The aim seems to be to inflict death by a thousand cuts. Banks and financial institutions are huge whales – sprawling businesses built over decades that make them seemingly impenetrable to the technological disruption faced by other industries.
But “fintech” start-ups are nimble piranhas, each focusing on a small part of a bank’s business model to attack.
If enough of these start-ups have an impact, the banks could suffer from a slow bleeding of their overall revenues. Here is a guide to some start-ups that are aiming to take income from the banks.
This Netherlands-based company is attempting to cut banks out of the payments process, both online and in stores. It already handles online payments for companies such as Netflix, Spotify and Uber.
But it is now expanding its technology offering to allow merchants to take in-store payments using internet-connected devices.
The idea is to free retailers from using multiple payments systems and instead plug into a single global platform. This allows any store – online or not – to accept payments in multiple currencies using more than 250 methods, from credit cards to Apple Pay.
Adyen’s payments platform can also capture information about customers as they buy across multiple venues, thus allowing it to provide additional services such as fraud detection and loyalty schemes.
Investors have valued the company at $2.3bn, making it one of Europe’s most valuable private tech companies.
The London-based company allows small businesses to take direct debits or recurring payments, such as monthly subscriptions, via apps or websites.
GC’s charges change according to the volume of transactions, but they are generally 1 per cent per transaction, capped at £2.
Although this is not significantly cheaper than banks and other payment processors, GC says that its systems are easier to access and use. In January, it secured $7m from investors including Balderton Capital, Accel Partners and Passion Capital – some of Europe’s leading venture groups.
This Swedish company has created credit card-reading devices that can be attached to phones and tablets, allowing individuals and small businesses to take card payments. This means that even market stall holders and ice-cream van owners can process such payments.
Its main rival is Square, the San Francisco-based group started by Twitter co-founder and CEO, Jack Dorsey.
The company has ambitions to expand into other areas, including lending. It has also launched iZettle Advance, a financial product that provides businesses with small cash advances that are returned automatically as a percentage of future card sales.
Stockholm-based iZettle has gained more than $157m in funding since its founding five years ago.
This San Francisco start-up is at the vanguard of companies building businesses around the bitcoin, the digital currency. It has created an online wallet that allows people to store, send and accept bitcoin payments. It has also launched an exchange that allows people to change real-world money into the cryptocurrency.
Investors see bitcoin as a serious threat to the established financial order. Earlier this year, Coinbase became the best backed bitcoin company in the world when it secured $75m from investors including US venture capital groups DFJ, Andreessen Horowitz and Union Square Ventures.
What caught the attention of the industry was the presence of traditional finance groups in this funding round, including the New York Stock Exchange, Spanish bank BBVA, and the former chief executives of Citigroup and Reuters.
Earlier this year, Coinbase launched its services in the UK and it is now planning further international expansion.
This US start-up offers an “automated investment service” – software that automatically makes investments and financial decisions for its clients – work traditionally done by well-paid asset managers. Wealthfront claims that its algorithms are just as competent, and will open up investing to the less wealthy.
In March, the company announced that it held more than $2bn in assets for 22,000 clients – and had saved those clients nearly $10m in financial advisers’ fees.
Based in Palo Alto, California, Wealthfront has raised close to $130m in funding, including from leading US tech investors such as Index Ventures, Greylock Partners and Spark Capital.
A London-based start-up that offers mobile-only banking services for children while providing parents with a degree of control over their children’s cash. Osper creates current accounts with separate login details for parents and children. Accounts, which have no credit or overdraft facilities, are accessed via an app.
Osper also creates pre-paid debit cards, which can be used to make withdrawals at cash machines, or for in-store or online purchases.
It is currently a UK-only service but it has raised $10m from investors, including Index Ventures.
By Murad Ahmed, Source: FT.com
Copyright The Financial Times Limited 2015
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