productfy Raises $16M to Bridge DeFi and Traditional Finance

Productfy Secures $16 Million to Advance "DeFi for Traditional Finance"

Productfy Inc., a banking-as-a-service (BaaS) platform, has successfully completed a $16 million Series A funding round. The investment was spearheaded by CM Ventures, demonstrating confidence in Productfy’s vision of bridging decentralized finance (DeFi) with conventional financial systems.

Funding Details and Previous Investment

This latest financing round saw participation from existing investors, including Point72 Ventures, 500 Startups, and Envestnet | Yodlee. With this new capital, the total funding raised by Productfy since its establishment in 2018 now approaches $19 million.

The Expanding BaaS Landscape

The BaaS sector is experiencing significant growth, with numerous companies aiming to streamline the launch of financial products and services for fintechs and other businesses. These platforms fundamentally seek to accelerate and simplify the process of introducing new financial offerings.

Productfy’s Distinct Approach

Based in San Jose, Productfy differentiates itself through its commitment to building DeFi solutions tailored for traditional finance. Founder and CEO Duy Vo emphasizes that the platform has been architected “from the ground up” to seamlessly integrate with multiple banking partners.

Vo asserts that this multi-partner capability is a key advantage, stating, “This is not something our competitors are built for.” He further believes that traditional banks must embrace decentralization to remain competitive.

The "Shopify of Embedded Finance"

Productfy envisions itself as the leading platform for embedded finance, akin to Shopify’s role in e-commerce. The company asserts that developers can utilize its platform to rapidly prototype and deploy financial solutions, achieving a functional deployment within as little as three weeks.

Beyond APIs: A Focus on Brands

Unlike many BaaS providers concentrating solely on developers, Productfy is actively developing white-label user interfaces. This strategic move targets brands lacking in-house technical expertise or specialized knowledge. The startup has reported a substantial 119% month-over-month revenue increase since July and currently serves eight clients, including HatchCard.

CM Ventures’ Investment Rationale

Vagan Khranyan, managing partner at CM Ventures, explained the firm’s decision to invest in Productfy after evaluating numerous BaaS and embedded finance companies. Approximately “30 different players” were considered before selecting Productfy.

Khranyan stated, “We concluded that Productfy has the only market-ready solution to be sold to customers.” He also highlighted the parallels between Productfy’s work and broader trends in distributed and decentralized finance.

Simplifying Complex Financial Processes

The company is focused on simplifying the complexities associated with managing multiple bank partners, data sources, and card vendors. This simplification is intended to reduce friction and accelerate time-to-market for its clients.

Strategic Partnerships

Productfy has established partnerships with key industry players, including Equifax, Marqeta, Arroweye, and Envestnet | Yodlee. A collaboration with Stearns Bank National Association is underway to enhance access to money movement, digital banking, and card issuance services through easily integrated APIs, widgets, and pre-approved interfaces.

Josh Hofer, chief risk and information security officer of Stearns Bank, commented, “The Productfy platform is unlike any we’ve seen in the market.” He believes the partnership will foster innovation and scalability within the financial ecosystem.

Accelerating Fintech Launches

The partnership with Stearns Bank aims to streamline the launch of money movement and card programs, reducing development time, compliance burdens, and the need for numerous third-party integrations.

A "Fintech in a Box" Solution

Vo explained that Productfy is evolving towards a “white label ‘fintech in a box’ solution.” This offering will empower organizations to launch financial products or retail banking experiences within days, leveraging the company’s accumulated knowledge and infrastructure.

A Mission-Driven Approach

Vo’s motivation for founding Productfy stems from a belief that the financial services industry has historically underserved vulnerable populations. He emphasizes the company’s commitment to creating a more equitable and compassionate financial ecosystem.

DeFi for Traditional Banking – Not Cryptocurrency

While acknowledging the association of DeFi with cryptocurrency, Vo clarifies that Productfy’s focus is distinct. “What we’re doing is we’re creating a DeFi for traditional banking,” he stated.

He envisions a system where banks act as origin servers, and dynamic traffic routing, similar to AWS, distributes power to smaller banks and organizations serving end-users.

Global Expansion Potential

Vo’s long-term vision includes expanding Productfy’s reach to countries like Uganda and Libya, establishing a “first true distributed financial infrastructure” capable of facilitating near-instant, low-cost funds transfers globally.

Future Plans and New Offerings

The newly acquired capital will be used to scale Productfy’s offerings, enhance its compliance-as-a-service capabilities, and develop new integrations and partnerships. The company plans to launch its first cohort of customers and introduce a new Card-Issuance-as-a-Service solution, “Latinum,” in the fourth quarter.

Latinum: Branded Debit Cards for Communities

“Latinum” aims to empower brands to enhance customer loyalty through branded debit cards. An example provided is a church congregation using a card where interchange fees fund loans to fellow members.

Simplifying Launch Processes

Currently, launching a branded card program requires an engineering team. Productfy aims to eliminate this requirement by the fourth quarter, offering a fully white-labeled solution that can be deployed in days.

Expanding Access to Retail Banking

“We’re moving the ability to offer retail banking services to the edge,” Vo said. This will enable organizations like religious groups, schools, gaming companies, and e-commerce brands to launch debit card programs with integrated deposits, money movement, KYC, compliance, and servicing.

Competitive Landscape

Other BaaS companies that have recently secured funding include Unit, which raised $51 million in June, and Solarisbank, a Berlin-based startup that raised $224 million at a $1.65 billion valuation in July.