It’s difficult to get excited about startups you can’t see.
Yet top investors are betting that it’s precisely the fintechs you don’t know – the backend operators, that sit behind your bank accounts and lending apps – that will become the next wave of profitable, billion-dollar companies.
Germany's Mambu is the latest in this category to catch investors' eye, announcing a mega €110m round and securing a $2bn valuation today.
The round was led by US-based fund TCV, whose investments include Netflix, Spotify, and money-transfer site WorldRemit.
The giant fundraise will be used to accelerate Mambu's race against peers like Thought Machine, which closed a $125m Series B last year, and the UK’s ClearBank.
It could also fuel Mambu to become one of the world's largest platform players, looking to ramp up to over 1000 employees by 2022.
This could be critical as Mambu sits in a niche but highly competitive space known as ‘banking as a service’ (Baas).
The idea is that by outsourcing the banking infrastructure to agile, cloud-based providers like Mambu, finance companies can focus on delivering their products without worrying about the back-end technology.
As a result, players like Mambu enjoy a reliable revenue model, as clients generally stick to their chosen core-banking platforms for a long time (it is complex and expensive to migrate).
The banking software market is currently valued at over $100 billion and is forecasting to grow at double-digits, according to research group Gartner.
Going global
Launched in 2011, Berlin-based Mambu currently has over 160 clients worldwide, including Santander and N26.
But Asia is emerging as a key battleground for BaaS players, with Mambu already setting up shop in Japan.
Meanwhile, Thought Machine is also gearing up to welcome its first Asia-based client later, having made its first hire there in mid-2019 and looking to onboard 35 employees.
“Banks [here] are now looking for a change…The average age of the tech here is around 20 years old,” said Thought Machine's Nick Wilde.
Wilde also highlighted that Covid-19 has actually made banks more willing to engage with the company, despite the surrounding disruption to business.