Varo Money Gets National Bank Charter; StashAway Raises $16M; TransferWise Hits $5B Valuation; Revolut Adds ￡63M from Share Sale

This week (27-31 July) was yet another interesting week in FinTech this year. Varo Money has become the first US consumer FinTech firm to be granted a national bank charter, enabling the digital challenger to offer a full suite of FDIC-insured services; StashAway, a digital wealth management startup hailing from Singapore, has completed a $16 million Series C fundraising round; AI-based financial crime detection startup ComplyAdvantage has closed a $50 million Series C funding round to fuel its international expansion plans, and much more!

Without further ado, let us dive into what has happened in the financial technology sector this week.

StashAway Raises $16M

StashAway, a digital wealth management startup hailing from Singapore, has completed a $16 million Series C fundraising round.

Square Peg, the largest venture capital fund in Australia, led the round, and Burda Principal Investments, the growth capital arm of German media and tech company Hubert Burda Media, as well as existing investor Eight Roads Ventures, the global investment firm backed by Fidelity, also participated.

Founded in 2016, StashAway offers personalised investment and cash management portfolios for both retail and accredited investors. The company employs 85 people and has seen assets under management grow by 4.3X over the past year.

StashAway currently operates in Singapore and Malaysia but plans to broaden its footprint across South East Asia on the back of the new funding.

Michele Ferrario, Co-founder and CEO commented:

This new round of financing further strengthens StashAway’s balance sheet position, bringing our paid-up capital to $50.7 million SGD. This latest round will enable us to accelerate product development to both broaden and deepen our wealth management offering for our clients in Singapore and Malaysia, as well as support new market entry.

Revolut Adds ￡63M from Share Sale

Digital banking app Revolut has netted ￡63 million ($80 million) from US private equity firm TSG Consumer Partners in its latest funding round.

The latest share sale is an extension of a Series D funding round that took place in February, earning Revolut ￡387 ($500m) and a ￡4.2 billion ($5.5 billion) valuation.

Revolut stated that its valuation remains the same and that the extra money will be used to finance the addition of new features in the US and the roll out of its operations across European markets.

The UK-based digital bank has acquired 12 million registered users since its establishment five years ago but it is still yet to make a profit. In 2018, it reported a ￡33m loss, more than double the ￡15m loss in the previous year. However, Revolut did more than quadruple its revenue in that time, from ￡13m to ￡58m and the company has stated that it expects to treble revenues again this year. 

The extra funding bolsters Revolut's position as the UK's most valuable FinTech startup and it comes at a time when funding for FinTechs has declined due to the Covid 19 pandemic.

UK FinTech Funding Slows Amid Pandemic

The first half of 2020 has seen investment in the UK's fintech sector slow by more than a third as venture capitalists (VCs) chose to either keep hold of the money or invest in more established companies amid the global pandemic.

Figures released by FinTech trade body Innovate Finance showed that UK venture capitalists invested $1.84 billion in the first six months of 2020, a 39% decline on the same period in 2019 which saw more than $3 billion invested in 263 startups. 

Furthermore, over half of the money $1.84 billion was invested in just five companies. Digital banking app Revolut netted the biggest investment with a $5 billion funding round completed in February, before the onset of the pandemic hit the UK. Payments startup Checkout.com, Starling Bank and Onfido also raised more than $100 million with Thought Machine completing the fifth largest deal at $83m.

However, Innovate Finance CEO Charlotte Crosswell has issued a note of cautious optimism stating that the H1 performance is still up by 26% on the second half of 2019 but that concern remains over the smaller startups that have lost out in the funding decrease.

“It’s encouraging to see investors are still backing FinTechs, particularly those which are accelerating the digitalisation of society," said Crosswell.

"But we need to highlight the significant drop in the amount of capital raised during the first half of the year. This is particularly impacting start-ups, with a recent survey showing that 75% of smaller FinTech firms are concerned about their next funding round.

“Whilst early stage conversations suggest capital is ready and waiting to be invested, there is still a lag in actual funding. It is yet to be seen if the rest of 2020 sees a pick up in activity, but in the meantime, we must help FinTechs of all sizes source the capital they need to emerge from the pandemic, if our sector is to grow during the crisis”, said Crosswell.

