Vyne raises $ 15.5 million seed round to expand its merchant-centric open banking solutions – TechCrunch

Open banking – a new approach to payments and other financial services that disrupts traditional card-based infrastructure by connecting directly to banks – has a moment. Following on from open banking startup TrueLayer, which scored a $ 1 billion valuation in its last round after a sharp surge in its services, another open banking startup, Vyne, officially opens its doors today and announces seed funding of $ 15.5 million to support growth.

Funding comes from Hearst Ventures, Entrée Capital, Triplepoint, Seedcamp, Venrex, Founder Collective and Partech, with Alex Chesterman (founder of Zoopla and CEO of Cazoo), Charlie Dellingpole (CEO and founder of ComplyAdvantage) and Will Neale (founder of Grabyo ) also participate. CEO Karl MacGregor said in an interview that the round was “massively oversubscribed”.

London-based Vyne has been quietly building its platform aimed at merchants to help them build open banking-based payment services over the past 18 months, refining the tools based on feedback from early customers, which it picked up prior to today’s broader introduction. The sizeable seed round from strong investors is due to a number of factors. First, because of its early pull – the company says it is already processing millions of pounds of transactions every month in the UK and is currently growing 95% every month – in what (second) many believe it will be a big market in the coming years. And third, because of the parentage of the four founders.

MacGregor’s longstanding résumé in financial services includes years as a senior executive at Barclays (at Barclaycard), online betting company Ladbrokes (where he oversaw payments as well as fraud) and Worldpay. COO Damien Cahill worked for Worldpay and Amazon for years. CTO Adam Rowland was an alum from Worldpay, along with other positions in the financial services sector. And business development director Nick Daniel spent years in financial services at Logica (now part of CGI) and VocaLink (which was acquired by Mastercard for nearly $ 1 billion a few years ago).

With a lot of experience with card-based payment systems and card networks, it was the perfect knowledge base to understand why Open Banking was such an important innovation and why it offered the opportunity to change a lot of today.

“Our key takeaway these years [of experience] was that payment cards aren’t that good for e-commerce, ”said MacGregor. “They were developed 40 years ago and are expensive and inefficient.”

He noted that the annual cost of fighting fraud is now € 25 billion (a comparable figure is provided in this report), before considering other issues related to the friction of using cards for payments, such as giving up instead of pulling out cards and typing in numbers), typed details, and more.

Because of this, MacGregor said, many in the industry, including the co-founders of Vyne, saw “open banking as a huge opportunity” to change the way people are paid. “This is a global opportunity and that motivates us,” he added.

MacGregor claims that implementing an open banking-based system can save a merchant up to 65% in costs due to the added speed and efficiency (and the need to pay fees to card networks).

TrueLayer’s value in the market as a pioneer in this area lies in working with a variety of banks, large and small, to help build the infrastructure and services to integrate their banking services into a wider network wherever they are could be used for direct payments and the provision of other types of financial data about their customers. It then took advantage of that critical mass to create the connectors for those who wanted to use these integrations to do things: create cash flows, authenticate users, and more.

As a later market participant, Vyne’s value lies in using some of this groundwork to then focus more on the merchant side of this ecosystem and make their open banking-based services smoother for their customers. For example, if a customer selects an open banking option for payment in an app, the customer is forwarded to the banking app to authenticate the transaction and the connection without any further information. “The UX has been greatly improved,” said MacGregor.

Primarily aimed at digitally native consumers as the most likely early adopters, Vyne also enables merchants to create QR codes and pay-by-link to complete transactions.

However, the fact that we’re still talking about early adopters speaks to the bigger challenges that exist, not just for Vyne, but for all startups focused on open banking. Open banking is most mature in Great Britain, but even here it is still relatively young: It was not until the beginning of January 2018 that the regulations came into force. Some have even speculated that it will never arrive.

The British Open Banking Implementation Entity (OBIE for short) with the catchy name, a trading organization for those building in this field, is predictably optimistic about growth. However, if the numbers speak for themselves, then there is a clear chance. The OBIE said in a recent report that there are currently around 300 fintechs in the open banking ecosystem and more than 2.5 million consumers in the UK are using services enabled by open banking (this includes payments, credit lines, authentication services and more). ). And API call volume reached 6 billion in 2020, down from just 66.8 million in 2018. It’s rolling out, albeit slowly and not as international as what Open Banking is trying to replace. (Update: A representative from OBIE contacted us to say the number is now 4 million consumers using open banking-based services.)

“We believe this is the growth hockey stick that all VCs like,” said Megumi Ikeda, CEO of Hearst Ventures, in an interview. “The second factor is consumer habits. You have switched to a cashless economy [but] Merchants still operate on old bank lines … Open Banking helps merchants to catch up. “

Perhaps equally important, open banking is part of a larger evolution in the way personal data and information are used. If systems catch up for what we use them for, that can only be good.