You don’t need to be an avid news reader to know that the world has thrown up some pretty big challenges of late. A global pandemic, rising interest rates, and tough market conditions in areas like tech, to name just a few. As an entrepreneur, it’s easy to feel discouraged and start to believe the naysayers. In times like these it is important to have a lot of support from your closest family, friends, and team members so that you can find the energy to pull through.

At the heart of any company there should be a clear why, and I use that reason many times when I get asked what Bricknode is. If the why is strong enough it will give you the energy you need to continue that journey to make change in the world.

We have been building Bricknode for 13 years now and I have been an entrepreneur for 25 years since I started my first company within FinTech at age 20. In all my endeavors, if the why had not been strong enough I would not have had the stamina to stay the course.

Early in my career I was driven by the quest for money but this quickly changed into a deeper drive to make a change. I wanted to be able to help as many people as possible to get closer, or all the way, to financial freedom and a more rewarding financial life.

I have always liked building, finding, and using new financial services where I could take care of my finances in better ways. The path for taking new services to market was way too long and was blocked by bureaucracy and challenges.

At that rate I calculated that during my lifetime I would only be able to launch a small number of financial services and that impact would not be big enough to make a real difference.

Understanding the bigger picture

By creating a B2B company that could provide a plug and play back-end solution for FinTech entrepreneurs, I saw that we would be able to impact many more lives than if we focused on a direct-to-consumer business model.

Trying to make a dynamic and efficient back-end solution forces you to make some tough decisions along the way. You cannot think short term and you cannot build a lot of specialized customization directly in the core because then you quickly bump into a wall.

Customization is definitely possible, but it should be separated from the core as stand-alone applications or through easy configurations.

This is a worthy cause to make a long-term impact on the lives of many and it deserves huge amounts of resources and investments. Basing our headquarters in a small town in Sweden has been both good and bad. The bad part is that it is hard to gain the type of exposure or trust that a company based in a larger city would get. Who would have thought that a tight team of FinTech experts in Skövde could persevere into running a company listed on the Nasdaq stock exchange! 😀

The good part is the loyalty and commitment that you build in your team.

We are still too small to make everything perfect, but we make up for that by showing heart in everything that we do. Helping entrepreneurs bring their products to market in a highly regulated industry with a lot of monopolies around is what keeps us working way too many hours per day.

Delivering superior investment infrastructure

Over these 13 years we have invented a very impressive and granular core investment system based on transactions and accounts that goes deeper than any other system that I have seen. Thanks to all the engineering skills that has gone into this and all the early adopters that stuck with us, we now have an enormous base where we can handle most types of financial activities.

As we announced in May, we are now going full force into setting up our own regulated brokerage firm. This is the missing piece for us to truly become a real plug and play provider to FinTechs, financial advisors and asset managers. We will not have a consumer facing brand of our own but strictly focus on being a great B2B broker with awesome technology.

We want to be seen as a partner to our customers and an enabler for them. We have invested everything that we’ve managed to raise ourselves, including customer revenue and external investment in order to build the company and the products that we have today. We want nothing more than to be able to continue to invest in our solution and our relationships. We want to participate in the risk of our customers and share in the upside of their successes.

To do this though, we need to get the word out about Bricknode and to gain a lot more users of our systems globally. Only then can we make meaningful change around the world and impact lives for the better. We need evangelists, both in the shape of customers, investors and team members who believe in this same cause.

A helping hand for fellow entrepreneurs

The market is now ready for us and Bricknode is ready to really go global. I will personally make myself available to help and advice entrepreneurs within finance that put the needs of consumers first.

To pull my straw to the stack, I have just launched a new website called Put the fun in finance together with a public code repository in GitHub where I will share code examples to help users along the way.

Only one thing is for certain, we are going to have ups and downs, but I can promise that every Bricknoder will always do their best and invest as much effort as possible into promoting positive change. No matter how great your product is the world is full of challenges and there is no certainty that your product will break through the noise.