Meanwhile VCs appear to be hopeful that funding is due to pick up imminently. “Anecdotally it very much feels we are back firing on all cylinders, deal activity at all stages of the funnel is happening," said Jay Wilson, investment manager at Albion VC.

"From my conversations with other investors I understand this is true for my peers too. To that extent Q2 2020 might get chalked up as a pause rather than a long term inflection point in FinTech funding activity.”

Banking App Dave Hit by Data Breach

American banking app Dave says a data breach at third party provider Waydev has exposed the personal information of its 7.5 million users.

Dave confirmed the incident after the information - including names, emails, birth dates, addresses and phone numbers - was posted on a public forum. The startup says that bank account numbers, credit card numbers, records of financial transactions and unencrypted Social Security numbers were not affected.

Says a statement:

Dave has no evidence that any unauthorizes actions were taken with any accounts or that any user has experienced any financial loss as a result of this incident.

The data was taken when hackers breached analytics platform Waydev, a former Dave third party partner.

Dave says it is coordinating with law enforcement, is notifying all customers and resetting all passwords. Launched in 2016 as a personal finance assistant, Dave was valued at $1.2 billion at its last funding round and this year began rolling out a bank account to a two million-strong waitlist.

ComplyAdvantage Raises $50M for Financial Crime Platform

AI-based financial crime detection startup ComplyAdvantage has closed a $50 million Series C funding round to fuel its international expansion plans.

Ontario Teachers’ Pension Plan Board led the round, which was joined by existing investors Index Ventures and Balderton Capital.

London-based ComplyAdvantage uses machine learning and natural language processing to help banks, FinTechs and other enterprises manage their risk obligations and prevent financial crime.

The company’s proprietary database is derived from millions of data points that provide dynamic, real-time insights across sanctions, watchlists, politically exposed persons, and negative news.

This, says the firm, reduces dependence on manual review processes and legacy databases by up to 80% and improves how companies screen and monitor clients and transactions.

Charles Delingpole, CEO of ComplyAdvantage, said:

This funding allows us to accelerate the development of our industry-leading data and suite of products to serve institutions with diverse clients and complex risk exposure.

TrueLink Raises $35M for Financial Services Helping Vulnerable People

True Link Financial, a US firm building financial tools for vulnerable people, has raised $35 million in two Series B tranches, the first led by Khosla Ventures and the second pre-emptively led by Centana Growth Partners.

Founded in 2012, True Link is aimed at three groups typically underserved by traditional financial providers: vulnerable older adults, people with disabilities, and those recovering from addiction.

The company offers a payment card for vulnerable older adults, who True Link says are targeted by $36 billion of fraud every year. The technology can be used to block exploitation related to memory loss (like scam charities, sweepstakes entries, and telemarketing) and allows caregivers to make safe purchases on cardholders' behalf.

Another card, for people in recovery, can help reduce relapse temptation associated with carrying cash, can enable budgeting, and can block liquor store or gambling purchases.

Meanwhile, investment advisory services are tailored to the needs of people who are depending on a fixed amount of resources for the remainder of their lifetime.

“I founded True Link because I saw my grandmother Ruth lose tens of thousands of dollars to financial abuse and fraud. At True Link, we are helping make spending and financial decision-making safer," says True Link CEO Kai Stinchcomb.

TransferWise Hits $5B Valuation

TransferWise has confirmed a secondary share sale raking in $319 million and valuing the money transfer unicorn at $5 billion.

New investors D1 Capital Partners and existing shareholder Lone Pine Capital led the round with Baillie Gifford, Fidelity Investments and LocalGlobe expanding their holdings.

The deal sees TransferWise - which stresses that it is profitable, cash generating and not raising any primary capital - increase its value by more than 40% on a May 2019 raise. Pitched as a cheap alternative to costly bank currency transfer fees, TransferWise serves around eight million customers, processing ￡4 billion in cross-border payments alone every month.

The unicorn has been steadily adding new products and services: its borderless account holds over ￡2 billion in current deposit, while one million debit cards have been issued by the firm since 2018. Recently it secured approval from the FCA to offer investment services to customers of its borderless bank account.

