Francesco Simoneschi, CEO and co-founder of British fintech startup TrueLayer.
LONDON – British financial technology pioneer TrueLayer says it has raised $ 70 million in new funds, highlighting investors ’constant appetite for fast-growing fintech companies.
TrueLayer allows fintech applications such as Revolut and Freetrade to connect to customers ’bank accounts using technology known as APIs or application programming interfaces. This means that users of these applications can then make payments from their bank or view balances and transactions from different accounts.
The company said its latest round of investments was led by Addition, a venture capital company founded by former Tiger Global partner Lee Fixel. Existing investors Anthemis Group, Connect Ventures, Mouro Capital, Northzone and Singapore’s Temasek also invested.
Francesco Simoneschi, CEO and co-founder of TrueLayer, said in an interview that the company decided to raise more money thanks to strong growth in 2020, helped little by the coronavirus pandemic and the shift from consumers to digital means of managing their finances.
“We closed 2020 in an extremely positive way,” Simoneschi told CNBC. “We have been going through an incredible year of growth,” he said, adding that the company has recorded that its payment volume has grown as much as 600 times.
TrueLayer declined to share its finances or estimates. The company, which also considers Chinese internet giant Tencent a shareholder, has raised $ 142 million to date.
TrueLayer said it will use the new money to expand its services internationally, first building its presence in Europe, before aiming to present in Australia. It is also being investigated whether the launch in Brazil will be further lower.
The news comes a day after Silicon Valley-based firm Plaid – which competes with TrueLayer in Europe – announced it had raised $ 425 million in a new investment, estimating the company at $ 13.4 billion. Plaid initially agreed to be bought by Visa last year for $ 5.3 billion, but withdrew from the deal after the U.S. government raised antitrust concerns.
Plaid and TrueLayer are part of a new finance movement called “open banking,” which aims to open up valuable banking data and payment services to fintech firms and other approved third parties, subject to obtaining customer consent. Other players in space include Sweden’s Tink and Britain’s Bud. They take advantage of technologically acceptable new rules in the UK and the European Union, known as PSD2.
TrueLayer and some other companies are now trying to reduce the number of cards like Visa and Mastercard, allowing fintech apps to initiate bank transfers on behalf of their customers, at significantly lower fees. GoCardless, a fintech platform that processes direct debit payments, is also developing open banking technology for transactions.
“Open banking can be a real competitor to traditional card networks,” Simoneschi said. “The question is, can card issuers accept this change or will they resist?”
It is worth noting that Visa is still an investor in Plaid, as is TrueLayer, which means it could benefit from an increase in open banking services in the long run. Meanwhile, Mastercard bought Finicity, another player in space, last year.
Plaid plans to more than double its European workforce from 40 to 100 employees by the end of 2021.
“I think the competition is good and benefits the ecosystem,” Keith Grose, head of international company Plaid, told CNBC. He added that the company has “good competitors”, but that its rivals do not offer a “transatlantic bridge” that was built by operations in the USA and Europe.
TrueLayer has its own plans to strengthen its team. The company currently employs 200 people and plans to increase the number of employees by another 50 employees this year, Simoneschi said.
Fintech has attracted billions of dollars of venture capital because investors want to capitalize on wild growth in the sector. Globally, venture capitalists pumped over $ 17 billion into fintechs in the first quarter of 2021, according to PitchBook, up 44% from the same period last year and the highest quarterly amount since the second quarter of 2018. Meanwhile , technology companies like PayPal and Square have seen their market values exceed those of Wall Street titanium like Goldman Sachs.
Yet meteoric growth in the sector has shaken some leaders in the banking world. JPMorgan CEO Jamie Dimon recently said that banks should be “less afraid” of fintech, and accused Plaid of “unfair competition” and “inappropriate” use of bank data. Plaid, who counts JPMorgan as a client, said “privacy and data security are at the heart of everything we do, including the data sharing agreements we have with JPMorgan Chase among many other banks.”