British open banking startup TrueLayer announced a $70 million raise in their latest round of Series D funding. Investment firm Addition led this round of funding, with previous backers including Anthemis Group, Connect Ventures, Mouro Capital, Northzone and Temasek all joining in. To date, the company has raised $142 million in funding and plans to use that money to fuel expansion and product development. Primarily operating in Europe, the company has expanded to an additional 12 countries in the region in the past year alone.
Competing in the Open Banking Space
TrueLayer is one of many startups competing in the open banking space. Open banking refers to the use of existing customer data by third-party providers to inform the development of new products. As a platform, TrueLayer provides software developers working at other fintech companies the ability to build their own financial applications that are connected to bank accounts at traditional financial institutions. In other words, the TrueLayer platform provides a gateway for digital applications to connect with bank accounts from traditional banks. By allowing developers to build services around their financial institution, the traditional banks benefit from giving their customers access to a range of additional services that they do not offer. The concept originated in the United Kingdom, when a regulator ruled in 2016 that the UK’s nine biggest banks must all allow licensed startups to have access to their data. Currently, over 50 percent of UK open banking traffic is handled through TrueLayer based channels.
Disrupting the Payment Processing Industry
Since the company’s founding in 2016, TrueLayer CEO Francesco Simoneschi has stated his belief that the single biggest opportunity for open banking exists in the payment processing space. PayDirect is TrueLayer’s newest product that is directly competing with traditional credit cards. Benefits of PayDirect over traditional credit cards for online payments include easier registration, more safeguards against fraud, customizability of platform, and no spending caps. While traditional credit cards were developed in an era where online payments were not relevant, the new generation of fintech companies have an opportunity to create new products that fill this void. Using the TrueLayer API, approved third parties can initiate the transfer of money out of customer bank account faster, more securely, and at a lower cost. Third-party companies that have been using TrueLayer’s API for their own product development include companies in digital banking, eCommerce, trading and investment, wealth management, crypto and iGaming fields.
Future Plans for Growth
Growth for open banking companies is heavily dependent on the regulatory environment. As mentioned, TrueLayer has had success in the UK and across Europe due to regulatory decisions regarding the ability of financial institutions to share customer data. Other countries have looked at the UK model for ideas to implement within their own jurisdictions. TrueLayer is hoping that the latest round of funding can be used to fuel growth into regions outside of the United Kingdom. Areas that are being targeted include Brazil and Australia for later this year. The company was already expanding its presence across Europe prior to this round of funding, and the new injection of money is likely to spur additional hiring.