Kristo K??rmann, CEO of TransferWise, said:

We’ve been funded exclusively by our customers for the last few years and we didn’t need to raise external funding for the company. This secondary round provides an opportunity for new investors to come in, alongside rewarding the investors and employees who’ve helped us succeed so far.

Remitly Raises $85M at $1.5B Valuation

Digital remittance outfit Remitly has raised $85 million at a $1.5 billion valuation in a funding round led by existing investor Prosus’s PayU.

Generation Investment Management, Owl Rock Capital, Stripes, DN Capital, Top Tier, Princeville Global, and Threshold Ventures joined the round, the proceeds of which will be used to expand Remitly's suite of digital services.

Remitly has established itself as a rival to old-school providers such as MoneyGram and Western Union in the multi-billion dollar global remittance market.

The firm's proprietary global money transfer network is used to move over $6 billion in annualised volume from people in the west to friends and relatives in Africa, Asia, Central Europe and South America.

And, while the World Bank forecast global remittances to decline by 20% in 2020 due to Covid-19 and the consequent economic crisis, Remitly has seen 200% new customer growth year-over-year.

The company is also moving into new areas: in February it announced plans to launch a banking service, called Passbook, aimed at the 44 million first generation adult immigrants in the US.

Matt Oppenheimer, CEO of Remitly, said:

Remitly was born out of this necessity - to provide the underserved, underbanked and overlooked access to financial services anytime, anywhere. And our digital solutions have never been needed more than they are today.

Enova to Buy OnDeck for $90M

OnDeck, the online lender to small businesses, is being acquired by rival Enova in a cash and stock deal worth around $90 million.

The $90 million - $8 million of which will be in cash - is a 90% premium on OnDeck's closing price on Monday.

Founded in 2006, OnDeck was a pioneer of the alternative lending market, using data analytics and digital technology to make real-time lending decisions. The firm went public in 2014 and joined the unicorn club.

However, it has struggled in recent times. Last year JPMorgan Chase ended a four-year collaboration with OnDeck to provide online loans to small businesses. The US bank has brought processing inhouse to offer similar services from its own platform, a decision which sent shares in OnDeck tumbling.

The company posted a $59 million loss in the first quarter of 2020 and has been further hit by the economic fallout from the Covid-19 pandemic.

Noah Breslow, CEO of OnDeck, commented:

Following an extensive review of our strategic options, we believe this is the right path forward for our customers, employees and shareholders.

Joining forces with Enova, a highly-respected and well-capitalized leader in online lending, and leveraging our combined scale and strengths, provides the best opportunity for our long-term success.

Varo Money Granted National Bank Charter

Varo Money has become the first US consumer FinTech firm to be granted a national bank charter, enabling the digital challenger to offer a full suite of FDIC-insured services.

The San Francisco-based outfit was granted the charter by the Office of the Comptroller of the Currency and has secured regulatory approvals from the FDIC and Federal Reserve to open Varo Bank N.A.

Co-founded by former Wells Fargo executive Colin Walsh, Varo Money - which last month closed a $241 million funding round - currently provides a range of savings, loans and account-based services through a relationship with The Bancorp Bank.

With the national charter now in hand, Varo Bank will expand its services to target a broader set of customer needs including access to credit, and additional savings products.

Says Walsh:

2020 has been challenging for many of us across the country and has highlighted, once again, how the traditional financial system is not meeting the needs of hardworking, everyday Americans. The ability to operate as a full-service national bank gives Varo more freedom to deliver the kind of innovation and allyship that many Americans have never had from their bank before.

Brian Brooks, Acting Comptroller for the Currency, added:

Granting a national bank charter to Varo marks an evolution in banking and a new generation of banks, born from innovation and built on technology intended to empower consumers and businesses.

Varo may be the first FinTech to score a charter but it seems unlikely to be the last with others - including Square and SoFi - closing in on bank licenses.

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About: I am a business developer, sales professional, FinTech strategist, as well as Cryptocurrency and Blockchain enthusiast. I'm highly passionate about Financial Technology and Digital Innovation, and strongly believe that it will change the world for the better. Apart from my daily job at a global payments startup where I'm leading company's expansion into Europe , I'm an active member of FinTech community and a TechFin evangelist.

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