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

I come to the front desk, they say, "Oh, Mr. Lima, nice that you're here. We need that card for you, basically to cover for accidents, but I don't have a card with me. I have my phone. Can I tap my phone somewhere?" And that's what I was like, "No, no, no, I need that physical card. Why? There's no reasons you need that card." Other than your systems don't work with each other, basically. Hi, everyone, welcome back to another Met Talks hospitality. And today I want to talk about finances. Handling payments has been a blind spot on hospitality. There's so much friction, there are too many intermediaries and very little visibility in how the money gets processed until it breaches your bank account at the hotel. On that note, a very exciting note, Muse has just been granted an electronic money institution license and EMI license from the Natalomsa Bank, which is the Dutch National Bank, making us the first vertical 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 can think can fundamentally change how it else operate money. My guest today is Maximilian Leman, he is the CEO of Muse Financial Services, the regulated subsidiary of Muse that holds the license. Welcome. Thank you very much, Matt. Excited to be here. This is very exciting now. It is, it is. It's been long into making and finally we can talk about it. We knew that your entity existed and the work was ongoing, but I don't think many people outside of Muse knew this. So what is Muse Financial Services and how did it come about? Muse Financial Services, or as we call it internally, Muse FS, is essentially a regulated arm of Muse, right? So we are part of the business, but we hold that license, that e-money 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, Muse payments, right? For us, it was really the next logical step of running Muse payments and go one level deeper. And that's to own it and to be in the money flow ourselves. So now, El Girok, you need a license for that and that's what Muse FS really is. 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? Yeah, exactly. So e-m-i 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 than instead of being removed from it and just like giving instructions. That's essentially what an e-money license is. And yeah, payments is the lifeblood of a 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. Like is the first level, is that not the payment license, then it's e-money license, and then you go to banking license? Is that the three levels that I'm thinking through? That's exactly right. So you have a payment license that essentially lets you to be in the money flow as well, but you can't hold money, right? So the e-money license is essentially the next level to a payment license where you are allowed to do payment initiation, payments itself, but also hold money for your customer, as part of an e-money. 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. In my way it works is we hold money, but in a separate entity, so it's not muse. It's also not museFS. It's actually a foundation where the money is safeguarded in that sense. So exactly to your point, like payment institution license, e-money license, bank license, we got the middle layer essentially. So any money 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? Yes. You can think of it as we can hold money and we can offer our customers additional services what to do with that money, right? So you can issue a card, you can have fast payments, you have all these additional services that you then can do once you are in the money flow and hold that money indeed. So what I'm hearing is that an e-money license allows us to remove little pieces of fragmentation in fast 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 remove them into this entity. 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 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. Why haven't we done it sooner? Like what the hell was back from doing this like five years ago already? It has to do with how hard it is and you can even ask like why do not other PMSs do that right? It's just like an e-money license sounds on paper as like oh it's a paper exercise but really what it is is on it's 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 race. 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 a 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 payments great ready and take on that responsibility that you just sort of lay out in those documents. And that's really when Robert has wrote because that's when you really have to make significant changes on how the platform was built and how software is treating payments. And in my intro I said we're the first vertical hospitality operating system in European economic area which is not in you I just need to say that I was correct. That holds kind of license. Why has no one else done this before? Yeah I think so first of all just to make sure we are talking the right thing here. So economic 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 UK maybe this is something else or not anymore right so Europe is much more. Your vision it includes Israel and Australia it goes very far beyond the borders. Exactly right. So this is now European economic area is a legal term that says okay these are the 30 countries that are in scope for our license. So we started the lens interview passport it's like applying basically for the same license into all these different countries 30 countries that's our scope now are we the first one to do this absolutely when it comes to operating system for hotels has anybody else in hospitality if you look up it broader have done this before actually there's 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 over I publish it that we end down just recently at unfold they have a license themselves there's other examples when it comes to market places eBay has a license vented has a license. So we're definitely not the first company that gets an e-money license although you typically see it from payment companies first right and not so much on the software side although there are examples then examples that I mentioned but we are definitely the first when it comes to. I also tell it to operate systems that the really deep space in a business 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 is in order to be more innovative to build for their own sort of vertical for their own industry and to be more in control. Thank you so much for listening to my talk to hospitality I really enjoyed these conversations I did want to take a moment to talk about the Muse revenue insurance 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 Muse 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 into Muse, 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 in 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 a few live by tomorrow and we can get recommendations flowing to instantly make your business a better business. I hope you enjoy it. 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 and 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 reception desk, 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 want to 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 this hole on a vertical and we think it's really critical that we get this right. Maybe one thing to mention here is when you look at the US, you have other examples too, like the toes and the Shopify's of the world that have done in their own respective vertical, right, e-commerce but also restaurants. They have done a tremendous job and 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 want to do what you 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 how 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. Yeah. Like if you look at the US, you see many, many great technology examples, especially on the FinTech services side because they've 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 US business has to some of those amazing APIs that they can build in beautifully natively and this is really why we want to have more access to that. 