Teller raises $4M to take on Plaid in the U.S. by providing API access to bank accounts – TechCrunch
“They’re idiots, they’re really naive,” is how Stevie Graham, the co-founder of fintech Teller, as soon as described Open Banking Limited, the physique charged with delivering open banking in the U.Ok.
His view again in 2017 — which now appears considerably prophetic — was that open banking wouldn’t be the competitors driver it was overestimated to be. Instead, incumbent banks have been incapable of change and would act in a malevolent manner to cease fintechs from strolling via the entrance door and stealing their lunch.
He, together with co-founder Dan Palmer, had spent a number of years constructing an early model of Teller that reverse engineered the APIs used by U.Ok. banks for their very own cell apps, and supplied access to builders that needed to create apps utilizing banking information. It was billed as a extra strong and realtime various to both screenscraping or ready haplessly for PSD2 — the European directive mandating open banking — to ultimately come into existence.
But this inevitably meant enjoying a recreation of Whac-A-Mole as incumbent U.Ok. banks tried unsuccessfully to thwart the efforts of Graham and Palmer. It was additionally by no means completely clear who was doing the whacking.
Fast-forward to right now, and Graham, who was Twillio’s first European worker, has a unique incumbent in his sights. In late 2018, Teller re-incorporated in the U.S. to take on Plaid, the monetary providers API supplier just lately acquired by Visa for a chunky $5.three billion.
The fintech startup additionally quietly raised $four million in seed capital from a slew of U.S. traders: Lightspeed Venture Partners, Founders Fund, and PayPal co-founder Max Levchin’s SciFi. Teller’s U.Ok. product has since been shut down, and the firm launched a U.S. beta of Teller in September.
“The U.S. is a better opportunity for Teller because the market is far larger with more mature, large-scale customers to serve as well as startups being created every day, [and] an incumbent with an unreliable, unpopular product and not much competition,” Graham tells me.
“PSD2 was also a factor in our decision to withdraw from the U.K. Primarily because it made practically every use-case of banking APIs a regulated activity, meaning that it’s no longer possible to quickly build and test a product without first spending thousands of pounds and 3-6 months getting FCA approval. When we checked at the end of 2018 less than 100 entities had been granted approval. We can not build the business we want with a total addressable market of 100 customers”.
On Plaid, Graham is nearly as scathing as he was about the main U.Ok. banks three years in the past, even when he chooses his phrases a bit extra fastidiously. Unlike Plaid, Teller’s know-how shouldn’t be constructed utilizing screenscraping, dubbed a “creaky technique” by the Teller co-founder, and subsequently is “more reliable and performant”.
“We are also better because we have the incentive to really care about our users and mean it. Plaid has rolled up the market by buying Quovo and is now effectively a monopoly. Speaking to users we found a lot of frustrated Plaid customers that didn’t feel as if Plaid was sympathetic when things went wrong. For example their Capital One integration has been down for months. Maybe the Plaid folks genuinely can’t fix it, maybe they don’t have truly enough competition to care. Either way, our Capital One integration works great”.
Suspicious of Visa’s capability to innovate and serve builders as clients, Graham says that if he was a Plaid consumer he could be involved about the future high quality of the product now that it’s owned by a legacy enterprise “not exactly renowned for … shipping successful developer products”.
The deal can be considerably all-cash, he notes, suggesting that workers could have little incentive to keep.
“The top talent at Plaid has to now be sitting there in the morning thinking ‘do I really want to work at a stodgy public company that has barely 3x’d its stock price in 5 years? This is not what I signed up for’. This is why I fear for the future of Plaid’s product. A lot of their best people will be heading for the door, and we’d love to talk to them,” Graham says unabashedly.