British fintech start-up TrueLayer raises $70 million to take on Visa and Mastercard

LONDON — British financial technology start-up TrueLayer says it's raised $70 million in fresh funding, highlighting continued appetite from investors for fast-growing fintech firms.

TrueLayer lets fintech apps like Revolut and Freetrade connect with customers' bank accounts using technology known as APIs, or application programming interfaces. This means users of those apps can then make payments from their bank or view balances and transactions from different accounts.

The company said its latest investment round was led by Addition, the venture capital firm founded by former Tiger Global partner Lee Fixel. Existing investors Anthemis Group, Connect Ventures, Mouro Capital, Northzone and Singapore's Temasek also invested.

Francesco Simoneschi, TrueLayer's CEO and co-founder, said in an interview that the firm decided to raise more cash on the back of strong growth in 2020, helped in no small part by the coronavirus pandemic and a shift from consumers toward digital means of managing their finances.

"We were closing 2020 in an extremely positive way," Simoneschi told CNBC. "We were going through an incredible year of growth," he said, adding the company saw its payment volumes spike as much as 600 times.

TrueLayer declined to share its financials or valuation. The company, which also counts Chinese internet giant Tencent as a shareholder, has now raised $142 million in funding to date.

TrueLayer said it will use the fresh cash to expand its services internationally, building out its presence in Europe first before targeting a rollout in Australia. It's also exploring whether to launch in Brazil further down the line.

The news comes a day after Silicon Valley firm Plaid — which competes with TrueLayer in Europe — announced it had raised $425 million in a new investment, valuing the company at $13.4 billion. Plaid had initially agreed to be acquired by Visa last year for $5.3 billion, but scrapped the deal after the U.S. government raised antitrust concerns.

Plaid and TrueLayer are part of a new movement in finance called "open banking," which aims to open up precious banking data and payment services to fintech firms and other approved third parties, provided they've got consent from customers. Other players in the space include Sweden's Tink and Britain's Bud. They're taking advantage of tech-friendly new rules in the U.K. and European Union, known as PSD2.

TrueLayer and some other firms are now looking 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 payments, is also developing open banking technology for transactions.

"Open banking can be a real contender to the traditional card networks," Simoneschi said. "The question is, can the card companies embrace this change, or will they resist?"

It's worth noting Visa is still an investor in Plaid, as well as TrueLayer, meaning it could benefit long term from the rise of open banking services. Meanwhile, Mastercard last year bought Finicity, another player in the space.

Plaid plans to more than double its European workforce from 40 to 100 employees by the end of 2021.

"I think competition is good and benefits the ecosystem," Keith Grose, Plaid's head of international, told CNBC. He added the firm has "good competitors" but that its rivals don't offer the "transatlantic bridge" it's built with operations in both the U.S. and Europe.

TrueLayer has plans of its own to boost its team. The company currently employs 200 people and plans to increase its headcount by another 50 employees this year, Simoneschi said.

Fintech has attracted billions of dollars in venture capital as investors aim to capitalize on wild growth in the sector. Globally, venture capitalists pumped over $17 billion into fintechs in the first quarter of 2021, according to data from PitchBook, up 44% from the same period a year earlier and the highest quarterly amount since the second quarter of 2018. Meanwhile, tech firms like PayPal and Square have seen their market values surpass that of Wall Street titans like Goldman Sachs.

Still, the sector's meteoric growth has rattled some leaders in the banking world. JPMorgan CEO Jamie Dimon recently said banks should be "scared s---less" of fintechs, and accused Plaid of "unfair competition" and "improperly" using banking data. Plaid, which counts JPMorgan as a client, said that "data privacy and security are core to everything we do, including the data exchange agreements we have with JPMorgan Chase among many other banks."