Raises $40M To Expand Open Banking Payments Between Accounts In Europe

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The rise of digital payments has changed the nature of how people do business with each other; and open banking — a movement in banking where actors are finally adopting new technologies such as APIs to open up their systems to modern integrations — is leading to a wave of new payment methods, each hoping to become as standard as paying in cash or card. In the latest development on this topic, a British startup called has closed $40 million in funding to expand its proprietary payment technology — account-to-account payments and account access for transactions using a single API — deeper into the UK and across Europe.

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Funding is being provided by Cota Capital and TempoCap in conjunction with Element Ventures, MissionOG and PostFinance, as well as former investors Octopus Ventures, Opera Tech Ventures and SBI Investments. The company did not disclose the valuation, but CEO Todd Clyde confirmed that it is up from previous funding.

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But to judge how Token works and how popular it gets for its technology, its clients include BNP Paribas, HSBC, Mastercard, Nuvei, Paysafe, Ecommpay, Rewire, Coingate, Raypd, Sonae Universo, Volt, Vyne and others whose names have not been released (some use Token as a white label service, which means there is no branding that would give away this relationship). Clyde also said that Token payment volumes have grown 20-fold in the last year and now account for 21% of all payments between accounts in the UK and Europe – a share that will grow as more of his customers use their tokens. live.

One comparable for a token, and an indicator of how big the overall business is, is TrueLayera major player in open banking, also based in the UK, which raised a major US$130 million round last year at a valuation of over US$1 billion.

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If the name “Token” made you think about how this startup is somehow related to cryptocurrency, you would be both wrong and right. The company started a few years ago with a mission to create alternative payment technologies to improve the way cross-border payments are made, and cryptocurrency has indeed been part of that premise. However, in 2019 promoted his crypto businesswhich is called M10 and today focuses on helping banks (state banks, commercial banks) create and manage tokens used to create their own digital currencies and for other purposes.

Token retained the name and part of the legacy of how “token” was traditionally used in financial services to continue its focus on secure and modern open banking technologies, and was part of a group of companies on a wave of interest in creating new services to compete with existing payment systems. promising to give consumers and businesses more choice and lower costs in the process.

Account-to-account payments are not a completely new concept in the most general sense, but they have long been a complex and expensive process, not something that you would use for everyday payments, but something that required setting up in banks and sometimes filling out documents. out, and fees to pay. What has changed over the past few years (and thanks to the innovations of companies like GoCardless) is that it has become something quick and easy, as easy as getting a card or cash out of your wallet.

“The turning point has come,” said Clyde. “Open banking removes barriers to account-to-account payments and allows them to become mainstream. And so the absorption is quite colossal. We are seeing 10% to 20% monthly growth in UK sales.”

Interestingly, however, it all seems to still be relatively small compared to the total volume of transactions, highlighting how much needs to happen before the account-to-account concept (and the companies behind it) can hope for any – either view. generally accepted recognition. Currently, Clyde estimates that A2A accounts for only about one-tenth of 1% of all payments in the UK and Europe, although all indications indicate that in three years it will account for 10% of all payments.

As with Kevin — another company in the field of payments between accounts, which we only covered last week, when they also announced funding for their specific approach to A2A, integrating it with POS services for retailers — Token’s approach was to create their own API, behind which he has done all the hard work of creating integrations with various banks to make payments possible.

In the UK, where open banking has been implemented for many years at the major banks in the country, it is relatively easy as these banks use the same standards; Clyde said it was much more complex in Europe: Token took 14 different banking standards, “harmonized” them and built them into its API, effectively making payments available to account holders at thousands of banks in 16 countries. different countries through a single API.

“Aggregation is a key value proposition for us,” he said.

Kevin Jacques is a partner at Cota Capital leading an investment in Token, having previously worked at Visa for many years and led its venture arm (hence has a specific and in-depth knowledge of how to create and dominate payment systems, as well as the shortcomings of some of the biggest today) noted that one important force pushing this market will be Strong client authentication.

These are new regulations in Europe (and the UK) requiring multi-factor authentication to improve the security of digital payments. A2A coming directly from customer accounts will mean that those managing payments will have more account holder data on file and as a result will be able to speed up some processing: many transactions often fail due to processing delays and glitches, simplification which could be a clue to wider adoption by both retailers and consumers.

Going forward, while Token will focus mainly on expanding its presence, its partners, and incorporating more live integrations with its platform, it will also be looking at how it can provide more services in addition to basic A2A payments to serve more a wide range of use cases. I mentioned the Clyde credit: today not every consumer wants or can pay for goods with cash, so why can they do it in A2A? Some will still need financing and credit alternatives. His response: while Token is unlikely to build such services on its own anytime soon, it will likely partner with others who are leading the way in this area to provide alternatives:

“Credit was a card, but it will be replaced by ‘buy now, pay later’ and other forms of credit,” he said.

We are currently in a particularly difficult funding market, so it is also notable that this round for Token has closed in the last couple of weeks, which is a sign that deals are still being made for the right teams and businesses.

“This round speaks volumes about the quality of the token as a business. We see a real opportunity for some dynamic changes in the payments market that don’t happen once every couple of years, even with open banking innovation,” said Adam Shepherd, investment partner at Tempo, who led the investment. “The Token team has a deep knowledge of payments and I think the fact that we are announcing this round at the moment shows that there is still funding available for the right businesses with the right plan, with the right unit economy. But yes, it’s a tougher market.”

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