Founded by ex-Silicon Valley engineers, based in the UK Griffin Bank, an API-based banking-as-a-service (BaaS) platform, has just obtained a banking license, about a year after starting the application process. This means it has been given the go-ahead by the UK’s financial services regulators, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), to come out of “mobilisation” and launch as a fully operational bank.
Griffin got its license about a year after starting the application process, unlike the UK’s most valuable fintech Revolut, which has yet to secure a banking license despite repeatedly stating its intentions over three years . (No doubt Revolut can take solace in the fact that from 2013 to 2019, only 28% of companies made it to the application stage, according to the PRA and FCA.)
Griffin says it now offers a full-stack platform for fintech companies to offer banking, payments and wealth solutions through automated compliance and an integrated ledger. Griffin is less likely to offer bank accounts directly to consumers, but rather to other businesses that want to offer integrated financial solutions, such as savings and protection accounts, as well as accounts to hold customer money.
Investors bet on the achievement of the company’s goals. After raising $28.1m, Griffin has just raised another $24m (£19m) in an extended Series A round led by MassMutual Ventures, NordicNinja and Breega, with participation from existing investors Notion Capital and EQT Ventures. Last June, Griffin raised $13.5 million in a Series A round led by MassMutual Ventures. The outfit has now raised about $52 million since its inception in 2017.
Griffin’s founders, David Jarvis and Allen Rohner, have plenty of experience to bring to the table. Jarvis was first an engineer at Standard Treasury (acquired by Silicon Valley Bank in 2015), after which he joined Airbnb, where he worked on infrastructure. Rohner founded software startup CircleCI. With Jarvis, he is its author Learning ClojureScriptan introductory book to the ClojureScript language, which Griffin uses to build his systems.
The founders emphasized that Griffin’s is a deeply technology-based product. UK banking has historically not been a particularly tech-friendly industry, but that changed a few years ago when Open Banking standards were imposed on the ultra-traditional industry, leading to the launch of a number of start-ups such as Starling, Monzo, Tide and others.
Now that fintech companies are here to stay, they and other types of companies are leaning into what’s known as “embedded finance.”
The advantages of integrating financial products into existing non-financial services are becoming clearer. They enhance customer lifetime value by putting functions in one place, which reduces customer churn. They also create new revenue streams for companies that previously did not offer financial products.
Last year, the banking-as-a-service space was expected to grow 15% annually in the US. precious to nearly $66 billion by 2030. Among other companies in the space, last year in North America Treasury Prime secured a $40 million series, Synctera raised $15 million and Omnio $9.8 million.
Other banking-as-a-service outfits – and raising money – include M2P (India), Pomelo (Argentina), Cross River (US) and Solaris (Germany), to name a handful.
Co-founder David Jarvis told TechCrunch that Griffin’s customers will be able to raise funds at “their own bank” rather than larger banks, many of which have stopped offering this type of service. He says the benefit of integrated finance and BaaS is that consumers “don’t end up with 50 bank cards”.
“We play the parts of embedded finance that are synergistic with our thesis. We will work with a payroll finance business that already has a relationship with the employee because they have access to earned wages. And they want to do, say, integrated savings accounts. Thus, they leverage an existing financial relationship to bundle additional financial services in an integrated manner. Which makes sense. Do we want to help people issue cards for their brand? No.”
He says there is a lot of “historical confusion between core banking system vendors and banking-as-a-service providers,” which means BaaS is getting mixed up with other services.
“When people talk about banking as a service, they tend to confuse real banking with a lot of non-banking services that still tick the box, where it looks like a bank and smells like a bank, but it’s not. This is an area where suddenly it matters to have a bank license versus a neobank that is not a real bank, because we can allow the embedded customer to actually earn interest on their funds.”
As well as companies regulated by the FCA, he noted, there is a wide network of companies that are not regulated by the FCA but are required by some form of regulator or governing body to hold money in a claimed money account. “Accountants then [and] Lawyers? a very large part of the real estate sector; anyone doing anything in managed leases. anyone doing anything for rental deposits — all of that should be in specially marked bank accounts.’
Griffin’s goal, he says, is to get as much of that business as possible.
Investors bet on the achievement of the company’s goals. After raising $28.1m, Griffin has just raised another $24m (£19m) in an extended Series A round led by MassMutual Ventures, NordicNinja and Breega, with participation from existing investors Notion Capital and EQT Ventures. Last June, Griffin raised $13.5 million in a Series A round led by MassMutual Ventures. The outfit has now raised about $52 million since its inception in 2017.
