London-headquartered fintech Griffin, which sits in the ever-expanding banking-as-a-service (BaaS) category, has raised a $13.5m Series A led by US investor Mass Mutual Ventures, with participation from Seedcamp, EQT Ventures and Notion.
The company, which was founded in 2017, provides the nuts and bolts for fintechs to launch core banking products — including savings, payments and deposits — without having to build the necessary software in-house.
It’s going up against some big rivals — like Railsr and Thought Machine — but, unlike them, it actually holds a UK banking licence which, the founders tell Sifted, gives it an in-demand edge.
It’s also backed by some of the UK’s most prominent fintech angel investors, including Chris Adelsbach, Charlie Delingpole, Matt Robinson and Carlos Gonzalez-Cadenas.
Where’s the money going?
Part of the appeal to fintechs of working with a BaaS provider is that they don’t have to obtain their own licences for the banking activities they want to perform.
In March this year Griffin obtained a UK banking licence "with restrictions". That means it can hold a limited amount of deposits and process a limited number of payments services, which need to be safeguarded for consumer protection.
Gaining a UK banking licence — as neobank Revolut knows well — is no easy feat. It’s a complex process, and it’s also expensive. Griffin’s cofounders tell Sifted that most of the new funding is going towards the remaining authorisation checks it needs to pass for an unrestricted licence, as well as some engineering hires.
It’s now in a so-called "mobilisation period", during which time the UK financial regulator will work out how much regulatory capital (the funds that a bank is required by regulators to hold) it needs. Once that’s worked out — in around nine months — Griffin plans on raising more capital from investors in a Series A extension “ideally in Q3 or Q4", Allen Rohner, cofounder and CTO, tells Sifted.
All this sounds rather arduous, but that’s precisely why there’s big demand among fintechs for a BaaS provider that actually holds a licence, Rohner says. Rivals Railsr and Thought Machine don’t hold full banking licences themselves — Railsr is an e-money institution and Thought Machine provides software that's used by banks that hold their own licences.
Griffin’s cofounders, who cut their teeth at companies like Airbnb and CircleCI, say they also plan to move into lending debt to fintechs — a move spurred by the recent Silicon Valley Bank crisis.
Two thirds of their clients (and clients in the pipeline) are business-facing fintechs — including embedded finance platform Liberis — and a third are consuming-facing.
Griffin operates as a banking software API platform that fintechs can subscribe to. It earns recurring revenue off this, unit fees on payments and interest on deposits.
It’s hoping to lure in more customers by promising to pay them back some of the interest earned on their deposits — something that most traditional banks don’t do.
Griffin is also building a leadership team of fintech veterans, including COO Maria Campbell, former head of people at GoCardless, Monzo and Snyk; CPO Sameer Dubey, former head of operations at N26; and CFO Chad Ryan, former CFO at Starling Bank.