TrueLayer, a British banking startup offering what’s known as “open banking” services, announced on April 8 that it had raised $70 million in fresh funding. The injection in capital will be used for promoting and improving the company’s open banking payment services and expanding internationally, with a long-term goal of eliminating the need for cards.
The open banking industry has skyrocketed partly due to a shift toward digital financial tools during the coronavirus pandemic. Seemingly capturing the momentum of this wave, TrueLayer’s payment volumes increased 600-fold in late-2020 according to Francesco Simoneschi, the CEO and co-founder of the firm.
Open banking companies have been competing with traditional card networks such as Visa and Mastercard in pursuit of customers. According to Simoneschi, his company is on the right track, as one in three customers decide to continue with open banking payment methods once they try them. It seems that traditional methods such as payment cards are slowly conceding ground to open banking.
The main reason behind this shift might be convenience; instead of memorizing card details or filling them in every single time, customers can use face-recognition technology or authenticate their identity with a fingerprint. On top of that, there’s no need for physical cards because payments are performed with a smartphone. Transaction fees are also much lower, encouraging customers to use open banking as their default method of making online payments.
Cards have long been irreplaceable for those who need help to develop healthy spending habits while improving their credit score. Many young adults also continue to use them while traveling or shopping online. The question, however, is whether card companies such as Visa or Mastercard can resist the trends or embrace the new trends in finance.
With this new injection of $70 million, TrueLayer’s funding totals $142 million to date, meaning scaling up TrueLayer’s open banking network should be more achievable than ever. The firm plans on expanding its presence in Europe, then launching in Australia and Brazil down the line. In five years, the way we spend, save, and transact online might be flipped on its head.