Founded by former Silicon Valley engineers, based in the UK Griffin Bank, a banking platform powered by this API has now obtained a banking license about a year after the start of the application process. This means it has received approval from the financial regulators in the UK, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), to graduate and launch as a full-fledged operational bank.
The move stands in stark contrast to Revolut, the most expensive fintech in the UK, which, despite repeatedly stating its intentions for three years, has not yet obtained a banking license. (Undoubtedly, Revolut can take comfort in the fact that from 2013 to 2019, only 28% of companies reached the application submission stage, according to the PRA and FCA.)
Griffin now says it offers a complete platform for fintech companies to provide banking, payment, and wealth solutions through automatic matching and integrated account books. In fact, Griffin tends to offer fewer direct bank accounts to consumers, but rather to other businesses that need to offer embedded financial solutions such as savings accounts, escrow accounts, and customer money-holding accounts.
Founders David Jarvis and Alan Rohner have a lot of experience to bring to the table. Jarvis was an early engineer at Standard Treasury (acquired by Silicon Valley Bank in 2015) and later joined Airbnb working on infrastructure. Rohner founded the software startup CircleCI. With Jarvis, he is the author of ClojureScript Programming, an introductory book to the ClojureScript language that Griffin uses to build its systems.
They claim that Griffin's offering is deeply technology-centric. The banking world in the UK historically was not particularly technology-friendly industry, but all that changed a few years ago when open banking standards were imposed on the super-traditional industry, leading to the launch of a range of neo-banks like Starling, Monzo, Tide, and others.
But now, with fintech companies here to stay, such companies and others tend towards what is called ’embedded finance.' The benefits of embedding financial products in existing services are becoming clearer. They increase the lifetime value of the customer by placing features in one place. They reduce churn for the same reason. And they create new revenue streams for companies that previously did not offer financial products.
Last year, Banking as a Service is expected to grow by 15% annually in the US to almost $65 billion by 2030. Among other companies in the field, last year in North America, Treasury Prime raised a $40 million Series C, Synctera raised $15 million, and Omnetio raised $9.8 million. Other players jumping on the Banking as a Service bandwagon include M2P (India), Pomelo (Argentina), Cross River (USA), and Solaris (Germany), to name a few. And they're raising money.
Looking ahead to the next stage of Griffin's growth, co-founder David Jarvis told TechCrunch that Griffin clients will be able to "pocket money to their 'own bank' and not to larger banks that many of them have stopped offering such services. He says that the advantage of embedded funding and BaaS is not that consumers "get 50 bank cards."
"We are playing parts of embedded funding that are synergistic to our vision. We will work with a business to fund salaries that already have a relationship system with the employee as they access the salary. And they want to do, say, embedded savings accounts. So they leverage an existing financial relationship system to knit additional financial services in an embedded way. It makes sense. Do we want to help people issue cards for their brand? No."
According to him, there is much "historical confusion between core banking system providers and banking service provider", meaning BaaS intertwines with other companies.
"When people talk about Banking as a Service, they tend to blend actual banking with many non-bank service providers that still tick the box, where it 'looks like a bank, smells like a bank'. But it is not. It is a space where suddenly we have a banking license compared to a neobank that is not a real bank. Because we can enable the discerning customer to actually earn interest on their money."
He also says that in addition to the offices regulated by the FCA, there is a wide network of companies that are unregulated by the FCA but have some sort of regulatory or governmental body requiring them to hold money in a regulated money account: "So accountants, lawyers, a huge chunk of the asset management sector… anyone doing anything in regulated renting, anyone doing anything in rental deposits. All of this needs to sit in specially tagged bank accounts."
Griffin's goal, he says, is to elevate this business as much as possible.
Investors are betting that he will achieve his goals. After raising $28.1 million, Griffin has now raised another $24 million ($19 million led by G3) in an extended 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 startup has now raised around $52 million since its founding in 2017.
