Mews secures an EMI license: What this opens up for hotels and hospitality finance. Ft. Maximilian Lehmann

[00:00:00] Maximilian Lehmann: I come to the front desk. They say, “Oh, Mr Lehmann, nice that you're here. We need a card for you, basically, to cover for accidentals.” “I don't have a card with me. I have my phone. Can I tap my phone somewhere?” And the hotel was like, “No. No. No. I need that physical card.” Why? There's no reason you need that card other than your systems don't work each other basically.

[00:00:33] Matt Welle: Hi, everyone. Welcome back to another Matt Talks Hospitality. And today, I wanna talk about finances. Handling payments has been a blind spot in hospitality. There's so much friction. There are too many intermediaries and very little visibility in how the money gets processed until it reaches your bank account at the hotel. On that note, a very exciting note, Mews has just been granted an electronic money institution license, an EMI license from the Nederlandsche Bank, which is the Dutch national bank, making us the first svertical hospitality operating system in the European Economic Area to hold one. This is a regulatory milestone that took us over a year to obtain, and it's the foundation for a financial services strategy that we think can fundamentally change how hotels operate money. My guest today is Maximilian Lehmann. He is the CEO of Mews Financial Services, the regulated subsidiary of Mews that holds the license. Welcome.

[00:01:27] Maximilian Lehmann: Thank you very much, Matt. Excited to be here.

[00:01:30] Matt Welle: This is very exciting. No?

[00:01:32] Maximilian Lehmann: It is. It is. It's been long in the making. And finally, we can talk about it.

[00:01:36] Matt Welle: We knew that your entity existed and the work was ongoing, but I don't think many people outside of Mews knew this. So, what is Mews Financial Services, and how did it come about?

[00:01:46] Maximilian Lehmann: Mews Financial Services, or as we call it internally, Mews FS, is essentially the regulated arm of Mews, right? So, we are part of the business, but we hold that license, that EMI license. And that basically means that we can handle money for ourselves now, and rather than always rely on third parties. For us, it was a logical step to get that license because we've been running payments for about 10 years now, Mews payments, right? For us, it was really the next logical step of running Mews payments and going one level deeper, and that's to own it and to be in the money flow ourselves. So, now, you need a license for that, and that's what Mews FS really is.

[00:02:26] Matt Welle: What is an electronic money institution license? Like, it's a mouthful. What does it actually mean, and what does it allow us to do?

[00:02:34] Maximilian Lehmann: Yeah. Exactly. So, EMI stands for electronic money institution license. Absolutely right. Think of it as the permission to hold money on behalf of your customers. At the moment, before the license, we were not allowed to do that, right? We had partners that would hold that money on behalf of our hotel partners. Now, we have that license to do it on our own rails, with our own sort of, on our own books, if you will. And in plain terms, we are much closer to the actual flow of a guest payment instead of being removed from it and just, like, giving instructions. That's essentially what an EMI license is. And yeah, payments are the lifeblood of a hotel, and that's why we wanted to be more in control, but also flexibility, offering additional services when it comes to the money that we're holding for our hotels.

[00:03:35] Matt Welle: Like, is the first level, is that not the payment license, then it's EMI license, and then you go to banking license? Is that the three levels that I'm thinking through?

[00:03:44] Maximilian Lehmann: That's exactly right. That's exactly right. So, you have a payment license that, essentially, lets you be in the money flow as well, but you can't hold money, right? So, the EMI license is essentially the next level to a payment license, where you are allowed to do payment initiation, the payment itself, but also hold money for your customer, as part of an EMI. And then a bank is one step further. And, essentially, what it does mean is that as a bank, you can lend out credits, loans, right? And you basically loan out that money. That's not what we do. EMI, the way it works is we hold money, but in a separate entity. So, it's not Mews. It's also not Mews FS. It's actually a foundation where the money is safeguarded in that sense. So, exactly to your point, like, payment institution license, EMI license, bank license, we got the middle layer, essentially.

[00:04:37] Matt Welle: So, an EMI license allows us to do more with the money than what we would be able to do with the payment license in terms of the innovation that we would likely start building.

[00:04:45] Maximilian Lehmann: Yes. You can think of it as we can hold money, and we can offer our customers additional services, so what to do with that money, right? So, you can issue a card. You can have faster payments. You have, like, all these additional services that you can then do once you are in the money flow and hold that money indeed.

