Fintech startups received a whopping $5.3 billion from investors in the first quarter of 2016, according to a report by Accenture. And the majority (62%) of this investment went to fintech startups in Europe and Asia.
The fintech industry includes two types of players: the collaborative (those targeting financial institutions as customers) and the disruptive (those wanting to compete with institutions). London has become a hotbed for challenger banks, able to build their IT systems from scratch and save on costs thanks to their digital-only banking approach.
Many finance startups are focused on changing the way millennials manage their money by providing tech-driven tools to invest, lend and share money differently. From money transfer apps and digital banks to automated savings and investment apps, these are the startups shaking up financial services. And, they all have one thing in common – they’re attracting big money from investors.
1) Revolut – the ‘money without borders’ app
Revolut is a smartphone app that’s revolutionising foreign currency exchange by allowing consumers to spend in more than 90 currencies around the world at the best exchange rates. The app is linked to a pre-paid Mastercard, shows travellers the current exchange rate and allows them to spend money abroad without running up foreign exchange fees.
Former investment banker, Nikolay Storonsky had the idea for Revolut while working at Credit Suisse and joined forces with friend and colleague Vladyslav Yatsenko to build the business. In July, the London-based startup raised $13.8 million in a Series A funding round led by Balderton Capital. Revolut also broke the UK crowdfunding record this year by attracting £20 million worth of pledges. The funds will be used to expand its operations outside Europe.
- Founded: 2015
- Total funding raised: $23 million, plus £20 million crowdfunding
- USP: multi-currency spending and money transfers in one app
2) Atom Bank – UK’s first mobile-only bank
Atom Bank offers a mobile-first digital banking experience with products that include current accounts and savings, loans and mortgages. Atom secured its banking licence and launched in full this year when its regulatory authorisation restrictions were lifted.
In just two short years, Atom Bank’s CEO Mark Mullen and founder/chairman Anthony Thomson have led the company to become one of the UK’s most successful fintech startups. Their digital-only strategy allows them to offer cheaper services compared to high street banks with higher costs. In 2015, Atom raised a whopping $128 million of investment from Spanish banking group BBVA and Toscafund Asset Management. Atom Bank’s app incorporates gamification and 3D visualisations to appeal to younger users and the startup brought the best digital design and development talent in-house by acquiring Grasp this year.
- Founded: 2014
- Total funding raised: $170 million
- USP: the UK’s first mobile-only bank
3) Chime – mobile bank for healthy financial habits
Chime app is banking built for a tech-savvy generation. Chime provides customers with a Visa debit card, a bank account and the option to automate savings. It has no minimum balance requirement, monthly fees or overdraft fees. In fact, there is no overdraft facility.
The California-based startup, co-founded by CEO Chris Britt and Ryan King, is on a mission to help us lead healthier financial lives. And, they’ve attracted plenty of investors on their journey. In May 2016, Chime closed a $9 million funding round led by Aspect Ventures with contributions from Crosslink Capital, Forerunner Ventures, Homebrew, Pivotnorth Capital and SurveyMonkey CEO Zander Lurie.
- Founded: 2013
- Total funding raised: $21 million
- USP: mobile banking for millennials
4) Tandem Bank – the app-only bank
Tandem is an app-only bank that wants to make their customers better off. The UK-based startup bank got its licence last year and, although the app is yet to launch, Tandem will use big data to make sure customers are getting the best deals on things like credit cards and mobile phone tariffs.
Founded by Ricky Knox and Matt Cooper, Tandem have built a community of over 7,000 “co-founders” who want to help shape the bank with their feedback. In May, Tandem announced it had raised $22 million in a Series B funding round, from investors including eVentures, Route66 and eBay founder Pierre Omidyar’s investment fund. They also smashed their £1 million crowdfunding target this May. The money will go towards launching the bank, scheduled for the end of 2016.
- Founded: 2013
- Total funding raised: $35 million
- USP: using data analytics to make customers better off
5) Final – the fraud-fighting credit card
Final provides a credit card and app that lets users generate multiple card numbers in order to prevent fraud. It also allows customers to track various accounts and subscriptions, and set amount limits on specific card numbers.
Founded by Aaron Frank, Andrew Dietrich and Matt Rothstein, Final are currently onboarding customers with a good credit history in order to maintain a high-quality of support. Investment remains strong as Final recently announced a Series A round adding $8 million to their funding pot. This included investment from Runa Capital, DRW Venture Capital, KPCG Edge, Digital Garage and Y Combinator.
- Founded: 2014
- Total funding raised: $9 million
- USP: eliminates the hassle associated with a cancelled card, fraud or theft
6) Circle – the social payments app
Circle is a Blackchain startup and social payments app that makes peer-to-peer payments as easy as sending a text message. It was the first bitcoin company to receive an electronic money licence by Britain’s Financial Conduct Authority (FCA), enabling customers to make cross-border payments, in sterling and dollars, without a fee.
Founded by CEO Jeremy Allaire and Sean Neville, in 2013, the startup recently announced a Circle China subsidiary. This follows news that Circle raised $60 million in a Series D round from China-based investors. The round was led by IDG Capital and includes investment from Fenbushi Capital, CreditEase and Breyer Capital.
- Founded: 2013
- Total funding raised: $136 million
- USP: make fast payments across borders and between friends
7) Mondo Bank – a bank on your smartphone
Mondo is a UK banking startup currently in Beta. The company is waiting for its full banking licence but it offers a prepaid Mastercard and peer-to-peer payments. The app is also a spending tracker that geo-tags and categorises your purchases so you can keep tabs on our daily spending.
Founded by CEO Tom Blomfield, Jason Bates and Jonas Huckestein, Mondo’s goals are to offer fully-regulated bank accounts, rollout across Europe, integrate Apple Pay and add more features to the app. So far, it’s been a stellar year for Mondo as it raised £5 million in venture funding from Passion Capital and broke the record (and as a result, Crowdcube’s servers) for the fastest crowdfunding raise in history.
- Founded: 2015
- Total funding raised: £12 million
- USP: a bank on your smartphone
8) Acorns – the micro-investing app
Acorns is an app that automatically invests your spare change. Users link their bank accounts to the app; it then rounds up the cost of your purchases and invests the spare change in an exchange-traded fund.
Father and son Walter and Jeff Cruttenden founded the micro-investing app to give millennials a simple way to build their wealth. The app is free and the fee is just $1 a month for accounts under $5,000. In 2016, Acorns raised $30 million in a funding round led by PayPal. This brings the startup’s total funding to $62 million.
- Founded: 2012
- Total funding raised: $62 million
- USP: automated investing for millennials
The future of fintech
The growing range of fintech startups is impressive and time will tell whether they’ll deliver long-term. One thing is for sure, digital startups are forcing traditional banks to face up to competition from new technology and meet changing customer demands.
Find out how apps are transforming other industries in our app startups series.