Abillio partners with Aiia to scale its operations

Latvian startup Abillio is a payments gateway for the growing gig economy that lets freelancers and gig workers use its Company-as-a-service solution to invoice their cross-border customers and get fast payouts for their services, while Abillio takes care of running the company, accounting, taxes and paperwork. Now it is partnering with open banking solution Aiia.

Abillio launched its digital platform in the spring of 2021 and has experienced rapid growth since then. While the growth is a good thing, it also has put a heavy load on the invoice and payment processing power since Abillio initially relied on human operators to get the job done. Aiia’s open banking solution is a perfect match to solve this ever growing problem.

Good combination

Abillio learned about Aiia through Mastercard’s Lighthouse Finitiv program, where the Latvian startup got accepted this fall.

“Our service has received wide popularity amongst Latvian freelancers. As we are planning to launch in other EU countries, it would not be possible to make our platform scalable without the open banking solutions that Aiia offers, plus they have a dedicated SMB growth program, which is a great opportunity for small startup companies like ours,” explains Mārtiņš Viļums, the co-founder and CMO of Abillio.

Aiia’s wide connection to the Baltic and EU banks has enabled Abillio to access the banking data of incoming payments and to automate the payout initialization, so the startup can save its human resources for more important, non-routine tasks.

Transforming the way of running a small business

Director of Fintech of Aiia Tanya Slavova tells Aiia is thrilled to empower Abillio on their journey to create a quick, convenient and cost-effective bookkeeping process for freelancers with easy access to financial data.

“Abillio is transforming the way of running a small business, allowing their customers to focus on their core business and leave the invoicing and taxing hassle behind,” she says.

Slavova adds: “At Aiia we’re keen to keep empowering the promising Latvian financial services industry with open banking which is also why we’ve opened up for access to our growth programme, letting SMB’s and startups leverage open banking for free in a 6 month period. Abillio is a perfect example of a forward-thinking Latvian startup increasing customer convenience through open banking.”

M. Viļums explains the automation of time-consuming manual tasks means speeding up payments, which means less customer churn. According to Abilio research, 72% of freelancers prefer same-day payments, so this is essential for the startup.

Abillio is targeting freelancers

There are 20 million estimated freelancers in the EU. That is 10% of the total employment. Abillio is targeting freelancers and independent creators like web and software developers, designers, 3D animators, film production people, tutors, creative service providers, marketing consultants, and others for whom running a solo business means burdensome paperwork, time-consuming formalities and dealing with taxes.

Abillio’s mission is to remove all barriers to run solo businesses for freelancers and gig workers, ultimately aiming to become a neobank for freelancers by adding more financial tools for the gig economy in the near future.

Business as a service

The digital platform Abillio offers the so-called Business as a Service. Abillio business model allows freelancers to become members of a cooperative and send invoices to customers in Latvia and abroad, reported Labs of Latvia. How does the platform work? People register, pay a membership fee and use the platform to invoice service recipients. Abillio pays corporate income tax and VAT to the Treasury. The commission for using the platform is 3% after tax.

“An Abillio member receives 77.6 euros from a 100-euro invoice issued to a customer,” told Viļums.

The money paid by Abillio to the members of the cooperative is a dividend, on which no social tax is payable. However, Viļums stresses that the platform cannot be used to pay disguised remuneration for paid employment, and Abillio monitors that this does not happen. If the cooperative suspects that someone is using the platform to pay for paid employment, an explanation is requested. If the suspicion is confirmed, such invoices are cancelled, and the member is expelled from the cooperative.

450 Members Already

The cooperative was founded in January 2021. As a service to others, it has been offered since April. Since then, there are already 450 registered users on the Abillio platform.  Some use it once a month, others as often as five times.

The average invoice per member is 900 euros, while the total monthly invoice volume is 85,000 euros.

Viļums points out that growth doubled between July and August.  He suggests that the activity is due to the repeal of the patent fee regime in 2021 and changes to royalties from the summer. Also, people who use the service are actively telling others about it. For example, if a production company is invoiced, they soon recommend Abillio to their other freelancers.

The platform targets casual workers. Often, they are creative professionals such as translators, designers, film directors, photographers, programmers. “The service is also useful for those who want to try out their own service business but first want to see if there will be demand for it. If a person is not ready to start their own business and look for an accountant, this is a way to see if entrepreneurship is the right way to go,” explains Viļums.

Next Step: Poland

“Abillio is the only Latvian company to be accepted into the Mastercard Lighthouse autumn program, wrote Labs of Latvia. The company plans to raise pre-seed capital after graduating from the program.

The platform has the potential to be developed in other countries. The EU has a special form of cooperatives that operate across Europe without setting up a separate unit in each country. In countries where a cooperative society will not be the best option for cooperation, a partnership is planned as an alternative.

One of the closest markets for Abillio’s development could be Poland. Tax changes are expected soon there, which could accelerate the development of business in the country. 

“We are also looking at Spain, where the self-employed currently have to pay a tax of 370 euros a month, but the plan is to increase it to 1,200 euros. After such a large increase, this form of work will no longer be viable for freelancers. At the same time, there are three million self-employed people in Spain, 15% of the total workforce. In Greece, self-employment is even more widespread; 32% of the country’s population, or 2.5 million people, are self-employed, but unfortunately, most of them work in the so-called grey area,” says Viļums.

There are 31,000 self-employed people in Latvia, which is 12% of the total number of employed people.

Could Become a Bank in the Future

The next big step we are planning is to add the possibility to “write off” business expenses; you can submit receipts and then reduce the amount of tax you have to pay,” says Viļums.

Even further into the future, Abillio sees itself as a modern bank specifically for European freelancers. It plans to introduce debit cards with virtual IBAN accounts for members and to start accepting card payments from customers. This would automate the calculation of eligible business expenses for members, while it would make it easier for companies to pay for services provided by freelancers: without having to wait for an accountant to process the invoice.

“Freelancers have a rather poor credit rating, which makes it difficult for them to get a loan to buy a house or a car,” says Viļums. Abillio knows these people better than traditional banks and could therefore assess and serve them better.

“The freelance economy will only continue to grow, at an average of 14% a year. Unfortunately, laws and regulations governing the relationship between companies and such workers are late in coming. Until then, no one takes care of this group. We see our role in caring for these people,” he said.

Source: labsoflatvia.com