“Simple banks” across the world raised $269M
Read full story in the new issue of Money Of The Future 2016\2017 report
In 2014, Simple bask was acquired by banking group BBVA for $117M — and in 2016 “Simple banks” across the world raised $269M (to be honest, more than $300M, because it is only major names — check “Money Of The Future”*): Monese ($10M, A, UK), Tandem ($42,7M, A+, UK), LunarWay ($4,4, A, Denmark), Loot ($3,1M, A, UK), NUbank ($80M, D, Brazil), Monzo ($6,72M, A+, UK), Tide ($2M, seed, UK), Tink ($10M, B, Sweden), N26 ($40M, B, Germany), Startling ($70M, A+, UK). Also Russian Tochka bank was acquired by Otkrytie bank (Rocketbank also), German Fidor — by French BPCE, Finnish Holvi — by Spanish BBVA.
Monese, the London-based fintech startup that offers a mobile banking app for immigrants and expats who might otherwise find it difficult to open a bank account outside of their originating country, has raised $10 million in Series A funding. The company plans to use the new capital to launch a Euro account, thus bringing its service to customers in European markets other than just the U.K., as well as roll out new functionality such as direct debit and credit services.
Backing the startup’s A round are fintech investor Anthemis Exponential Ventures (which previously backed challenger bank Simple — together with Life.SREDA VC), STE capital, and Korea Investment Partners (KIP). The latter recently invested in Korea’s first Internet-only bank Kakao Bank and is described as a “strategic investor” with relation to Monese. It is also the first time Korea Investment Partners has backed a European startup. Previous investors Smartcap and Seecamp also participated in the round. It brings total funding raised by the company to $15.8 million.
Available via an app for Android and iOS, a Monese account, which claims to be able to be opened in “under 3 minutes”, provides a ‘current account’ interface (including a bank account number), low-cost international money transfers, and a Visa debit card. You’re also able to make cash deposits and withdrawals, and store money in multiple currencies.
Noteworthy, the startup quietly changed its revenue model towards the end of last year. Rather than charging per transaction once a user had used up their free quota, the startup has switched to a simple monthly fee of £4.95 per account for almost all of its services (it still charges a minor additional fee for currency exchange, for example). This covers its own banking fees, but with enough margin, except for the most active users, to be potentially profitable. So how is that working out for Monese? It claims that over 40,000 customers from over 179 different countries have signed up to date. Collectively they’ve made over 1.8 million transactions, moving £150 million since September 2015.
Department store House of Fraser is planning to invest £35 million ($42,7M) into app-only challenger bank Tandem. The department store wants to offer financial services to customers through its partnership with Tandem, founded in 2014. The investment is subject to some unspecified conditions and is a minimum commitment, according to the emailed statement. Tandem has raised over $30 million from investors including eBay founder Pierre Omidyar. Earlier this year the bank raised £1 million in a crowdfunding campaign that valued it at £65 million. Tandem, which gained its banking licence last year, is an app-only bank that currently offers a savings tool that lets people monitor spending on any bank account. It began rolling out its app last month and plans to launch credit and debit products next year.
Danish banking app Lunar Way is one of a plethora of startups in Europe attempting to update the retail banking experience with a mobile-first offering too. However, rather than securing a banking license of its own — à la challenger banks such as Monzo, Atom, Starling and Tandem in the U.K. — the Danish company is partnering with local banks in the countries in which it operates, a strategy it believes has enabled it to get to market and innovate faster. To get ready for a full launch, Lunar Way is disclosing €4.2 million ($4,4M) in new funding. Leading the round is SEED Capital Denmark, along with a number of unnamed angel investors — partner bank Nykredit (the biggest mortgage lender in Denmark) is also a minority shareholder.
Aiming to build a banking experience for the “Snapchat generation” the startup offers a mobile banking app that lets you open a banking account, receive a debit card powered by MasterCard, get a real-time transaction feed of your spending, view your transactions by shopping category or retailer and more. You also can set saving goals through the app, and pay bills.
