A new report from CB Insights reveals that of the $8.9 billion in global fintech funding raised during the third quarter of 2019, challenger banks reached a quarterly funding high, raising $1.3 billion. In the US, that included deals for corporate credit card company Ramp Financial and payments company Stripe, as well as $20 million in Series A funding for Mercury, which provides accounts, debit cards and payment services for startup companies.
CB Insights’ latest Global Fintech Report highlights another important trend: challenger banks are not only raising more money, they are providing specialised B2B and B2C services for specific industries and demographics. The report mentions the fact that challenger banks now provide specialized services for student loan holders, freelancers, unbanked and underbanked customers, small and medium-sized businesses, tech startups, impact banking customers and Gen Z customers and Millennial customers, to name a few.
“challenger banks now provide specialized services for student loan holders, freelancers, unbanked and underbanked customers, small and medium-sized businesses, tech startups, impact banking customers and Gen Z customers and Millennial customers”
CB Insights also sees this happening in the payments space, where the antiquated payments systems in the US and slow pace of innovation has created an enormous opportunity for companies providing next-generation payments services. It mentions that companies are offering high-tech payments software in high-touch, specialized industries and cites the examples of Squire, an all-in-one platform that allows barber shops to manage their businesses and process payments, and Boulevard, a business management and payments platform for spas and salons.
At Open Platform, we’ve noticed this trend for a while. Open Platform’s banking and payment APIs support neobanks like Azlo and Wise that cater to small and medium-sized business customers and Catch, which serves freelancers and gig economy workers. When it comes to payments services, Open Platform’s APIs also supports a wide variety of different payment platforms and apps that cater to very specific markets and enable everything from student loan payments to payments for private jet travel.
Banking as a Service is growing
Another key trend in the CB Insights report is that more large banks like Citi and JP Morgan are offering Banking as a Service to their enterprise customers. That’s because so many big technology companies, like Google, Uber, Amazon and AirBnB, want to borrow from the fintech playbook and offer banking and payment services to customers themselves.
This makes perfect sense for banks and for their enterprise customers. BBVA USA was the first top 30 bank in the US to embrace Banking as a Service and to offer a full suite of white label banking and payment APIs to companies. We have long understood that our future success lies in empowering other companies to serve their customers in new and innovative ways, rather than owning those customer relationships ourselves. This is a huge opportunity because, as top VC firms like Andreessen Horowitz have said, “Every company in the not too distant future will be a fintech company.”
“Every company in the not too distant future will be a fintech company.”
–Angela Strange, General Partner, Andreessen Horowitz
Today, Open Platform enables a wide range of different companies to offer their individual or business customers FDIC-insured** deposit accounts, debit cards, ACH payments, bill pay and real-time payments to debit cards, all under their own brand. We’re delighted that other innovators are joining us in this effort to build the future of banking and payments and only see exciting opportunities ahead.
Get in touch to learn what our embedded banking and payments services can do for your business. We’d love to answer your questions!
The Open Platform Team
*Actual fund availability varies by financial institution and region. Please see Visa Direct for more information.
**Banking products provided by BBVA USA, Member FDIC