Railsbank Raises $70M to Expand Fintech-as-a-Service Platform

The Rise of Financial Services as a Service and Railsbank's Expansion

The provision of financial services as a service – enabling companies such as neobanks and retailers to develop and market their own financial products through APIs and code – has emerged as a significant trend within the fintech sector. Forecasts from Bain Capital suggest this embedded finance market will reach a substantial $7.2 trillion by the year 2030.

Railsbank Secures $70 Million in Funding

Railsbank, a company specializing in the creation of APIs for banking, payment cards, and credit solutions utilized by fintechs and diverse businesses, has successfully raised $70 million in a new equity funding round. The London-based startup intends to allocate these funds towards continued international expansion and the enhancement of its product offerings.

Nigel Verdon, CEO and co-founder of Railsbank, articulated the company’s vision last year, stating, “Our mission is to reinvent, unbundle and democratise access to the complex, opaque and byzantine 70-year-old credit card market, which is worth $4 trillion in the U.S. alone.” Verdon brings considerable entrepreneurial experience, having previously founded Currency Cloud.

Valuation Insights

While Railsbank has chosen not to publicly disclose its precise valuation, Verdon indicated it falls within the high hundreds of millions of dollars and is approaching $1 billion. He emphasized the company’s preference for focusing on customer acquisition over valuation metrics.

“Valuation is a very inward-facing and self-centered metric,” Verdon explained to TechCrunch. “Near-unicorn would best describe us today.” Data from PitchBook previously indicated a valuation of just under $200 million in the company’s prior funding round at the close of the previous year.

Investment Details and Strategic Backers

This latest funding round was spearheaded by Anthos Capital, an existing investor. Participation also came from Central Capital, Cohen and Company, Chris Adelsbach’s Outrun Ventures, and other returning investors. Central Capital, the venture capital arm of Indonesia’s largest privately held bank, and Cohen and Company, founded by Bancorp, highlight Railsbank’s target markets and potential collaborators.

The Growing Importance of BaaS

Banking as a service, and more broadly, financial products as a service, are becoming increasingly vital components of both the fintech landscape and the wider financial services industry. Similar to the roles of Twilio and Sinch in communications, or Stripe in payments, specialized financial firms are developing the complex infrastructure and partnerships necessary for products like credit cards and banking accounts.

API Integration and Expanded Applications

This infrastructure is then offered as a service, accessible through APIs, requiring minimal code integration for other platforms. These APIs aren’t limited to financial services companies; any business seeking to incorporate a financial product into its customer service or loyalty programs can utilize them. This could involve a retailer offering a branded credit card or a neobank providing a user-friendly interface without the need to build underlying banking infrastructure.

Competitive Landscape

Railsbank is not alone in capitalizing on this trend. Key competitors include Rapyd, which secured a significant funding round at a $2.5 billion valuation earlier this year; Unit, also experiencing growth and funding; FintechOS, focused on its namesake; and 10x, designed to provide incumbent players with access to fintech-as-a-service solutions.

Railsbank's Differentiators

Railsbank distinguishes itself by building much of its infrastructure from the ground up, circumventing legacy systems. This contrasts with competitors who rely on software operating on top of older, less efficient platforms. Furthermore, Railsbank operates as a regulated financial institution.

Strategic Acquisitions and Partnerships

Railsbank actively pursues acquisitions to accelerate growth, such as the acquisition of the U.K. operations of German fintech Wirecard following its collapse. The company also fosters partnerships, exemplified by its recent collaboration with Plaid to integrate services within the Railsbank ecosystem.

Client Base and Industry Recognition

While Railsbank maintains a private list of clients, case studies featuring GoSolo, Kyshi, and SimpledCard demonstrate the widespread adoption of financial services today.

Betsy Cohen, chairman of Fintech Masala and founder of Bancorp, commented, “The market has evolved so rapidly since we founded the world’s first BaaS business, the Bancorp. As we move into the $7 trillion embedded finance market, it has been great watching Railsbank’s growth story. With this investment, it’s a privilege to continue to be part of the journey with a global leader like Railsbank.”