“The incumbent banks are trying to be everything for everybody — and with that distributing mediocre products for their users. Those products require a long processing time, physical contracts and even the odd appearance in a branch,” says Lunar Way founder Ken Villum Klausen. Klausen says that so far the average user is 24 years old and is the type of person who is ready to cut ties with the bank they inherited from their parents. Furthermore, 23 percent of Lunar Way’s beta users have closed their old bank account, thus choosing Lunar Way as their primary banking service. He also tells me that 85 percent of its users follow the startup on Snapchat!
DST Global, the investment firm started by a Russian venture capitalist, Yuri Milner, has led an $80 million private investment in a Brazilian start-up called Nubank. The new financing suggests that despite Brazil’s political and economic upheaval, the financial technology sector remains a bright spot. Peter Thiel’s Founders Fund, QED Investors, Sequoia Capital and Tiger Global Management, all prior investors in Nubank, also joined the investment round, which closed in late November, David Velez, the company’s founder and chief executive, said. New backers Redpoint and Ribbit Capital, which over the last six years have been two of Silicon Valley’s most active investors in Brazil, also participated. Mr. Velez did not disclose the private company’s current valuation.
The investment comes at a time when the broader financial technology sector in Brazil is gaining traction. In November, the online trading platform XP Investimentos, backed by the private equity firm General Atlantic, said it had acquired Rico, another online investment platform. “We think there’s a lot of interest, both from local and international players in the space, and we expect to see a number of transactions in the full spectrum of fintech in the coming 12 to 24 months,” said Mr. Sznifer, a former Goldman Sachs vice president.
Nubank provides a digital credit card for smartphones. It is looking to take customers away from Brazil’s highly profitable banks. The start-up, based in São Paulo, was founded in 2013, and it rolled out its credit card in 2014.
Brazil has some of the highest interest rates among emerging economies even after the country’s central bank has recently begun to lower its benchmark Selic rate for the first time since 2012. The average annual interest rate for credit cards as of October was 119.7 percent, up from 97.5 percent in October 2015, according to data from Brazil’s Central Bank. Nubank’s monthly interest rate ranges from 2.75 percent to 14 percent, depending on a customer’s credit history. Even that upper rate is lower than the average rates offered by Brazil’s largest banks, according to the most recent weekly central bank data.
Mr. Velez said the company, which now has 392 employees, has received more than seven million applications for its card and has more than half a million people on a wait list. “To sustain our growth, we need to put the capital into systems, infrastructure, in people, and make sure we maintain really good customer service and great technology and infrastructure,” he added.
Loot, a banking services app pitched at millennials, topped up its seed funding round with an extra £2.5 million ($3.1 million) from existing investors SpeedInvest (Austria) and Global Founders Capital (Germany), taking the total raised this year to £4 million. The growth funding comes 5 months after the London startup raised £1.5 million to build a banking app for “Generation Snapchat.” Loot is a pre-paid card linked to a money management app that lets people track and gain insight from their spending. The new version of its app will also feature savings tools and targeted offers.
CEO and founder Ollie Purdue, 23, told Business Insider that Loot has now built the product it promised in June and will use the fresh funding injection to attract customers. “We wanted the money to really start marketing heavily. It’s purely growth and customer acquisition money.” Loot, which employs 32 people, will launch the new version of its app later this month and begin a marketing push after that. The startup currently has 5,000 customers, who will be moved to the new service, and a waiting list of 20,000 people. Purdue says: “When we go live we’ll be issuing 500 cards every day. As go live capacity, that’s quite good.” Purdue believes Loot has an advantage. The startup has chosen not to apply for a banking licence, instead using an E-Money licence and partnering with other companies to offer banking services.
Loot’s service is free. The company takes a cut of all purchases made in shops on its card, a standard banking model, and plans to make money through offering targeted discounts and offers. Purdue says: “One of the features we’re working on is called Compare, which goes live towards the end of the year. We’ll show your spending against the average person similar to you. Instead of just telling you how much you’ve spent on travel, we can tell you whether it’s good or bad. If it’s higher than average we would want to give you a discount to help lower that. We’re working on a network now to provide that.”