[00:05:04] Matt Welle: So, what I'm hearing is that an EMI license allows us to remove little pieces of fragmentation in us launching new products or services. And every piece you introduce is exceptions, like rules we have to comply with that make the process messier for customers. So, it sounds like, ultimately, our customers will have a much smoother experience once we move them into this entity.

[00:05:27] Maximilian Lehmann: Absolutely. That's essentially what it comes down to. Plus, what I think is very important and one of the reasons, on top of what you just explained, why we are doing this is that when you're in control, you can add much more hospitality-centric payment products that other partners couldn't just launch before. The only reason why we can do this is because we have that license.

[00:05:50] Matt Welle: Why haven't we done it sooner? Like, what held us back from doing this, like, 5 years ago already?

[00:05:53] Maximilian Lehmann: It has to do with how hard it is. And you can even ask, like, why don't other PMSs do that? Right? It's just like an EMI license sounds, on paper, as, oh, it's a paper exercise, but really, what it is is basically three layers, right? On one side is the regulation, right, that you have to adhere to. So, you have to think of, like, how to adhere to the regulation. How do you change your process so your money is safe? And because you process money now, all of a sudden, on your own rails. So, the regulator, especially in Europe, expects you to have all the processes in place to keep that money safe. So, we created about 2,000 pages of documents just to lay out essentially all the processes and all the different things that we are implementing at the moment to keep our customers' money safe. And it reaches from onboarding through IT security to the data layer, all the way to how we pay out and how we safeguard customer funds. All the way. But then also, what you have to do is not only that paper exercise. No. You also have to implement it. You really have to uplift a software platform to become payment-grade ready and take on that responsibility that you just sort of laid out in those documents. And that's really when the rubber hits the road, because that's when you really have to make significant changes on how the platform is built and how software is treating payments.

[00:07:30] Matt Welle: And in my intro, I said we're the first vertical hospitality operating system in the European Economic Area, which is not the EU. I just need to say that correctly. That whole kind of license, why has no one else done this before?

[00:07:45] Maximilian Lehmann: Yeah. I think so. First of all, just to make sure we are talking about the right thing here. So, the European Economic Area, that's 30 countries, right? So, that's 30 countries all over Europe, and it's actually much broader than Europe. And Europe is actually not a legal term. Europe, sometimes people think of, like, hey, this is the UK, this is something else or not anymore, right? So, Europe is much more of…

[00:08:10] Matt Welle: The Eurovision, it includes Israel and Australia. It goes very far beyond the borders.

[00:08:15] Maximilian Lehmann: Exactly right. So, this is now, the European Economic Area is a legal term that says, “Okay, these are the 30 countries that are in scope for our license.” So, we start in the Netherlands with the passport. It's like applying basically for the same license in all these different countries. 30 countries. That's our scope. Now, are we the first ones to do this? Absolutely. When it comes to an operating system for hotels. Has anybody else in hospitality, if you look a bit broader, done this before? Yes. Actually, there are good cases out there. Think of, like, Booking, for instance, OTAs. Right? Booking has a license in Ireland. If you think about even broader hospitality, Uber, a partnership that we announced just recently at Unfold. They have a license themselves. There are other examples when it comes to marketplaces. eBay has a license. Vinted has a license. So, we're definitely not the first company that gets an EMI license, although you typically see it from payment companies first, right, and not so much on the software side, although there are examples, the examples that I mentioned. But we are definitely the first when it comes to hospitality operating systems.

[00:09:21] Matt Welle: Yeah. The really deep space in the business.

[00:09:23] Maximilian Lehmann: Very deep space for hotels. Absolutely right. Yes. Now, there's one thing that sort of spans across all of these industries and examples, and that is all of these examples, all of these companies have done this in order to be more innovative, to build for their own sort of vertical, for their own industry, and to be more in control.