The more you practice the luckier you get, and we have certainly practiced a lot!

We have accomplished something incredible at Bricknode, let us just look at a few points that come to mind.  

The problem with this though is that it creates a burden to explain in a short format and it might be difficult to grasp the extent of the opportunity that our wide product suite permits us to act upon. 

It might be difficult to take in that a small company based in Skövde, Sweden has been able to build a product that can be used to rival or complement products built by multiple billion-dollar firms. One of the best confirmations of what we have created is real, is when new staff members join Bricknode from large tech companies and after a few months tells us how incredible it is that we have been able to create such a system on such a small team.  

By using new tech and thinking in new ways I view what Bricknode has accomplished in the financial industry in the same way as what SpaceX is doing in the space industry. No one thought it was possible until it was! 

Getting this message relayed to the world is the real challenge. Most of our efforts over the years has been spent on building extremely smart and generic solutions in the back end which could support any type of financial operation and customer segment that we would choose to target in the future.  

In our interim report for Q1-2022 we talked about our revenue model and how we are working to make the growth less “bursty” by adding more product segments, like Bricknode Investment Manager, Bricknode Deposits, Brokerage as a Service using our own brokerage license, etc.  

The current focus is, and has been, on the product segment called Bricknode Broker where the ticket sizes are large, but sales cycles are long (5 – 6 months). This is where the sales team that we assembled 5 months ago started to work. 

The main limiting factor on growth rate right now is what capital is available for starting organized and sustainable efforts on selling and marketing various verticals.  

In addition to the Bricknode Broker segment the sales team started to work on Bricknode Lending during 2022 and now we are getting ready to start working on Bricknode Investment Manager and Bricknode Deposits. As soon as we can conduct regulatory business using a brokerage license we will be working on Brokerage as a Service too. 

All these product possibilities have been sitting within our product core but we have not had the resources to expose them by associating each one with marketing, sales, and customer success efforts but that is where we are now. 

This short video illustrates what we have been doing at Bricknode. 

So, where do we see our competition? We have a hard time finding someone that can perform as wide an aspect of services like we can but within the different segments we have competition. The main difference with Bricknode compared to other suppliers is the fact that we have been, and are, operators of our own software which we use ourselves. We build stuff that we have a need for and thus we do not work in just theory when developing products which is a huge advantage.  

Developing product is no longer an issue for us but getting the word out to explain who we are and what we can do to everyone from potential customers to other stakeholders is an issue. This is a challenge that we humbly take on and increasing our transparency and communication to all stakeholders is one step on the way to understanding and recognition! 

Best regards,
Stefan

Today, we formally announced that Bricknode has started the application process for a brokerage/securities license in Sweden. Ever since Bricknode started in 2010, we have had the ambition to add a subsidiary to the company group where we can be the primary broker and custodian for our software users. This will boost our own scalability and help deliver a complete service to many customers.

In order to understand the benefits that acquiring a brokerage license will bring our different customer groups, it is helpful to know how we work with them today.

Distinct customer groups

Within the brokerage product division today, we see two groups of customers. The first group are customers who have their own full regulatory permissions to carry customer accounts. These companies can be rather complex and relative to our other customer groups, there are fewer of these around.

In terms of Bricknode solutions, these companies consume pure software, and they can also outsource their back-office operations to Bricknode if they do not want to manage this themselves.

Today, these companies must also establish their own relationships with banks, brokers, exchanges, fund companies etc. to access financial instruments that they would like to distribute.

This means that each customer needs to have their own relationships which can be less cost effective and take a lot of time to cut through red tape. This is bad from a few standpoints.

First, even if Bricknode delivers the software solution on the same day that it is ordered by the customer, it could still take months before the customer gets approval by institutional brokers and fund networks that it might need to access. In addition, it can take years before relationships are set up to manage international tax withholding and other administrative things that should just simply work.

Second, time to market for new valuable products is greatly increased and companies can go out of business even before getting to first base.