Startup, app-only bank Monzo has announced an “interim” funding round of £4.8 million, shortly after securing its banking licence. The funding round, led by long-term backer Passion Capital, values the company at £50 million, up from the £30 million it was valued at in its February funding round. The bridging round takes the total raised by Monzo, founded in 2015, to £12.8 million.
Monzo has 50,000 of its pre-paid card in circulation but a waiting list of 250,000. Monzo is hoping that the extra cash will allow it to ramp up distribution of cards to take advantage of customer demand. The startup launched an Android version of its app at the end of September and has 8,000 Android customers.
Monzo, formerly known as Mondo, aims to create a digital-only bank for the mobile generation that offers things like instant notifications of transactions and balances, a detailed Facebook-style feed of what you have spent your money on, and a breakdown of spending across the month. The startup currently offers a pre-paid card to customers but plans to launch a full bank account next year after gaining a banking licence in August.
Blomfield says in the release: “For a pilot programme, the response has been incredible — we’ve seen more than £45 million spent by 50,000 people in over 150 countries. What’s more, over 60% of the Beta accounts are being used actively.” Blomfield told that Monzo will have to raise at least £15 million as part of requirements from the regulator but the startup says the £4.8 million in not included in this target. Monzo plans to raise that amount in early 2017, partially through crowdfunding. (The bank raised £1 million in just 96 seconds on Crowdcube earlier this year.)
Tide claims to be the ‘world’s first’ mobile-first banking service for small businesses. It’s raised a $2m seed round from Passion Capital (with Passion partner Eileen Burbidge joining as Chairman), LocalGlobe, Zoopla founder Alex Chesterman, William Reeve (co-founder from Lovefilm), Greg Marsh (founder from One Fine Stay), Songkick’s co-founder Ian Hogarth, serial fintech investor Errol Damelin and Albion founder Jason Goodman.
Tide’s mobile app will literally read your ID — such as a passport — and establish your identity. It then lets you set up a business current account in 3 minutes or less. Benefits include no set-up, monthly or annual fees. The space is ripe for development since Main Street banks just don’t really care enough about small businesses as they are painful to deal with. So tech startups are well placed to enter the arena.
In addition, Tide also has a range of additional valuable features for UK small business owners. These include:
• Free banking forever — no monthly, annual or setup fees, just 20p per bank payment
• Money-saving tools including credit, payments (accept cards and direct debits) and foreign exchange which will be available later in 2016
• Fully extensible APIs to build bespoke apps on top of, or easily integrate with, Tide
• Easier accounting and expenses including auto-categorisation of transactions, native integrations to leading accounting software like Xero and FreeAgent, and the ability to issue and send invoices instantly from the app and attach photos of receipts from recent transactions for expenses
• Banking assistance whenever needed, including instant help available from staff via instant messaging and an online customer community
• Safety and security including bank payments always authorised on a known mobile, photo ID and automated Companies House verification required to set up an account, and spend controls for different team members. All deposits made with Tide are ring-fenced at Barclays under an FCA e-money licence
Burbidge, co-founder of Tide, said: “Tide is the future of small business banking services by addressing serious pain points for small business owners and entrepreneurs. With Tide, small business owners can get an intuitive mobile-first experience that is almost instant to set up and easily integrates with best in class cloud-based tools and services seamlessly.”
It must be made clear that Tide is not a bank: member deposits are kept in a ring-fenced account at Barclays under an FCA-regulated e-money license by PrePay Solutions (a large B2B deposit manager co-owned by Edenred — a multi-billion dollar B2B financial services provider — and MasterCard). Funds are held under an e-money license, not a banking license. Tide deposits are held by PPS in a ring-fenced account at Barclays and cannot be invested by PPS. But to all intents and purposes, a small business would simply use Tide just like it would use a normal business banking account.
‘CivilisedBank’, the new UK-wide business and retail bank, announced that it has submitted to the regulators (the FCA and the PRA) its banking licence application. It expects to receive its banking licence later this year and to launch early in 2017. Over the coming months CivilisedBank will focus on meeting its regulatory capital requirements and on developing its technology and operations platform ahead of launch early next (2017) year.
