Challenger Banks and the Rise of Viva Wallet

Challenger banks are increasingly impacting the financial landscape, attracting customers from traditional institutions by offering streamlined banking experiences and leveraging technology for enhanced personalization and competitive pricing.

Viva Wallet Secures $80 Million in Funding

In a recent development, Viva Wallet, a Greek startup focused on providing banking solutions for small and medium-sized merchants, has successfully raised $80 million in funding. This capital injection will be utilized to broaden its operational reach and expand the suite of services offered to its user base, with a particular emphasis on growing its Merchant Advance loan program.

Geographic Expansion Plans

Currently operating in 23 European markets, Viva Wallet has outlined plans for imminent expansion into Croatia, Hungary, and Sweden.

Key Investors in the Funding Round

The funding round is distinguished by the participation of prominent investors. These include Tencent – the Chinese technology conglomerate behind WeChat, actively expanding its presence in financial services – alongside the European Bank for Reconstruction and Development (EBRD) and Breyer Capital. Hedosophia, a fund known for its involvement in U.S. SPACs, is also confirmed as a backer.

Valuation and Growth Trajectory

While Viva Wallet has not publicly disclosed its current valuation, Yannis Larios, the company’s VP of strategy and business development, confirmed that a large Series D funding round is nearing completion, projecting a valuation of €1.5 billion ($1.8 billion).

This represents substantial growth, as the company was valued at €305 million during its Series C closure in the latter half of 2019.

Potential Series D and Loan Book Expansion

It remains unclear whether the ongoing Series D round is related to a previously reported €500 million ($603 million) raise in August 2020, intended to facilitate the development of a new loan portfolio centered around Merchant Advances and other customer loans.

Innovative Approach to Loan Management

If approved by regulatory bodies, investors would acquire stakes in a newly established legal entity – a special purpose vehicle – designed to hold these loans. This approach, atypical for neobanks, aims to provide greater agility in scaling operations by mitigating risk exposure on the balance sheet. However, potential concerns regarding accountability surrounding these loans have been raised.

Timing and Economic Recovery

This funding arrives at a crucial time, as Europe gradually emerges from the economic challenges posed by the COVID-19 pandemic. Viva Wallet, with its focus on merchants, is positioned as a key enabler of recovery for these vital businesses.

Statements from Leadership

“We are excited to onboard Tencent, EBRD and Breyer Capital to Viva Wallet,” stated Haris Karonis, founder and CEO of Viva Wallet. “We are confident that our investors’ extensive know-how and network of partnerships will accelerate Viva Wallet’s plan to unify the fragmented European payments market.

He continued, “The technology innovations that we are bringing forward to European merchants will help them provide a frictionless, localised payment experience to all their clients, and liberate them from the hassle of maintaining legacy card terminals.”

Competitive Landscape

Acknowledging the increasingly crowded neobank market, particularly within the SMB segment – with competitors like Finom, Wise, Monzo, Penta, Starling, and ANNA – Viva Wallet distinguishes itself through its demonstrated traction and proven track record.

Profitability and Growth Metrics

Larios revealed that the startup achieved profitability in Q1 of this year, fueled by a business that has experienced over 40% growth in the past year. Currently, 60,000 merchants are actively utilizing its services, with a projected increase to 100,000 by year-end.

Localized Approach and Physical Presence

A key factor in its success is its localized growth strategy, establishing physical operations with branches in each country where it operates. This approach contrasts with the trend of banks closing brick-and-mortar locations in favor of virtual services.

“Viva Wallet is proving the resilience of its business model,” Larios emphasized.

Expanding Service Offerings

The funding will support the expansion of its loans program and further development of existing strengths, such as its Tap-On-Phone point of sale solution. This technology transforms any Android device into a card terminal, enabling contactless and PIN payments without requiring separate hardware.

Future M&A Activity

The company anticipates pursuing mergers and acquisitions to accelerate expansion into new markets.

Focus on Businesses, Not Consumers

Unlike some neobanks that have expanded into the consumer market, Viva Wallet remains firmly focused on serving businesses. Larios explained that the consumer market has proven challenging in terms of profitability.

“Viva Wallet focuses on businesses only and will continue to do so!” he stated. “The consumer segment is not providing any space for profitability and we are seeing that all competing neo-bank business models focusing on consumers are mostly burning money away.”

Targeting SME Needs

“We are focusing on the SMEs of Europe, providing a pan-European payments solution which however is very much localized to address merchants’ true local needs in terms of local payments acceptance, local IBAN accounts, local BIN business debit cards etc.”

While primarily serving SMBs, Viva Wallet also caters to medium-sized businesses and larger enterprises, such as supermarket chains, and intends to continue expanding its reach within these segments.

Investor Confidence and Future Outlook

This specialization and demonstrated profitability have attracted significant investor interest, aligning with the broader economic recovery and the potential for substantial returns.

Investor Statements

Jim Breyer of Breyer Capital commented, “We are very excited to help Viva Wallet unify the fragmented European payments ecosystem across 23 countries. Viva Wallet is at the forefront of a paradigm shift for fintech and together, we expect to transform the payments industry in Europe.”

Danying Ma, MD of Tencent Investment, added, “Tencent shares Viva Wallet’s aspirations of creating value for users and partners through innovation. We look forward to supporting Viva Wallet in its expansion across Europe.”