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OPEN by Eliga September insights

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In September, the open banking community was inundated with news about TrueLayer. JP Morgan Chase and Starling Bank grabbed headlines as the banks expand and develop their offering. There was also an abundance of BNPL news as the industry gains traction, thanks to Mastercard Installments and strong performances over the summer.

 

TrueLayer secures its place in the unicorn club

In September, TrueLayer joined the 'unicorn club' with its $130 million funding. The term unicorn club is used by venture capitalists to describe a privately held startup company with a value of over $1 billion.

  • According to Finextra, the company now accounts for more than half of all open banking traffic in the UK, Ireland and Spain.
  • The company enjoyed an impressive 400% growth in monthly payment volume and 800% growth in monthly payment value.
  • It doubled its customer base and rolled out a host of new products.
  • It covers 90% of all major EU markets, expanding across 12 EU markets.

According to Francesco Simoneschi, CEO and co-founder of TrueLayer, the funding will supercharge mainstream adoption through industries like e-commerce and subscriptions, so customers can pay straight from their bank account with instant payments. 

 

Post-Brexit financial centre

At the end of August, it was announced that TrueLayer was authorised by the Central Bank of Ireland (CBI) as a Payments Institution. The company's new HQ in Dublin is headed up by Joe Morley, TrueLayers VP and General Manager for Europe and Leigh-Anne Cotter, who is COO of TrueLayer's European operation. 

According to Finextra, the CBI authorisation enables TrueLayer to incorporate payment processing into its open banking network. It follows the launch in January of its first payments product, PayDirect.

 

The open banking opportunity in Ireland

On TrueLayer's blog, it cited the story of Revolut in Ireland as a testament to the 'opportunity' in the country. The neobank established a large user base, supporting consumers and businesses with open banking-based services with minimal market spend. Joe Morley noted, 'That’s what happens when you have a slow-moving market with a small number of big bank incumbents who aren't innovating. Revolut arrived with an open banking experience and people loved it. It spread quickly through the young population, and then to their families and so on.'

Revolut shows the appetite and quick adoption of open banking. Post-Brexit, some companies may need to reconsider their strategy in the UK and Europe. The capital has become an EU financial services centre and post-Brexit hub for payments and e-commerce for companies.

 

Starling Bank launches its EU banking-as-a-service platform

Revolut and TrueLayer aren't the only FinTech companies refining their strategy post-Brexit. Subject to regulatory approval, the Starling Bank plans to launch its banking-as-a-service (BaaS) platform across the EU, including France, Germany, The Netherlands, and Spain.

According to Altfi, the launch will enable French firms to provide financial services to their customers like payments, data processing and issuing cards. CEO and founder, Anne Boden cited the thriving technology and FinTech scene in Europe as a 'great fit for the culture of innovation at Starling' as the digital bank offers and develops its solutions outside the UK.

 

JP Morgan Chase's digital bank expands to the UK

Experts predicted that JP Morgan Chase's digital bank has a good shot at UK success with its rollout of its first retail banking presence in the UK. The digital bank will start with current accounts that include rewards programs. It plans to launch future products, including mortgages, investment, and personal lending.

  • According to Reuters, the US retail banking giant sees the UK as a testing ground for global expansion.
  • Chase will face tight margins and tough competition in a crowded bank of neo banks, direct banks, and incumbents.
  • Nonetheless, JP Morgan has a longstanding presence in the UK with its investment banking and commercial banking.

 

BNPL market surges

With open banking names like Bud offering transparent BNPL onboarding to providers, open banking technology will help providers tighten the onboarding process to provide the very best user experience. Following a strong surge in summer spending and recent growth initiatives, Afterpay and Klarna delivered strong performances, thanks to volumes and user growth.

  • According to Insider Intelligence, Afterpay's global underlying sales increased 102% year over year, hitting $22.8 billion in its first fiscal year ending in June 2021.
  • Global active customers grew to over 16 million and its merchant partner network expanded to 100,000.
  • Similarly, Klarna's gross merchandise volume or GMV surged to 77% year over year and hit $39 billion in H1.

Another sign that the BNPL market is gaining traction was Barclay's announcement that payments veteran, Antony Stephen is joining as CEO of its POS finance business in October from Amazon. He is tasked with scaling up Barclays' point-of-sale finance business in the UK, Barclays Partner Finance, the bank's buy now, pay later (BNPL) lending platform enables consumers to spread the cost of new purchases.

Finally, at the end of September, Mastercard launched Mastercard Instalments, a point-of-sale payments programme for online and in-store purchases in the UK, Australia and the US. The announcement signalled its fightback against competing BNPL providers.

 

Join the conversation

Follow Eliga on LinkedIn. We'd love to hear what you think about TrueLayer's expansion and the rise of the BNPL market.