[00:09:42] [AD]: Thank you so much for listening to Matt Talks Hospitality. I've really enjoyed these conversations. I did wanna take a moment to talk about the Mews Revenue Management System. Two years ago, we acquired Atomize, and we then, from that moment, started rebuilding the whole platform from the ground up at the core. So, the idea was that the Mews Operating System becomes the core platform that everyone in the hotel lives in. But we had to rebuild the whole user experience inside that same platform whilst we optimize the algorithms. That product is now live. Hoteliers and revenue managers love it because once they log in to Mews, they get their business intelligence insights. They can manage the rates and the connectivity to the channel managers. And now all the price recommendations are sitting on that same platform. And this makes the life of revenue managers much more interesting because it turns them into revenue strategists. You can see this demo straight away, directly inside the system. We can get you live by tomorrow, and we can get recommendations flowing to instantly make your business a better business. I hope you enjoy it.

[00:10:36] Matt Welle: The companies you mentioned are some of the greatest product companies in the world. And, you know, when you build a product that is very close to delivering an excellent experience, an end-to-end experience for the user, you have to own more of that cycle, like the touch points that happen. And this is one of those very natural things if you think about hotels. And whenever you walk up to a receptionist, usually, you have to whip out your credit card at some point because there is a payment moment included in there. And more and more, we're switching that to digital experiences where actually a lot of things in hotels now happen via WhatsApp or SMS, and you wanna make sure that you take really secure payments over those digital channels. And this just allows us significantly more control over that end-to-end experience. So, this is really why we've gone down this hole on a vertical, and we think it's really critical that we get this right.

[00:11:24] Maximilian Lehmann: Maybe one thing to mention here is when you look at the U.S, you have other examples too, like the Toasts and the Shopifys of the world that have done in their own respective vertical, right, ecommerce, but also restaurants. They have done a tremendous job at also pushing the boundaries when it comes to embedded financial services. Here in Europe, it's much more about customer protection, right? So, if you wanna do what we plan to do, our ambition is really to become the financial infrastructure for hotels, then you have to have a license because that's the only way a regulator like the Dutch central bank, the Dutch national bank says, we trust you to handle this money for your customers in the appropriate way.

[00:12:08] Matt Welle: Yeah. Like, if you look at the U.S, you see many, many great technology examples, especially on the fintech services side, because they have access to a single market. Whereas once you get to Europe, we like to say that we're a single market, but we're not. We're also 30 individual countries with individual regulations. So, scaling technology for fintech services in 30 countries is difficult, and there isn't the same access that a U.S business has to some of those amazing APIs that they can build in beautifully natively. And this is really why we wanna have more access to that.

[00:12:40] Maximilian Lehmann: Exactly right. If you think broader and if you think beyond payments and really think about financial services and better financial services, then you have to have a license because what you quickly find is, like, these payment providers that help you with payments, they really come to their limitations when it comes to IBANs, for instance, right? Issuing IBANs or issuing cards in multiple currencies. If you will really come to your limitation. So, the only way to build something truly for hospitality is if you own the rails and if you then are in control of who you connect with for the specific needs of your customers.

[00:13:18] Matt Welle: Can we talk about what actually gets involved with the card's payment? Because like, as a guest, I just assume, I just tap my card, and then the bank is like, yeah, I'll just put that money into your account, but a transfer of transaction, there's multiple steps in between. Can you simplify that? What actually happens once I tap my card in a hotel to the hotel getting paid out?

[00:13:37] Maximilian Lehmann: There's actually a lot of different parties involved. Now, to you, it feels instant as a hotel owner or as a front desk staff. It feels instant because you get that ping instantly. But, actually, what happens is that this card, the transaction, travels through a lot of hands. Basically, what happens once you tap a card, it goes all the way to your issuing bank. So, the bank that has given you this card, your Raiffeisen, your German Sparkassen, your Dutch local bank that you, as a guest, even the U.S bank, right? Whoever you have, like, this card given to, that needs to basically say, yes, Matt has enough money on their card in order to pay for this. So, you have the banks, then you have, of course, as an aggregation layer, almost as a messaging layer, you have the Visa, the Mastercards, the AmExs of the world. So, the schemes that essentially connect all the banks to the acquirer, and the acquirer is nothing else but somebody that basically connects the hotels to all these banks and to the schemes, because you, again, need a license. And then you have all of these different players, in the back, that handle the transaction and ultimately say, “Yes, the card is approved. You can sort of bill that customer. Yes or no?” And each of them, taking their own little time, they all have their own sort of API layer, and then you see beautifully on Mews that it is approved. Yes or no. Right? So, ultimately, we hold a session that has the last bit of passing through all these hands, and we tell you, yes, that card is approved or not. And then what happens is the entire settlement flow. So, in addition, so it goes all the way back, right? So, essentially, yes, the card is approved. Yes, you can pay, and then the money has to flow through the system. Each of these players they take the little time. And that's essentially what happens underneath.

