Founded by former Silicon Valley engineers, based in the United Kingdom Griffin Bank, an API-powered banking-as-a-service platform just obtained a banking license, about a year after starting the application process. This means it has received the green light from UK financial services regulators, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), to exit “mobilization” and launch as a fully functioning bank. .
The move stands in stark contrast to Revolut, the UK's most valuable fintech, which, despite repeatedly stating its intentions over a three-year span, has yet to obtain a banking licence. (Revolut can certainly take solace in the fact that, from 2013 to 2019, only 28% of firms reached the application stage, according to the PRA and FCA.)
Griffin says it now offers a complete platform for fintech companies to deliver banking, payments and wealth solutions, through automated compliance and an integrated ledger. In fact, Griffin is less likely to offer bank accounts directly to consumers, but rather to other businesses that need to offer integrated financial solutions, such as savings accounts, escrow accounts and customer money accounts.
Founders David Jarvis and Allen Rohner have a lot of experience to bring to the table. Jarvis was one of the first engineers at Standard Treasury (acquired by Silicon Valley Bank in 2015), after which he joined Airbnb, working in 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 his systems.
They argue that it is important that what Griffin offers is a deeply technology-driven product. Historically, the UK banking world has not been a particularly technology-friendly industry, but that all changed a few years ago when banking standards Open Banking They prevailed over the super-traditional industry, leading to the launch of a number of neobanks such as Starling, Monzo, Tide and others.
But now that fintech companies have matured more, these and other types of companies are leaning toward what's known as "integrated finance." The advantages of incorporating financial products into existing services are becoming clearer. They increase customer lifetime value by putting features in one place. They reduce customer flight for the same reason, and create new lines of income for companies that did not previously offer financial products.
Last year, banking as a service was expected to grow 15% each year in the US, to be valued at nearly $66 billion by 2030. Among other companies, last year in North America, Treasury Prime raised a $40 million Series C, Synctera raised $15 million, and Omnio raised $9,8 million. Other companies that have jumped on the banking-as-a-service bandwagon include M2P (India), Pomelo (Argentina), Cross River (USA), and Solaris (Germany), to name a few.
Commenting on Griffin's next stage of growth, co-founder David Jarvis said Griffin clients will be able to pool funds at their "own bank" rather than at larger banks, many of which have stopped offering these types of services. . And he says the advantage of integrated finance and BaaS is not that consumers “end up with 50 bank cards.”
“We leverage the parts of integrated finance that are synergistic with our thesis. We will work with a salary financing company that already has a relationship with the employee because they are accessing the salary collected. And they want to create, let's say, integrated savings accounts. Therefore, they are leveraging an existing financial relationship to bundle additional financial services in an integrated manner. That makes sense. Do we want to help people issue cards for their brand? No."
He says there is a lot of “historical mixing between core banking system providers and banking service providers,” meaning BaaS mixes with other companies.
"When people talk about banking as a service, they tend to confuse real banking with many non-banking services that still qualify, where 'it looks like a bank, it smells like a bank.' But is not. This is a space where suddenly it matters to have a banking license versus a neobank that is not a real bank. Because we can allow the nested client to earn interest on their funds.”
It also says that, in addition to firms regulated by the FCA, there is a wide network of firms that are not regulated by the same entity but have some form of regulator or governing body that requires them to hold money in a claims money account: “So financiers, lawyers, a large part of the real estate sector… anyone who is doing anything in managed lettings, anyone who is doing anything with tenancy deposits. All of this must be deposited in specially marked bank accounts.”
Griffin's goal, he says, is to capture as much of that business as possible.
Investors are betting that it will achieve its objectives. After raising $28,1m, Griffin has just raised a further $24m (£19m) in an expanded Series A round 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 team has raised around $52 million since its founding in 2017.
