The London-based money-transfer startup WorldRemit on Wednesday announced a new $100 million funding round, with a reported valuation of more than half a billion dollars. The round is led by the Silicon Valley venture capital firm TCV, whose previous investments include Facebook, Spotify, and Netflix.
The news comes just weeks after another London money-transfer startup, TransferWise, raised $58 million, with a rumoured valuation of $1 billion. TransferWise's investment involved Andreessen Horowitz, one of the largest and most respected venture capital firms in the world. Andreessen Horowitz partner Ben Horowitz also personally joined TransferWise's board.
And last year, the peer-to-peer loan service Funding Circle, also London-based, raised $65 million, bringing its total raised to $123 million. The round was led by Index Ventures, along with participation from Accel Partners and Union Square Ventures.
We're beginning to see a trend: Investors are finally waking up to the weakness of traditional banks and the possibilities of FinTech. And the UK's FinTech startups are their main weapons.
Compared with other sectors, the financial industry has remained relatively untouched by technology. Media has been turned on its head; the transportation industry is being racked by Uber; the mobile-app economy didn't exist just a few short years ago but is now bigger than the film industry. In contrast, the major players in finance — with the exception of PayPal and Square — are largely the same as they were 20 years ago.
This is beginning to change. TransferWise is a perfect example of how the tech sector can move onto the banks' turf — and with great success. Launched in 2011, the company aims to eliminate the high transfer fees associated with sending money overseas. It's working — the company is growing 15% to 20% month-on-month, and it has transferred more than $3 billion using the platform, saving its customers money in the process. And while it is one of the most prominent FinTech startups, it is far from the only one.
Tech is tackling finance's problems, and now tech's biggest investors are taking notice.
Index Ventures cofounder Neil Rimer said Funding Circle exemplified "the new class of fintech entrepreneurs who are combining technology and novel business models to offer much better value than banks and other customers have been offering their customers."
Earlier this year, Andreessen Horowitz's Ben Horowitz said TransferWise "could not have come at a better time ... we see little to no innovation from the traditional banking sector, which creates a massive opportunity for new financial institutions."
Bank regulators are alive to the threat, too. Bank of England Governor Mark Carney worried aloud on stage at Davos that the sector was vulnerable to an "Uber-type situation" that was "imminent."
Bitcoin is another example. Even amid hacks and declining prices, unprecedented funding is flowing into the digital currency ecosystem. The bitcoin exchange Coinbase recently raised $75 million in venture-capital funding, with investors including Andreessen Horowitz and the New York Stock Exchange. In the long term, it's an open question as to whether bitcoin complements or competes with conventional FinTech. But for now, unprecedented access to the sector is yet more proof of investor interest in new tech-driven financial products.
Silicon Valley investors are betting on FinTech startups over the established banks. And that funding will in turn accelerate the growth of new and innovative financial services — at the established financial industry's expense.
