Apiax: building the next leader in regtech

By: Bastian Hinterramskogler

Can financial institutions solve their overwhelming manual compliance challenges and master regulatory complexity automatically?

Apiax believes so, and so do we! XAnge is excited to co-lead their $6.6m Series A with our friends at e.ventures.

The surge of financial services regulations — a ‘necessary evil’ for financial institutions

Since the financial crises in 2008, the volume of regulations and their updates has continuously increased. Anti-money laundering, financial stability, consumer protection — just to name a few of the many important fields concerned. This has led the RegTech Council[1] to the conclusion that similar to Moore’s law in the field of computing, there seems to be a ‘Law’s law’ which means the volume of regulations doubles every few years.[2]

And we have arrived at a stunning pace of regulatory change: just in 2018, 57.000 regulatory alerts were counted by Thomson Reuters.[3] This figure translates into ~223 regulatory developments for the banker per working day or, put differently, 1 regulatory development every ~2 minutes.[4]

While effective regulation is essential for stakeholder protection, the extent of these developments has severely challenged financial institutions. Their legal and compliance departments are struggling to keep up the pace, even though their workforce has quadrupled since the financial crises to more than 7.000 employees per global bank.[5] This increase in needed expertise has also driven the industry-wide compliance spending which has surged to $270bn per year.[6] However, this ‘labor fix’ is neither economical nor sustainable given the continuous growth in regulatory updates arising from the ever-accelerating nature of financial markets.

The banks need digital tools to master the surge of complex financial regulations.

Apiax — an ‘open compliance platform’ to cure the pain

Apiax’s appeal is easy to understand in the aforementioned context: they have built an ‘open compliance platform’ which links law firms as the suppliers of up-to-date legal opinions with the financial services firms as the consumers. Apiax, as the empowering tech intermediary, greatly facilitates this bridging process with a highly flexible SaaS workflow tool to transform the legal opinions from paper into binary, digital machine-readable rules. These verified and up-to-date rules can then be easily fed via the Apiax API into any bank’s process or financial product. And compliance can be tracked within the Apiax SaaS end-to-end across all involved stakeholders.

With Apiax, law firms can finally scale their regulatory expertise distribution; financial institutions can finally automatize their compliance processes leading to significantly lower costs. Win-win — it’s a great product.

Traction from day-1

Apiax went live in the early summer of 2018. Until the end of the year, they had not only convinced leading law firms but also secured major clients in the banking industry — and the recurring revenue that goes with it.

Given the usual long sales cycles for enterprise SaaS, this is nothing short of an exceptional performance. It has a lot to do with the team’s amazing energy and execution which is also showcased in their yet comprehensive offering for global financial institutions: their compliance solutions already span across wealth management to asset management and encompass rules across 90+ jurisdictions.

A great team hints at a great journey ahead

Great startups are great teams if anything, and Apiax is no exception. The founders Nicolas, Philip, Ralf & Thomas bring a unique skillset combination arising from profound professional experiences in compliance & banking, software engineering, product management and enterprise software sales. That is what we at XAnge refer to as an unfair advantage. And we weren’t the only ones impressed given the competition between VCs to get into this Series A. We are proud having received the trust of the founders to co-lead their round with our friends at e.ventures.

It’s not the first time that we and e.ventures have seen innovation in the financial markets through a similar lens. May we remind you of the market for deposits? e.ventures has been instrumental in helping Deposit Solutions to build the leading open platform for deposits and to develop into Germany’s latest unicorn. Wait! Open platform for deposits, open platform for compliance — are there parallels here? Only time will tell but one thing is for sure: Nicolas, Philip, Ralf & Thomas, we are excited to back you on your visionary journey!

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[1] The RegTech Council is a not-for-profit think thank composed of regulators, firms and academia.

[2] RegTech Council (2018, http://bit.ly/RegTechCouncil2018).

[3] Thomson Reuters (2019, http://bit.ly/ThomsonReuters2019).

[4] Assuming 256 working days per year such as in the UK and an 8-hour working day.

[5] KPMG (2019, http://bit.ly/KPMGRegTech2019) and The Economist (2019, http://bit.ly/EconomistRegTech19). While the KPMG figure refers to 2014, The Economist mentions that the compliance hiring has continued in the years after.

[6] Financial Times (2017, http://bit.ly/FTRegTech17).