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!

This is for all you FinTech entrepreneurs who would like to give the likes of Revolut, N26, Lunar and Klarna a run for their money. In this article I will demonstrate how to literally configure a new subscription to Bricknode as a core banking system to start managing current accounts within 30 minutes and at a fraction of the cost that legacy suppliers charge.

We love to empower entrepreneurs so they can bring new solutions to the market at lightning speed.

First I simply signed up for a subscription at www.bricknode.com and I got the logins for the system the same day.

Now, if I wish I can take care of everything myself or I can ask for help from the customer success team. Starting a current accounts business is extremely easy and this article explains everything that you need to do to get going.

Where will you hold your customers cash?

As a first step you will probably already have established a relationship with a bank, or “Custodian” as we call it, where you have an account for client assets. This account has to be created in the Bricknode system as a custody account so the system knows where the assets are stored in the world outside of Bricknode.

Basically the only concept that you really have to understand before you start is what we call Account worlds and Dimensions, that’s it.

Here is an illustration.

The “Internal accounts” are your individual customers accounts, your partners accounts and could also be your own accounts, we call you the “House”. All the assets that reside in the Internal accounts has to be backed up by assets in the outside world, like cash at a client account at a bank.

In Bricknode Financial Systems (BFS) I have now received access to four interfaces, these are:

In the screenshots that follow I will reference which interface they are coming from with BackOffice, Partner, Customer or API.

Let’s have a first look at BackOffice to set up your first Custody account.

When you first log on you will come to the Dashboard, which you can easily customize with regards to the widgets that you see.

Locate the House View in the upper right corner.

To create a new account simply click on the Create button.

In the resulting dialog I will select Custody Account as the Account Type and I will name the account Bank 1 Client Assets, we are going to store the actual IBAN number of the custody account as a property on the account but it is recommended to include parts of the account number in the label so you can easily identify the account going forward.

Within Bricknode an account can hold any asset so we are not limited to having one account per currency, which a lot of traditional banks seems to be limited to because of legacy systems. We do have to set a base currency on the account though because this is used for calculating account returns in percentage terms, we do not have to deep dive into that here though.

If your bank/custodian limits you to one custody account per currency, no problem, just set up more custody accounts within Bricknode to reflect that.

Now the first custody account is created and I can progress to the next step.

What currencies would you like to accept?

Within Bricknode it is possible to manage any financial asset/instrument that I know of, in this article though I will only discuss traditional currencies. Any account can hold any type of asset but for currencies I want to configure a default custody account for ease of use and I also want to activate a certain number of currencies. Let’s navigate to System Data->Currency Management for this.

Within Currency Management I see that there are 33 currencies available by default but I have set a lot of them to Closed. I have the option to open currencies with different permissions to make them available to BackOffice, Partners and/or Customers.

To start with I have enabled four currencies and I use the same default custody account for all of them.

Setting up the partner and the customer

In this article I am working with a partner relationship where a user called Bricknode Partner is bringing in business and the first customer is called Bricknode User. Creating these users manually in Bricknode is very easy, simply navigate to User Management and create the users through the creation buttons.

Repeat the same process as above for creating the customer manually. Through your own customer facing apps or websites you would be doing this using CreatePersons in our API. If you use DotNet you should get our NuGet package where you have everything already implemented.

Working with the customer account

Let’s navigate to the customer within BackOffice and create a simple account. When you use the API you would implement the function called CreateAccounts for this purpose.

Deposit cash

The transactions relating to deposits and withdrawals would probably come automatically from an integration with a payment service or the custodian but here I will illustrate a manual deposit. Click on the action menu for the account and select Deposit Money.

The resulting dialogue will default to the right custody account and set the Trade Date, Settlement Date and Value Date to today. I have entered a deposit of EUR 1,000.

The balance and the transaction will now show up in the Overview within BackOffice.

The partner perspective

On the customer account I have set up a relationship with the Partner user.

And I have also set up a Power Of Attorney with “View” permission which will enable the Partner to see what is going on in the account. When you use the API you would implement the method called CreatePOAs.

On the dashboard, which the partner can arrange and add widgets to, the customer account can be seen and the related transactions.

By clicking on the customer the partner can drill down into the details.

The customer perspective

If you do not have your own app or website ready you can let your customers log on to the standard customer portal where full interaction can take place and the content can be fully configured by the administrator together with branding.

Reconciliation

The final step is the reconciliation of accounts that should occur daily. Remember the Internal and External accounts, the first I will check is the total balance of the Custody Account against the account statement that I get from my bank/custodian. To view this I will navigate to Positions->Cash.

Now I will filter on the transaction dimension Settlement and enter the balance date of what I would like to reconcile and also select Custody Account as the Account Type.

Here I see that EUR 1,000 is present in the custody account which should align with the account statement from the bank/custodian. If it does not I can click on the account and drill down into each transaction to see where the difference comes from.

Now when I know that the External account is fine I want to know if these assets are correctly spread out across Internal accounts too and for that I want to activate the Add-on that we call Reconciliation Manager. By navigating to the Marketplace I can request a trial of this Add-on right away.

The Reconciliation Manager is now activated and available in the House menu.

 

From the reconciliation overview I can drill down into each transaction if I wish by clicking on the House icon in the list.

Now I am all set and can continue doing business!

I love metaphors! They are extremely useful for explaining new concepts before they gain mainstream recognition. Like the Ents in Lord of the Rings I also think that if things are not worth taking a long time to do, they are not worth doing at all.

We have built a real operating system for financial activities, the same way that Microsoft built an operating system for the computer. It took us 10 years to build this thing and for the next 10 years our plan is to become something for everyone.

Windows harnesses the communication with the computer and standardizes how you use the processor, memory, storage and much more. Bricknode standardizes how you perform financial activities of any kind. Trading stocks for us is like storing data in computer memory for Windows. Initially Microsoft had to create their own applications on top of their own operating system as well, like office. We have created “office”-like applications like Bricknode Broker, Bricknode Fund Manager, Bricknode Lending and a few more to perform specialized financial activities and we are just getting started!

Are you a startup FinTech company? Get in touch with us, just as a new software developer would not start off by developing a new operating system we can deliver it to you and you do not have to concern yourself with the nitty gritty details of communicating with the CPU, you can get started right away with building the business logic and customer experience.

Are you an industrial company with 20 shareholders where you are going to manage a shareholder loan with interest calculations and monthly payouts? We have the “office”-application for you!

We deliver the software in the way we think that financial software buyers should be able to receive software in the 21st century. Delivered the same day, no strings attached and completely composable and scalable. You activate the stuff that you need when you need it, just as the App Store, and you pay only for what you use!

Launching a financial service company or managing financial activities have never been easier. If you want to build your own applications for managing financial activities come join our marketplace and we will give you a free setup of Bricknode Financial Systems right away as a developer. Just as with the App Store you can build and market your own business on top of ours.

Let’s start the operatingsystemfor.finance-revolution together!