Founded by former Silicon Valley engineers, UK-based Griffin Bank, an API-driven banking-as-a-service platform just obtained a banking license, roughly one year after starting the application process. This means it has been given the green light from the UK’s financial services regulators, the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA), to exit ‘mobilization’ and launch as a fully operational bank.
The move stands in marked contrast to Revolut, the UK’s most valuable fintech, which, despite repeatedly stating its intentions over a span of three years, has yet to secure a banking license. (No doubt Revolut can take solace in the fact that from 2013 to 2019, only 28% of companies reached the application submission stage, according to the PRA and the FCA.)
Griffin says that it now offers a full-stack platform for fintech companies to offer banking, payments, and wealth solutions, via automated compliance and an integrated ledger. Indeed Griffin is less likely to offer banking accounts directly to consumers, but rather to other businesses needing to offer embedded financial solutions such as savings accounts, safeguarding accounts and accounts for holding client money.
Founders David Jarvis and Allen Rohner have plenty of experience to bring to the table. Jarvis was an early engineer at Standard Treasury (acquired by Silicon Valley Bank in 2015), after which he he joined Airbnb, working on infrastructure. Rohner founded the software startup CircleCI. With Jarvis, he is the author of Learning ClojureScript, an introductory book to the ClojureScript language, which Griffin uses to build it systems.
They argue it’s important that what Griffin offers is a deeply tech-driven product. The UK banking world has historically not been a particularly technology-friendly industry, but that all changed a few years ago when Open Banking standards were forced on the super-traditional industry, leading to the launch of a swathe of neo-banks such as Starling, Monzo, Tide and others.
But now that fintech companies are here to stay, these and other kinds of companies are leaning into what’s become known as ‘embedded finance’. The advantages of embedding financial products into existing services are becoming clearer. They boost customer lifetime value by putting features in one place. They decrease churn for the same reason. And they create new lines of revenue for companies that previously didn’t offer financial products.
Last year, banking-as-a-service was expected to grow 15% each year in the U.S., to be valued at nearly $66 billion by 2030. Among other companies in the space, last year in North America, Treasury Prime secured a $40 million Series C, Synctera raised $15 million, and Omnio raised $9.8 million. Other outfits jumping on the banking-as-a-service bandwagon include M2P (India), Pomelo (argentina), Cross River (US) and Solaris (Germany), to name a handful. And they are raising money.
Commenting on the next stage of Griffin’s growth, co-founder David Jarvis told TechCrunch that Griffin’s customers will be able to have funds pooled into their ‘own bank’ rather than larger banks, many of which has stopped offering these kinds of services. And he says the advantage of embedded finance and BaaS is not that consumers “end up with 50 bank cards.”
“We play up the parts of embedded finance that are, synergistic to our thesis. We’ll work with a salary finance business that already has a relationship with the employee because they’re doing earned-wage access. And they want to do, let’s say, embedded savings accounts. So they’re leveraging an existing financial relationship to bundle additional financial services in an embedded way. That makes sense. Do we want to help people issue cards for their brand? No.”
He says there is a lot of “historic conflation between core banking system vendors and banking as a service providers” which means BaaS gets mixed up with other companies.
“When people talk about banking as a service, they tend to conflate actual banking versus many non-banking services that still tick the box, where it ‘looks like a bank, smells like a bank’. But it’s not. This is a space where suddenly our having a bank license versus a neobank that’s not a real bank matters. Because we can enable the nested customer to actually earn interest on their funds.”
He also says that in addition to the FCA regulated firms, there is a wide net of firms that are not FCA regulated but have some form of regulator or governing body that requires them to hold money in a claimed money account: “So accountants, solicitors a very large part of the property sector… anyone who’s doing anything in managed lettings, anyone who’s doing anything on a tenancy deposits. All of that needs to sit in specially marked bank accounts.”
Griffin’s aim, he says is to pick up as much of that business as possible.
Investors are betting on it achieving its aims. After raising $28.1 million, Griffin just raised another $24 million (£19 million) in an extended Series A round that was led by MassMutual Ventures, NordicNinja and Breega, with participation from existing investors Notion Capital and EQT Ventures. In June of last year, Griffin raised $13.5 million in a Series A round led by MassMutual Ventures. The outfit has now raised around $52 million since its founding in 2017.