UK fintechs take a 🍃 out of US fintech playbook
Payroll and HR platform PayCaptain is SotW 🚀 📈
Tweet of the week 🦉🏆
In the last issue of FATP of 2020, I wanted to thank all the readers and subscribers supporting FATP in what has been a difficult year for everyone. I would greatly appreciate any feedback you have so we can kickstart 2021 in style to provide more value to you all. Reach out here.
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Fintech’s are increasingly looking at payroll and HR as a beachhead into both consumers and businesses spaces and this week’s SotW is UK fintech PayCaptain which provides a payroll solution that combines traditional payroll functionality with banking and financial wellness services. Read more below 👇👇.
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Recent News 📰
🇬🇧 UK fintech’s have started a lobby group called Fintech Founders, to better advocate for the industry. Members include Paul Taylor from Thought Machine, Fred Kelly from Credit Kudos and Christian Faes from LendInvest.
🙌🏻 FATP Take - Lobby groups are more common across the pond but it is great to see UK fintech’s going on the offensive to lobby the UK government for a more equal footing in the financial services sector, especially given the challenges COVID has presented and the digital focus of startups.
🇬🇧 Altfi announced their favourite fintech apps of the year, with Tymit, Snoop and Freetrade winning out.
🇺🇸 Two interesting “employee first” initiatives I discovered recently are 1) Pipe allowing employees to sell some of their vested equity annually & 2) the approach Zach at HMBradley takes to giving new employees offers with varying amounts of equity.
Funding 💸
🇪🇺 French fintech Lydia has raised an additional $86m for its Series B, taking the total for its round announced in January to $131m. Accel is leading the extension round at a significantly higher valuation.
🇪🇺 Dutch banking vendor Five Degrees raised €22m to launch a cloud-native banking platform
🇪🇺 ABN Amro has allocated an additional €50m to its €100m CVC.
🇬🇧 Over-the-top BnPL provider Zilch has closed a $30m round from Gauss Ventures and Money Supermarket co-founder Simon Nixon.
🇬🇧 GoCardless has raised $95m in a Series F from new investor Bain Capital. This takes the fintech’s total amount raised to well over $200m and Bain joins Balderton, Notion, Accel, Passion Capital and Hoxton Ventures on the cap table.
🇬🇧 Cloud payments platform Form3 has signed a partnership and received an undisclosed investment from Mastercard. A big vote of confidence in the startup.
🇺🇸 CloudTrucks raised a $20.5m Series A to help drivers better manage their businesses as the industry shifts towards more independent drivers. The round included fintech investors Khosla Ventures, SciFi VC and Better Tomorrow Ventures.
🇺🇸 Self Financial, a credit building solution, has raised a $40m Series D led by Meritech Capital.
🇺🇸 Social investing app Public raised a $65m Series C led by Accel and included 🛹 Tony Hawk
🙌🏻 FATP Take - Public is one of my favourite fintech’s to watch as investing becomes more social and democratised thanks to apps like Robinhood. Following the investments of successful investors should be far easier.
🇺🇸 GoDaddy has acquired payments company Poynt for $320m, signalling GoDaddy’s deeper ambitions into e-commerce.
Embedded Finance
🇬🇧 Railsbank launched its no-code embedded finance platform Houston and OpenRailz API for financial services providers.
Challenger Banking 🚀
🇪🇺 Mass affluent Swiss challenger bank Alpian has selected Temenos for its core tech stack.
🇬🇧 Sifted’s Isabel Woodford analysed the nearly 300 neobanks to provide some insights into what to expect for 2021.
🇬🇧 Revolut is rolling out a lower cost subscription option, priced at £2.99.
🇬🇧 UK Insurer Admiral is partnering with Credit Kudos to boost its credit underwriting process.
Traditional Banking 🏦
🇪🇺 ABN Amro announced it achieved 1 billion logins to its mobile banking app in 2020, with the average customer logging in 390 times in twelve months.
🙌🏻 FATP Take - An amazing achievement and it will provide a yardstick with which other banks measure their mobile app’s success. The average customer accessed the app more than once per day which is surprising.
🇬🇧 Barclaycard has launched a new platform to allow the instant issue of virtual corporate cards, designed for the remote working environment we now face.
🇺🇸 Citi is launching a marketplace for third party fintech apps to allow customers seamless sharing of their data with apps including BillGo, eMoney, Envestnet, Yodlee, Expensify, finicity, Intuit, MX and Xero.
🙌🏻 FATP Take - An interesting approach for a bank to take which could increase take up of the products of such apps but hopefully customers can access other apps if they want outside of the marketplace. Whilst some banks are partnering with fintechs and embedding their service directly in their app, Citi is taking an alternative approach.
