Challenger banks, incumbent banks, and all of the many businesses that are making inroads into any kind of banking service all have something in common: when it comes to launching a new product like a credit line or a deposit or current account, these days many of them are opting not to build from the ground up, but are instead using third-party technology to power these services. Today, one of the big players in providing that tech is announcing a large round of funding to expand its business, underscoring the growth in this market.
Mambu, a Berlin-based startup that describes itself as an SaaS banking platform — providing, by way of APIs, technology to banks and others to power lending, deposit and other banking products — has closed a round of €100 million (about $122 million at today’s rates). The funding gives Mambu a post-money valuation of €1.7 billion (just over $2 billion at today’s rates), the company has confirmed.
CEO and co-founder Eugene Danilkis said it will be using the money to expand deeper in the 50 markets where it is already active, as well as focus more on specific regions like South America and Asia. (And for those keeping tabs on the “Is the Bay Area dead?” story, it’s one of the many tech companies with its US offices established in Miami.)
Mambu has been seeing 100% growth year-on-year, but notably, Mambu covered 50 markets when it last raised money, €30 million in 2019, so you can argue it has some investing and expanding to do on that front.
The round is being led by TCV, with Tiger Global and Arena Holdings, along with past investors Bessemer Venture Partners, Runa Capital and Acton Capital Partners, also participating. TCV, known for making big growth round bets (it’s invested in the likes of Netflix, Facebook and Spotify in the past) has also been carving out a name for itself for backing some of the biggest names in European fintech and e-commerce, with recent investments including Revolut, Spryker, Mollie and Relex.
The market that Mambu is courting is the vast opportunity for a new wave of banking and financial services that tap into the growth of smartphone and web usage.
Long gone are the days where people have to go into physical banks to take out or deposit money, or fill out loan applications and meet with assessors who ultimately decide whether you or your business will get money or not. In fact, many of those brick-and-mortar locations don’t even exist anymore. In their place are apps, websites, and on-demand services that live wherever people are spending time and money online.
Mambu’s platform, according to Danilkis, covers some 7,000 different banking products at the moment. These are roughly split across three primary categories: lending, current accounts and deposit accounts, but the sheer number of products really speaks to just how many ways and forms in which you are offered banking services today. (Take credit for example: you can get it through various kinds of cards, point of sale pay-later products, straight loans, and so on.) Alongside its own products, it also provides links through to certain third-party financial services like TransferWise, additional services such as security (perhaps a given for a banking platform) and a platform for “process orchestration” (its equivalent of providing business process management tools).
Gartner estimates (cited by Mambu) put the banking software market at over $100 billion and growing at double-digits, and Mambu’s customer list reveals the range of companies that are vying these days for a piece of that action: they include the likes of challenger banks like N26 and OakNorth, but also large incumbent banks like Santander and ABN Amro, and telecoms carriers like Orange, which together cover some 20 million customers and some $12 billion under management, Mambu said.
And indeed, the bigger opportunity has also meant that companies like Mambu have a large and growing list of competitors too: they include newer companies like Rapyd and Unit, as well as Thought Machine, which raised a big round last year; Temenos and Italy’s Edera. It will be interesting to see how newer entrants in the SaaS banking-platform space disrupt what are, effectively, becoming incumbents in their own right: Mambu is now approaching 10 years old (it was founded in 2011). That could lead to consolidation, too.
Turning back to that customer list, I can understand the logic of a company not really in the business of financial services like a telco, or a neo-bank taking an API-based service to power banking — it focuses instead on building clever algorithms for running those services, and fast interfaces to make them easy to use — it was interesting to me to see large banks on that list, too. It turns out that the reason is because banks are up against it in another way.
“Yes, banks have the functionality and capability, but launching something new is often a case of speed and cost,” said Danilkis. “The banks might have a generation-2 system but many will be much older. And changing how a financial product behaves is very difficult and highly risky because even a small change can create problems. And those systems are not designed to work with APIs, so it is extremely hard if not impossible to connect to other systems, never mind in real time. Certain solutions or offerings become impossible or impractical to build yourself.”
John Doran, the TCV partner, is joining Mambu’s board with this round, and while the company may be seen as an incumbent to some, its early mover position has helped it not only gain market share, but to stand out for investors as one of the players with staying power.
“Mambu was one of the first companies to leverage the opportunity to move banking software into the cloud,” he said in a statement. “The team has built a highly composable, truly cloud-native product in a multi-billion dollar, rapidly-growing market traditionally dominated by large, slow-moving on-prem vendors. We have been following Mambu’s progress for many years and are truly delighted to be able to partner with Eugene and the entire Mambu team on their journey to expand their offerings to customers worldwide.”