[00:15:39] Matt Welle: So, knowing all of that, and now when we look at Mews hoteliers, what actually changes for them?

[00:15:45] Maximilian Lehmann: We got the license, right? Great. That gives us the right, the license to operate in this environment. We're still building this out, and we will start later this year with a small-scale pilot. For now, what is very important for you as a hotel customer, especially if you're outside of Europe, nothing changes. Even within Europe, nothing changes today because we're building the platform, and we're making sure this is built for scale. Today, nothing changes. And then in 2027, 2028, we will do a country-by-country rollout, and that's when you see things really, really change for you.

[00:16:28] Matt Welle: One of the questions we often get from hoteliers is just because they all want to have a local payment method in their country. You mentioned earlier the German method that we've been asked about before. What's our plan on alternative payment methods?

[00:16:41] Maximilian Lehmann: It's very dear to my heart. So, when we will roll out Mews Financial Services, Mews FS, a big component of that, a very crucial component of that, is to launch also the alternative payment methods in each market that guests are actually using. So, we started already by having iDEAL, and that will be the first local payment method that we launched, iDEAL. And then we go market by market and look at local payment methods that are most relevant for guests in that local market that are missing today. And, you know, you can think of the local payment method we're discussing, the blue one in Germany, but then there's many, many others: there's local card schemes like Girocard in Germany, there's local card schemes in France, like Cartes Bancaires, there's Bancontact in Belgium. It's like, in every country, there's at least one local payment method that we will launch and that you will have very soon at your fingertips for your guests to pay.

[00:17:42] Matt Welle: We, as an industry, have always been particularly slow to adapt to new ways to accept money. Any ideas why our industry is, maybe it's just me living in this industry for so long, that I think we're slower than other industries. But one, are we slower? And two, why are we slow?

[00:18:00] Maximilian Lehmann: Well, look. First of all, I don't think this industry is particularly slow, right? It's just like there's some good reasons. Right? So, number one, I think the nature of the industry. Right? So, booking a holiday, blocking their money on a card with a pre-auth, and then capturing it later, as we say, in the payments phase, three months later, sometimes six months, a year later, is very, very different from buying a movie or, like, a music track, the newest Taylor Swift track on Spotify. It's very different from buying a subscription on Netflix or buying a movie, or, like, something on an ecommerce site like Amazon. It's very different. It's much easier to buy that, make that purchase on an ecommerce website, comparing it to, like, the hospitality flows that you have. At the end of the day, on top of that, hospitality is centered around guest experience. And as a hotelier, correct me if I'm wrong, it's all about that, right? And it's centered around the guest experience. Now, the scariest thing is to introduce something that you cannot really control, payments, because you don't know if that payment will go through or not. So, people tend to stick to something that they know, and they don't want to make too many changes in that sense, that could impact the guest experience ultimately. So, when you introduce something like this, it has to be very well thought through. It has to be built from the ground up. It has to be built with a hospitality mindset in the background. And that's what we're doing. And that's why I love my job here at Mews, because it's really not just launching the next local payment method. Right? Everybody can do that, I think. It's really rethinking finance, embedded finance, payment is part of it, or hospitality. With all the experience that Mews brings to the table, with all the experience that you have, and Richard, and the entire company have been experiencing with hotels as customers and relaunching that for our hotel partners. And, you know, at the end of the day, someone has to do the hard work and radically thinking of, like, how to simplify this experience, innovating this experience, and at the same time, connecting the dots from payments to finance, embedded finance that is, and the license is the first step, and that's why I love it.