The second customer group is characterized by firms that lack full regulatory permissions for carrying or operating their client accounts in their own firm. Some are simply not interested in having the administrative overhead that is required for those accounts like tax reporting, corporate actions, MiFID II reporting and so on. These can be financial advisors or various types of FinTech companies.

There are many of these companies around but today they need to find an external party that holds the required licenses and that has relationships with various trading venues. This  third party might already have a different software provider to Bricknode, so the deals are ultimately lost if the  third party does not want to go through the process of switching core systems.

The problem is that Bricknode cannot supply the full plug and play brokerage solution for this group of customers, since we must go through a  third party which can introduce more costs for the potential customer and make the whole setup less attractive.

Acquiring a license: benefits for our customers

By setting up a subsidiary of Bricknode with a brokerage license we can merge our administrative services into the brokerage division, and we become a one-stop-shop for customers that do not have their own regulatory permissions.

Bricknode is then the only party that must set up and maintain the relationships with trading venues and issuers of financial products and we can obtain economy of scale.

When it comes to the other customer group that has full permissions, we can now present them with a choice where they could either maintain their own external relationships or switch to Bricknode as their primary brokerage firm. The latter would enable them to participate in the cost savings that this would generate both from shrinking the administrative overhead and from lower trading fees.

 

Acquiring a license: benefits for Bricknode

From a revenue perspective, obtaining a license would greatly increase the market opportunity for Bricknode in the short and long term. It will help create higher margins and shorten sales cycles in general.

As the provider of accounts, Bricknode would have a direct legal relationship to each account holder. This would enable us to apply all our internal tools and knowledge to optimize processes and the end customer experience.

Brokerage-as-a-service

Not that long ago, big UK-based fintech Revolut decided against setting up their own regulated securities firm when they launched equities investments on their app. Instead they made a partnership with another company that is providing and carrying those accounts and making the trading facilities available. It makes a lot more sense for our prospective customers to let Bricknode take care of everything under the hood too, so they can just focus on the end customer.

There are still very few alternatives today for this sort of service and no one is in control of the full back-office software like Bricknode is with Bricknode Broker. By controlling all technology, Bricknode can be agile and quick in ways that other companies who rent their back-office systems for this purpose can only dream about.

Bricknode will provide these accounts and facilities as a pure back-end service and will not have its own B2C offering that could compete with the services of our customers. During the years Bricknode has established technology and the required facilities to provide a wide array of financial instruments like global equities, funds, bonds and more. We see no technical limitations with regards to the products that we can provide, and we think that this complete service bundle will be revolutionary.

Together with front-end partners like Additiv we will be able to provide financial advisors with stellar tools to manage their customers and a full suite of financial products to distribute. This is all the while making sure that the financial advisor builds their own brand and customer loyalty. This is something that is not being done today when financial advisors are forced to place their customer accounts with standard retail brokers that compete for the same customers.

The time is now

Why now, you might ask. Simple, it’s because we have not been ready for this in the organization. Thanks to the IPO we have been able to onboard the right team members for this and we now have the necessary resources to do this with great quality. We have also been able to conduct the full administration for current software customers which has enabled us to build up the required internal routines and learn everything first-hand.

Getting a license to perform regulated activities will not do any harm to the current pure Software-as-a-Service offering where business is expanding aggressively over multiple product lines based on Bricknode Core. It will, however, add a whole new dimension to Bricknode and unleash us from many limitations impacting customer acquisition today.

We did it! We just reached the most important metric in the history of Bricknode. As Jim Collins puts it in his great books, this metric is “the percentage of key seats on the bus that are filled with the right people for those seats”. We just reached 100 %!

I see articles each day where companies are saying that the most challenging thing for them is to recruit the right people.

It is difficult for a company to grow faster than its ability to get enough of the right people but now we are there. One of the core values that we believe in is endurance and long-term thinking. A lot of things in life comes down to pure luck but by having endurance we expose ourselves to luck over a longer period and increase our odds for reaching our vision to be the BEST Platform on Earth for Financial Products!