CivilisedBank will not have branches but will operate through a network of Local Bankers backed by an innovative, yet tried-and-tested technology platform being deployed for the first time in the UK. Its unique, branchless local banker network will help build one-to-one relationships, without the traditional costs associated with high street banks.
CivilisedBank will target owner-managers of small and medium-sized UK businesses by offering businesses current accounts with deposits, transaction banking, overdrafts, foreign currency exchange, investments, savings and loans. It will also address the UK retail market with specific savings and investment products.
Chris Jolly, Chairman, CivilisedBank said: “Applying for a full banking licence is a major milestone for CivilisedBank and places us firmly on track for a customer launch early in 2017. Customers remain poorly served by the incumbent banks, which is why our team of local bankers will be responsive to their financial needs. We will bring back the best of banking: one-to-one relationship banking for business customers, enabled by the latest banking technology.”
N26 (ex Number26), a Peter Thiel-backed mobile banking startup that’s setting out to create the bank account of the future, has raised $40 million in a Series B round led by Horizons Ventures. Battery Ventures, Robert Gentz, David Schneider, and Rubin Ritter also joined the round as new investors, while existing backers, including Peter Thiel’s Valar Ventures, Earlybird Ventures, and Redalpine Ventures also participated.
Founded out of Berlin, Germany in 2013 by Maximilian Tayenthal and Valentin Stalf, N26 offers “mobile-first” bank accounts similar to Simple in the U.S. Originally only available in Germany and Austria, the service later expanded across the EU into Ireland, Spain, France, Greece, Slovakia, and Italy, and today it claims more than 200,000 users.
Prior to today, N26 had raised almost $13 million, the bulk of which came last April in a round led by PayPal cofounder Peter Thiel’s VC firm. With $40 million more in the coffers, N26 will now push to grow in more markets and launch new finance products across savings, investments, and credit to “create a true fintech platform,” Stalf said on stage at MoneyConf in Madrid. Co-founder and CFO Tayenthal indicated that the company planned to enter verticals beyond checking accounts through partnering with complementary fintech startups. (And N26 has followed through on that goal by teaming up with TransferWise to give customers in-app access to a cheap international money-transfer service.)
Sweden’s Tink, a mobile banking app, has raised $10 million in Series B funding in a round led by Swedish investment firm Creades, and SEB Venture Capital, the venture arm of Swedish bank SEB. The new capital will be used to help the startup expand internationally and, by taking advantage of new European banking technical standards, evolve its product beyond a ‘read only’ personal finance app to something Tink CEO Daniel Kjellén is calling a virtual bank. “Today we’re live in Sweden with 300,000 users on Tink 1.0 and are currently running beta tests in 10 additional European markets for international expansion later this year,” adds Kjellén.
Launched in Sweden in 2013, and available for iOS and Android, the first version of Tink’s mobile app lets you keep a handle on your personal finances, by linking the app to banks accounts and credit cards. From this ‘read only’ data it presents insights into spending habits via a news-feed style stream in a bid to make it fun and useful. Broadly speaking it might be compared to Mint and Level Money in the U.S., and Numbrs, Bankin’ and Money Dashboard in Europe. However, Kjellén says that the new Payment Service Directive (PSD2) approved by the EU regulator in January opens up European banking infrastructure, and therefore competition, by enabling third parties to initiate payments into the banks’ systems, thus letting an app like Tink actually able to make withdrawals and deposits, like a proper banking app.
Starling Bank, a financial startup vying to crack the dominance of Britain’s biggest lenders, gained a license to operate from the Bank of England. The company started by former Allied Irish Banks Plc executive Anne Boden, received a U.K. banking license with restrictions from the BOE’s Prudential Regulation Authority and the Financial Conduct Authority on Tuesday, the London-based firm said. The firm raised $70 million from investors in January and follows Atom Bank, backed by Spain’s Banco Bilbao Vizcaya Argentaria SA and fund manager Neil Woodford, which gained approval to operate last year. The bank said it also joined the U.K.’s Faster Payments network, which offers real-time payment services to lenders in the country. Started two years ago, Starling Bank will offer checking accounts via mobile phones.
Read full story in the new issue of Money Of The Future 2016\2017 report