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 your own payments, they really come to their limitations when it comes to events, for instance, right, issuing events or issuing cards and multiple currencies. If you really come to your limitation, so 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. Can we talk about what actually gets involved with a card's payment because we 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 to the hotel getting paid out? 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 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 life, Eisen, your German spark, your Dutch local bank that you as a guest or even the US bank, right, wherever you have like this card given to, that leads to basically say, yes, Max, 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 master cards, the annexes of the world. So the schemes that essentially connect all the banks to the acquirer and the acquirer is nothing else as 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 build 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 mues that is approved, yes or no, right. So ultimately we hold essentially where the last bit of passing through all these hands. And we tell you, yes, that card is approved or not. And that what happens is the entire settlement flow. So that's an additional, 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 their little time. And that's essentially what happens underneath. So knowing all of that. And now when we look at mues hoteliers, what actually changes for them? We got the license, right. Great. That gives us the 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 it, we're making sure this is built for scale. Today, nothing changes. And then in 2027, 28, we will do a country by country rollout. And that's when you see things really, really change for you. One of the questions we often get from hoteliers is because they all want to have a local payment method in their country. You mentioned earlier the German methods that we've been asked about before. What's our plan on alternative payment methods? It's very dear to my heart. So when we will roll out mues financial services, MuesFS, a big component of that, a very crucial component of that is to launch also the alternative payment methods in each market that guests actually are using. So we started already by having ideal. And that will be the first local payment method that we launch, a deal where up. 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 are just discussing the blue one in Germany. But then there's many, many others. There's local cards schemes like zero card in Germany. There's local cards schemes in France, like card bank care. There's bank contact in Belgium. There'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. We as an industry has always been particularly slow to adopt to new ways to accept money. Any ideas why why our industries, 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? 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 then money on a card, we have pre-auth and then capturing it later, as we say in the payments, there's three months later, sometimes six months later, a year later, it's very, very different of buying a movie or like a music track, the newest Taylor Swift track on Spotify. It's very different of buying a subscription on Netflix or buying a movie or like something on an e-commerce site like an Amazon. It's very different. It's much easier to buy that, make that purchase on e-commerce 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 that 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 and has to be built within the hospitality mindset in the background. And that's what we're doing. And that's why I love my job here at Mu is because it's really not just launching the next local payment method, right? Everybody can do that, I think. It's really rethinking fine as a valid finance, payments that are part of it for hospitality. With all the experience that Mu brings to the table, with all the experience that you have adridged at the entire company, I've been experiencing with hotels as customers and relaunching that for our hotel partners and Yeah, at the end of the day, someone has to do the hard work and rather keep thinking of like how to simplify this experience, innovating this experience. And at the same time, connected the dots from payments to finance, embedded finance that is. And the license is the first step and that's why I love it. You know, we never really wanted to be a payment company. We always just wanted to solve for the really hard problems and 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, I think back to, yes, that I was in London and with my husband, we were driving past. I would tell that I did my internship at about 22, 23 years ago and I worked in the reservations departments. 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'd type in 16 digit numbers to charge the non-refundables and I'd 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, those transactions are called mototransactions. 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 want to 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 type of 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 that 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 the accountant doesn't have to do lots of manual reconsolidation. They just look in use, get one light out of them of what the payout in the bank is and they can consolidate that to all of the transactions on our side. That's exactly what it comes down to. 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 it out now that you get really frustrated by it? It is. I wish more with this would use views because there I know we solved it. But it just happened to me the other day when I checked into 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. We need a card for accident, for you basically cover for accidentials. I don't have a card with me. I have my phone, can I tap my phone somewhere? And this hotel was like, no, no, no, I need that physical card. Why? There's no reasons 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. But 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 had, I couldn't solve it. This weekend I stayed in the hotel and you know, it wasn't running on mute. I had a mirror behind so I could see exactly which system they were on. 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 stress because I don't know the pincoe 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 we'll solve for hotels around the world. But it would take us a few more years to get like every hotel converted to mues. It was definitely not seeing that coming back. It was not a great experience. And I came there and I already saw my temperature was up here and eventually it was somehow solved, but it took me literally half an hour on the front desk with the front desk stuff. Going back and forth because eventually I'm like, okay, well somehow they made a motor transaction. Yeah. This is really what they did. They typed it like a card that I gave them. Thank you for joining me today. I know this is a complex topic. So I'm really happy that you demystify this for us. Thanks for letting me speak here. I wasn't happy to go even deeper. The more we can sort of launch on mute FS. So thank you for having me back there. In about a year's time we'll get you back on here and then yeah, exactly. We'll see what's changed. Yes. This is the first step of many. So looking forward to many more of these conversations. Thanks Matt. Thank you. 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 hotels on this platform and I love asking them the hard questions so that hopefully you can improve your hospitality business as well.