Francesco Simoneschi, CEO and co-founder of the British fintech start-up TrueLayer.
LONDON – UK financial technology start-up TrueLayer claims to have raised $ 70 million in new funding, underscoring investor appetite for fast-growing fintech companies.
With TrueLayer, fintech apps such as Revolut and Freetrade can be linked to customers’ bank accounts using APIs or application programming interfaces. This means that users of these apps can then make payments from their bank or view balances and transactions from different accounts.
The company announced that its final round of investments was led by Addition, the venture capital firm founded by former Tiger Global partner Lee Fixel. Existing investors such as Anthemis Group, Connect Ventures, Mouro Capital, Northzone and Temasek from Singapore also invested.
Francesco Simoneschi, CEO and co-founder of TrueLayer, said in an interview that due to strong growth in 2020, the company decided to raise more money, helped not least by the coronavirus pandemic and the shift of consumers to digital management methods their finances.
“We ended the year 2020 extremely positively,” Simoneschi told CNBC. “We have had an incredible year of growth,” he said, adding that the company’s payment volume has grown 600x.
TrueLayer declined to share its financial data or ratings. The company, which also has Chinese Internet giant Tencent as a shareholder, has raised $ 142 million in funding to date.
TrueLayer said it will use the fresh money to expand its services internationally and expand its presence in Europe first before attempting a rollout in Australia. It is also checked whether it should start later in Brazil.
The news comes a day after Silicon Valley company Plaid, which competes with TrueLayer in Europe, announced it raised $ 425 million on a new investment that the company raised $ 13.4 billion rated. Plaid originally agreed to be acquired by Visa for $ 5.3 billion last year, but abandoned the deal after the US government raised antitrust concerns.
Plaid and TrueLayer are part of a new financial movement called “Open Banking,” which aims to provide valuable banking information and payment services to fintech companies and other approved third parties, subject to customer approval. Other players in the room are Sweden’s Tink and British Bud. They take advantage of the tech-friendly new rules in the UK and the European Union known as PSD2.
TrueLayer and several other companies are now trying to undercut card networks like Visa and Mastercard by allowing fintech apps to initiate bank transfers on behalf of their users at much lower fees. GoCardless, a fintech platform that processes direct debit, is also developing open banking technology for transactions.
“Open banking can be a real competitor to traditional card networks,” said Simoneschi. “The question is, can card companies accept this change or will they oppose it?”
It’s worth noting that Visa remains an investor in Plaid and TrueLayer, which means it could benefit from the rise of open banking services in the long term. Meanwhile, last year Mastercard bought Finicity, another player in the room.
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 good for the ecosystem,” Keith Grose, international director for Plaid, told CNBC. He added that the company has “good competitors” but that its competitors are not offering the “transatlantic bridge” it has built with offices in the US and Europe.
TrueLayer has plans of its own to join its team. The company currently has 200 employees and plans to increase its workforce by an additional 50 this year, Simoneschi said.
Fintech has attracted billions in venture capital as investors seek to capitalize on the sector’s wild growth. Globally, venture capitalists pumped over $ 17 billion into fintechs in the first quarter of 2021, according to PitchBook. That’s a 44% year-over-year increase and the highest quarterly amount since Q2 2018. Meanwhile, tech firms like PayPal and Square have found their market values to surpass those of Wall Street titans like Goldman Sachs.
Still, the sector’s meteoric growth has rocked some leading companies in the banking world. JPMorgan CEO Jamie Dimon recently said banks should be “less afraid” of fintechs, accusing Plaid of “unfair competition” and “improper” use of banking information. Plaid, a customer of JPMorgan, said that “privacy and security are central to everything we do, including the data-sharing agreements we have with JPMorgan Chase among many other banks.”