I’m getting inklings that one of fintech’s most debated innovations is making a comeback: open banking. Perhaps it never really went away…
Last week it was reported that buy now, pay later (BNPL) player Klarna is set to enable its UK customersto pay directly from their bank accounts. The rollout follows other movements in open banking, including Mastercard’s new open banking-powered subscription management solution in the US and GoCardless’ acquisition of account-to-account payments business Nuapay. Avid Sifted readers may also remember that Eight Roads partner Lucile Cornet chose account-to-account payments as her big prediction for where fintech will go this year.
Account-to-account payments (A2A) are enabled by open banking, a system where banks can share account information with other financial companies. At one point, the payment method was widely seen as a potential challenger to the dominant payment rails of Visa and Mastercard networks. Yet despite being widely touted for many years in fintech circles, it’s yet to truly take off.
And while Klarna jumping into the open banking conversation may empower its proponents, a recent 2023 WorldPay report predicted that A2A will only comprise 10% of the world’s share of transaction value by 2026, trailing behind digital wallets and the card payment network they aim to undercut.
But, dear reader, what do you think? Will this be the year open banking finally makes it? As always, I want to hear from you.
In other news today, I’ll be tackling the wealthtech wars, details on Starling’s new CEO and the lowdown on exits among payment startups.
Managing strong growth while managing trust inside your startup is not easy. In this episode of The Inclusive Startup Playbook, we look at how to build a culture of trust and how to maintain it.
It’s fair to say that Robinhood’s entry into the UK has been a long time coming. The Silicon Valley HQ’d investment app, known for its key role in the pandemic trading frenzy, is today launching its third foray into the country.
Those following Robinhood’s international expansion plans closely will remember how it dramatically scrapped its plans to enter the UK market back in 2020. Last year, it also cancelled its acquisition of UK-based crypto platform Ziglu, which would have seen it establish a footprint on this side of the Atlantic.
Hoping that third time’s a charm, Robinhood is looking to muscle in on a maturing set of homegrown startups in the wealthtech space — and one that’s already proved difficult for those across the pond to conquer. US trading app Public, for example, launched in the UK last year, but is now preparing to cancel its operations there.
“It’s quite a crowded market. An awful lot of people have already signed up to these [European] firms,” says Michael Reid, market intelligence manager at UK fund research house Fundscape.
The market consists of players like the UK’s Freetrade, and continental offerings such as Trade Republic, Scalable Capital and Bux — all of which have been downloaded more than half a million times on the Google Play app store, per SplitMetrics figures.
Europe’s wealthtech companies tell me that localisation, not only in terms of currency but also the equities that you offer, is important when expanding across Europe.
“Europe is not like the US where you have 50 states that have more in common than they are different,” Wander Rutgers, investment app Lightyear’s chief operating officer, tells me. “In Europe, even if you don’t consider currency, investing is something that is so innately local.”
Still, Robinhood is trumpeting features such as fee-free trading for US stocks at any time on a given weekday and a 5% interest product.
But can the Silicon Valley HQ’d company finally make it on British shores? Get the lowdown here.
🏦 Former HSBC exec Raman Bhatia is set to become CEO of neobank Starling. Since founder Anne Boden announced her departure last year, the ship has been steered by an interim CEO.
Bhatia, who is currently CEO at energy provider OVO, will take over in the early summer.
💶 Paris-based Lago, a Y Combinator alum that provides open source infrastructure for billing systems, has raised a $15m Series A round.
Its cap table is dominated by a host of US-based VC funds, with New York-based FirstMark leading the round.
Other US investors included SignalFire, Script, Addition and YC.
💰Payments giant Stripe revealed it passed 1tn in payment volume last year, per its 2023 annual letter. That’s an increase of 25% from volumes in 2022, which cofounders Patrick and John Collison attribute to Stripe’s enterprise business, along with billing and tax services.
💸 An exclusive fundraise for fintech newsletter readers (don’t say we don’t treat you): Xaver, an AI-driven platform for the selling of life insurance and private pensions, has raised €5m in pre-seed funding.
The round was co-led by Motive Ventures and Cavalry Ventures. Other investors in the round include angels such as Wefox founder Julian Teicke and GoStudent CEO Felix Ohswald.
The company plans to use the capital to launch a white label Pan-European Pension Product (PEPP).
Exits at European payments startups are at their highest point ever, amid a dip in investment into the sector, according to the latest briefingfrom Sifted’s Intelligence team.
Last year, while VC funding in the space totalled $2bn — its lowest level since 2018 — there were 31 exits among payment companies in Europe.
Cologne, Germany-based Naro, which is building infrastructure to enable companies to launch their own investment products such as ETFs and funds, raised $3m in pre-seed funding. La Famiglia and Discovery Ventures led the round and were joined by investors including Angel Invest and Robin Capital.
London-based PPRO, which offers a cross-border digital payment platform, raised €85m in funding from investors including Eurazeo, HPE Growth, Sprints, J.P. Morgan, Citi Ventures and PayPal Ventures.
London-based SAPI, which enables payments companies to offer business loans and other financing products to their clients, raised £7.5m in funding from investors including Passion Capital.
Stockholm-based Younium, a B2B subscription management and billing software startup, raised €2.7m in funding from investors including Partinc Capital.
Anna Money, a UK-based business banking startup, has acquired Australian spend management platform GetCape.
Expanding to the US involves complex legal and regulatory considerations — and these are particularly challenging for fintech startups. How can startups navigate US tax laws? Tune in to our next Sifted Talks to hear practical tips from Vertex, EY, JamJar Investments and Babbel.