[00:20:22] Matt Welle: You know, we never really wanted to be a payment company. We always just wanted to solve the really hard problems in hospitality through great technology, and we started as a software business, and then over time, we realized that payments is such a key component that we had to get deeper in that cycle. And now I really think back to yesterday, I was in London and with my husband, we were driving past the hotel that I did my internship about 22, 23 years ago, and I worked in the reservations department. And every day, I went to pick up all of the non-refundable reservations that were created. And then I'd go on the payment terminal, and I type in 16-digit numbers to charge the non-refundables, and I take the receipts and staple that to the bill. And I've realized that we've solved for this, like, we don't do that, but I think a lot of hotels in the world still today have someone in the back office taking payments and taking these transactions, they are called MOTO transactions. And that's the thing that terrifies me, the carelessness with which credit cards are handled, personal details of guests in hospitality. And this is the ultimate mission. We wanna make sure that our guests' data is protected, and the flows for the guests and both the employees are automated to a point where no one gets joy out of having to type a 16-digit credit card number into a payment terminal and then stapling the receipts to another piece of paper that then goes to the accounting department where they consolidate that and check that that money is being paid into their bank account at some point in the future. And we're just connecting all the dots. And at the core of that has to be a deep vertical software, and then you link all of the payment flows to it so that we can do all the end-to-end reporting as well, so that the accountant doesn't have to do lots of manual reconsolidation. They just look at Mews, get one line item of what the payout in the bank is, and they can consolidate that to all of the transactions on our side.

[00:22:10] Maximilian Lehmann: That's exactly what it comes down to.

[00:22:11] Matt Welle: My last question is always about something that really upsets you in hotels and that you'd love for someone to fix. I'm assuming it's probably payments-related, but what's something when you check in the hotel that you get really frustrated by?

[00:22:24] Maximilian Lehmann: It is. And I wish more hotels would use Mews because there, I know we solved it. But it just happened to me the other day, when I checked into a hotel, and they asked me upfront for my credit card details. And, you know, I don't take my wallet anymore. So, what happens is I come to the front desk. They say, “Oh, Mr Lehmann, nice that you're here. We need a card for you, basically, to cover for incidentals. “I don't have a card with me. I have my phone. Can I tap my phone somewhere?” And that hotel was like, “No. No. No. I need that physical card.” Why?"There's no reason you need that card other than your systems don't work with each other, basically, because there's, like, one online flow and there's one something else flow that I'm not aware of. And I can't even tap a card, so you need to somewhere, tap it, staple it to, like, my guest profile. I don't know why still happening out there. That upsets me. I don't know. Because, ultimately, I couldn't solve it.

[00:23:26] Matt Welle: This weekend, I stayed in a hotel and, you know, it wasn't running on Mews. They had a mirror behind so I could see exactly which system they were on. But, oh, this is interesting. Let me ask a few questions about how they take payments and how they sit in the system, and it was that. Because I said, “Oh, can I just use Apple Pay?” And they're like, “No. No. It has to be the card.” And then I stressed because, like, I don't know the PIN code to my card. But the only place where I still have to use that physical card is in hotels today. And this is what, hopefully, will solve for hotels around the world, but it will take us a few more years to get, like, every hotel converted to Mews.

[00:23:56] Maximilian Lehmann: It was definitely not, seeing that's coming back, like, it was not a great experience. And I came there, and sort of my temperature was already up here, and it eventually, it was somehow sort of, but it took me literally half an hour on the front desk with the front desk staff, going back and forth because, eventually, I'm like, “Okay. Well, somehow, they made a MOTO transaction.” Essentially, what they did was they typed it like a card that I gave them.

[00:24:19] Matt Welle: Thank you for joining me today. I know this is a complex topic, so I'm really happy that you demystify this for us.

[00:24:25] Maximilian Lehmann: Thanks for letting me speak here. I'm more than happy to go even deeper, the more we can sort of launch on Mews FS. So, thanks for having me.

[00:24:34] Matt Welle: I think we’ll have you back in about a year's time, we'll get you back on here.

[00:24:38] Maximilian Lehmann: Maybe in a year from now.

[00:24:39] Matt Welle: Yeah. Exactly. We'll see what's changed.

[00:24:41] Maximilian Lehmann: Yes. This is the first step of many, so looking forward to many more of these conversations. Thanks, Matt.

[00:24:47] Matt Welle: Thank you.

[00:24:48] Outro: I hope that you're enjoying this episode, because if you do, make sure that you press that subscribe button. It really helps grow the audience and keep you informed whenever a new episode drops. We have some of the best hoteliers on this platform, and I love asking them the hard questions so that, hopefully, you can improve your hospitality business as well.