concentrate anew on the fintech space and then the corporate market. “With a couple of years under our belt, we’ll be in a position to comfortably re-establish our connections with the bigger banks,” predicts Buschmann.

It certainly has useful form in the FI space. Following its MVP work with Poland’s Alior Bank, the first paying client was PZU, the country’s largest insurer. However, alongside players in the wealth management space (including one with an innovative gold-linked bank and card account), international property portfolio management, and a set of challenger banks targeting specific demographics, AAZZUR’s client list today includes a major European travel agency. There are also a number of pitches going in to larger corporates seeking to enhance their loyalty programmes with embedded finance solutions.

The latter is an area where, once smaller businesses begin to understand the full extent of what can be relatively easily achieved with these programmes through AAZZUR, a whole new market will open up. Indeed, growth is the firm’s current focus, states Buschmann. To help achieve this, another funding round is planned to take it up to Q3 2024. This will likely be smaller than its initial €3m capital injection. However, after Q3, a larger round is being considered, aimed at pushing AAZZUR to the next level.

From a technological standpoint, one of the aims is to make the platform easier for external developers to work on. This will require the build-out of new features, making the platform even more robust. Although Buschmann believes that most corporates don’t want to build their own functionality, and so “a certain level of hand-holding is always appreciated”, he knows that some are keen to immerse themselves in technology. For that, he says, AAZZUR is looking to provide a developer portal, which he feels will help fuel growth.

But as with every business with big plans, headcount is important. “We now have a proven product, we have found our market and channel, and we have built the brand. But to move from tens of customers to hundreds, and then thousands, we need totally new business functions,” states Buschmann.

His list of personnel ‘wants’ includes relationship managers and an expanded operations team. And while he says AAZZUR’s systems security is strong already, this will become a function in its own right as the company and user base grows. “We all have six jobs each at the moment,” he jokes. “But in a year, we hope only to have three.” Nobody said the life of a fintech was easy!