In UK and Europe, open banking catches up with fintechs, as U.K.-based consumer lending service, Abound is doubling down on its ambitions in the space with a big fundraise to fuel its own open banking-based business.
The startup has raised a whopping £500 million ($601 million at current rates); money that it will be using to help finance loans, to bring more customers on to its platform, and to invest in its technology, which combines open banking data and machine learning algorithms to build what Abound believes is a better “credit score” for applicants.
To complement its direct-to-consumer offer in the U.K., Abound also plans to expand as a B2B service in Europe, which has been building out its own open banking framework, PSD2.
“We see ourselves as going beyond credit scoring,” CEO and co-founder Gerald Chappell said in an interview, who describes the bank transaction data that Abound uses to build its AI-based risk and lending profiles as akin to “financial X-rays.” These in turn help Abound “understand true affordability” when it comes to loans.
Its rise comes at the same time that we’re are seeing a lot more activity around open banking.
Last year, Visa acquired open banking developer Tink, which provides API rails for thousands of banks, for more than $2 billion. Another major rails provider, TrueLayer, last raised at over a $1 billion valuation (granted that was back in 2021…). Meanwhile, Token.io and Vyne are, similar to Abound, examples of startups building more specific applications on open banking standards (respectively person-to-person payments and merchant services).
More pointedly, the reason for the big sum raised here is that Abound has been seeing a surge of interest since launching in 2020.
Its service — based around loans of between £1,000 and £10,000, with repayment options extending up five years (although average repayments have been 2.5-3 years), with interest rates the company guarantees are lower than those offered by banks (currently they are 24.8% APR) — has been growing on average 30% month-on-month; it has issued loans to more than 150,000 customers to date, and it says it is on track to loan out £1 billion ($1.2 billion) by 2025.