We have managed to embrace working globally and we are completely flexible with when and from where our team members are working. We are in multiple countries, and we are having a blast each day, who would have thought that we would reach this level of team and product while being completely independent and coming from an unknown small town in Sweden! I would say that Bricknode completely embodies what ROWE means.

Our purpose is to make sure that great consumer friendly financial products and services reach the market and never die from the lack of available tools or from having to fight the giants of the financial industry.

I remember myself the day that we got our first API launched at Bricknode and how the possibilities of building anything for finance just opened up in front of me.

Now we have reached the first big goal and now just watch us as we motor on to the next one!

Please take a few minutes and listen to my reasoning around this blog post.

Last night Salesforce released its report for the 4th quarter and showed that it generated more than 7 billion USD in income. Salesforce was the main inspiration for me when I decided to start Bricknode in 2009.

Salesforce was one of the first companies in the world to offer a cloud-based Software as a Service to businesses and started in 1998. Salesforce began with a CRM application and to offer it they had to build a core cloud application infrastructure. As the years progressed Salesforce started offering the core infrastructure called Force.com. It also expanded into other product areas together with its marketplace offering and promoting their API for others to use and expand upon.

This is extremely similar to what Bricknode is doing, we started with Bricknode Broker for what is called financial intermediaries. These are banks, brokers and FinTechs which distributes financial products and acts as an intermediary between the issuers of these products and the consumers.

When developing Bricknode Broker we too had to create a core, we call this the operating system for finance. The main challenge for Salesforce in 1998 was technology since there were no infrastructure available for offering cloud based software.

For Bricknode the pure technology behind cloud infrastructure has never been the main challenge. Instead, the challenge was to invent how the so-called financial domain objects should be represented in code in a scalable and generic manner as to not “hard-code” stuff and get us into a dead end. Another challenge was regulations, in 2010 both potential customers and regulators told us that it was not possible to have financial applications running in the cloud…how wrong they were.

Many have failed along this journey and not taken the time to create a real granular transaction engine as the base. It took Bricknode between 2009 – 2021 to do this right and test every aspect of our invention with multiple real life customer cases. It took Salesforce about 10 years to build up the core technology and launch into a real core software provider in the cloud for a whole industry.

Just as Salesforce did when they launched Force.com in 2008, Bricknode is now morphing into being a multi-product company based on a strong core system, which customers can use to build their own applications through our API.

Our own research shows that a majority of neobanks are choosing to use a SaaS provider as their core when it comes to offering financial services and we think this trend will continue to expand. The Bricknode core now covers everything from investments and loans to wealth management and you can basically build anything related to finance on top of our operating system.

During the last few years we have been able to build a number of new killer applications within specialised areas like Bricknode Deposits and Bricknode Fund Manager which are scheduled to be released to the market during 2022. On top of this we are also developing an application for mass adoption globally that does not require the user to be a regulated company. It will help every company around the world to organise their finances and automate administrative activities around this including accounting, reporting and keeping up to date with all of their investments and liabilities. This will be a “must-have” addition for companies to connect to their regular accounting systems so stay tuned!

Salesforce, together with many software companies, have seen their share price fall more than 40% since the end of 2021 even though they continue to show unbelievable long-term growth. The scalability of the offerings are governed by how dynamic and generic they are, if the solutions are custom made for each customer then the scalability of future profits does not exist. A while back I wrote my thoughts on how to value a SaaS company which you can read here.

The gross margins for Salesforce are at 75% while the total operating margin is at 3.5%. If the system is built right the total operating margins could eventually go to +50% but that would mean that the company would slow down its investments into future growth and in reality, borrow from itself which Salesforce is not interested in.