SME Banking
🇬🇧 Tide, the UK SME banking platform has announced it will roll out the first payroll solution within a banking service through a partnership with KeyPay.
🇬🇧 Lloyds is partnering for a six month trial with Satago to provide its invoice financing platform to UK SMEs.
Fintech Infrastructure 🚧
🇬🇧 Google Pay is partnering with Fidel for its merchant funded cash back rewards.
🇺🇸 Galileo is powering new credit card fintech TomoCredit and its immigrant focused card.
Payments 💰
🇪🇺 Danish challenger bank Lunar has launched a ‘Pay Later’ solution to split all transactions into instalments retrospectively or delay an expense up to 30 days via its app.
🇪🇺 Klarna is partnering with payments firm Verifone to embed its BNPL solution in physical stores as the space continues to be 🔥.
🇪🇺 Adyen is partnering with healthcare and travel payments startup Flywire to support the expansion of payments options internationally.
🇬🇧 Plaid is launching QR code authentication to its UK customers, which seamlessly hands off a payment session on a browser to a mobile via a QR code to authenticate a user.
🇺🇸 Checkout fintech Fast has partnered with WooCommerce to offer its Fast Checkout product to the four million stores on its platform.
🇺🇸 Affirm is partnering with online home services firm HomeAdvisor to offer extended payment options for home improvements.
🙌🏻 FATP Take - The race to sign up merchants and platforms by BNPL providers is accelerating as the industry seeks broad adoption across retail categories and scale becomes critical in the competitive sector.
🇺🇸 As the ski season gets underway, Square has partnered with POWDR to power contactless payment solutions at ski resorts.
Regulatory Corner 🔎
🇺🇸 Tough week for Robinhood as Massachusetts regulators have filed a complaint against the company for aggressive tactics and failing to prevent platform outages and they paid a $65m fine for misleading customers about payment for order flow and cost traders £34m in lost gains.
🇺🇸 IBM Security Trusteer has uncovered a major fraud of financial institutions across Europe and the US with mobile emulators stealing millions.
Longer reads 📜
Railsbank rocks the Banking-as-a-service sector with big US plans - Lawrence Wintermeyer, Forbes
Modular architecture powers Blend’s expansion - FinLedger
Unpacking Neobanks for SMEs - Arrival Bank
Why is there financing for everything now - The Atlantic
Startups of the Week ⭐🇺🇸🇬🇧🇪🇺🏆
You can check out last month’s featured startups here.
🙋If you are working on any exciting fintech startups, I would love to connect with you so drop me a message.
PayCaptain is a payroll solution that combines traditional payroll functionality with banking and financial wellness services.
Team
PayCaptain was started in early 2020 by Simon Bocca who spent sixteen years at Fourth where he gained a deep insight into the challenges of managing large workforces in the hospitality industry.
Market
The global payroll outsourcing market is a $18bn market in 2020 and expected to grow to nearly $23bn by 2027. Existing payroll solutions are built on legacy technology which makes innovation difficult and payroll processors are not able to add value to the companies they serve. As an example 99% of UK employees are still paid by BACS which takes three days to clear. When consumers are used to same day payments with Faster Payments, existing payroll solutions just don’t cut it.
One of the big trends is the nature of work shifting more towards non-traditional employment and away from more traditional pay cycles. Employees are increasingly asking for access to their wages as they are earned to help them reduce their financial stresses and stop the need for expensive short term credit at the end of the month. Ernst Young estimates that in the OECD, $1trn is accrued in employer's payroll every day.
Product
PayCaptain combines a modern tech stack with payroll embedded at the heart of the solution rather than an afterthought bolted on solution. This approach enables employees to have total control over their pay, drawing it down when necessary, as well as a close integration of payroll with financial wellbeing. They also offer bank accounts, debit cards and are adding international payments.
Everything is seamlessly integrated into an app for employees giving them more control and engagement with their payroll. The opportunity for additional lending products, savings accounts not to mention payroll API access for income verification. If the government had access to this type of information, the furlough scheme could have been a lot smoother with less fraud risk.
Business Model
PayCaptain bundles lots of value added services together in a seamless solution designed to increase employee engagement, to serve as a hiring tool and to reduce stress about money which is estimated to cost employers £35bn annually in the UK and $500bn in the US alone.
PayCaptain is a SaaS solution and charges a fixed fee per employee per month. On average employers spend £4-£6 per employee per month for a basic package or £10-£13 for more additional services (Source). Whilst PayCaptain is more expensive than the other pure payroll solutions, over the long term employers should save money through increased employee engagement, productivity and retention.
PayCaptain is currently live with two customers and is hoping to launch with additional customers soon. It is targeting companies who are active in creating a positive working environment for their employees.
Wishing you all a Merry Christmas and a Happy New Year!
🎅🎄🍾🍾🎉🥳
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Michael