For the last 10 years Salesforce has grown its annual revenues by 25 – 35% each year, this is what having a long-term view can do for a company, like the view that Salesforce founder Marc Benioff has had all the time. Salesforce has become a purpose driven company that does good things for the world and is a great inspiration for today’s entrepreneurs!

By focusing on products and helping customers reach their goals my dream is to make Bricknode into a Salesforce for finance. I love building software that I can use myself and with the coming mass market offering from Bricknode we are truly closing the circle of building the network between financial service providers and financial service consumers where we are driving change to a more efficient and user-friendly way of consuming and delivering valuable financial services to companies and individuals.

As I and Co-CEO Erik Hagelin wrote in the last quarterly report, 2022 is when we use our newly acquired body at Bricknode (going from around 20 to 40 staff members) to launch all our new products on top of our great core and establishing ourselves as the premier software, network and infrastructure provider to the financial industry and all its stakeholders, consumers and providers alike.

This is what really motivates me personally to burn the midnight oil and be highly engaged in coding our applications!

Just as Elon Musk is now able to help Ukraine with internet, I hope one day that Bricknode will be a global powerhouse for good and make an impact through technology!

Being able to offer buying and selling of equities through various apps and FinTech offerings is gaining in popularity and traditional mutual fund brokers is seeing the need for adding single stocks to their universe of investible assets too.

This article builds upon the article called How to get started with Bricknode as a core banking system for current accounts in 30 minutes

Adding the instrument type

The first order of business is to activate the instrument type for stocks, I will navigate to the marketplace and then find the add-on for stocks.

With this add-on enabled I can go on and add stocks to the system, this can be done automatically from a data feed, via API or manually. Bricknode has a feed for reference data (all the basic information about a stock) and end of day pricing data that can be enabled for a system and then all instruments available on subscribed exchanges will be imported into the system and a daily price feed activated.

For demonstration purposes I will add the stock of Apple manually in this article.

There are some pre-requisites that are needed when adding a stock so that things like order routing and TRS reporting can function properly. One of those things are the setting for primary market. Within the “System Data” section there is a selection called Places.

This is the area where I will register the exchanges where the instruments are listed. I will start off by adding Nasdaq US as a market.

Now I can navigate to the instruments section and select Stocks and then simply click the “Create” button to get a new dialogue for creating a new stock instrument.

The first view will look like this.

As can be seen there is a setting called Issuer where I can register the issuer of the stock if I wish, in this case this would be Apple Inc. and if I want to get the full value of the system I can use this granularity but I do not need to work with issuers to simply offer investing in this stock so I will leave it for now.

On the next screen I define some properties for the instrument.

On the last screen I can enter various categorizations like for example risk groups, industry groups etc. Categorizations are highly configurable but outside the scope of this article.

When I click “Create” the instrument will be created and I will be asked if I want to create an Execution Interface.

What in the world is an Execution Interface?

An Execution Interface is a trade route, it defines how orders are going to be executed. If I have activated an integration to a broker or bank I will have that as an available Execution Interface with the relevant settings for that trade route.

In this example I will configure the Manual Execution Interface. Before I do this I will set up a new custody account that will mirror the brokerage account that I am using for safekeeping of the stocks that are bought.

Just as in the previous article the custody account is created from the House View.

Bank 1 will be the Legal Entity that will act as a counterparty to all trades as my broker and thus I need to create a Counterparty Account for this Legal Entity too. I do this by navigating to the Company and then I create the new account of the Counterparty Account Type.

Now I can go back and create the Execution Interface.

Let’s add some data

Finally I will get some historic data for the instrument which I can import via API, files, enter manually or by activating an add-on with end of day data for the instrument, this way I can see a chart and start using historic performance calculations too.

All is now set and as a back-office user I can enter trades on behalf of accounts.

The Financial Advisor with Power Of Attorney for a customer can enter orders too.

And finally the end customer can log on and enter trade orders as well.

Complete order management capabilities are available through our API too for you to build your own customer experiences and automation.

Please get in touch with us to explore your case further!