Why we invested in Banked
Force Over Mass Fund IV has led an investment round in Banked, a payments startup that uses Open Banking and the Faster Payments Network to allow consumers, businesses and banks to process payments in real-time, at a tenth the traditional cost, and with a 96% reduction in fraud.
We see Banked as part of the second wave of Fintech innovation. The first — embodied by unicorns such as Stripe and Adyen — focusses on the customer acquisition side. They found new ways to access customers. Stripe, for example, requires only one line of code to integrate, while Adyen provides access to more than 200 channels and methods of payment across more than 150 countries.
Fintech 1.0 is innovative in the way it acquires customers. However, it relies on the traditional payment ‘rails’ — the name given to the transmission protocol platforms — that were built 40 years ago. These are predominantly controlled by Visa and Mastercard. They remain slow and expensive, with payments taking days to process and costing 1–3%.
With the introduction of Open Banking regulations in the UK and the Second Payment Services Directive (PSD2) in the EU, there is an opportunity for change. By requiring banks and payment providers to give third parties access to a customer’s account and transaction information (with the customer’s permission), they have enabled a new wave of innovation. Banked is built on this second wave.
Banked settles payments directly between customer accounts, bypassing the traditional payment rails. This shift allows for far lower transaction costs — a 0.1% flat fee, with no hidden charges — and, as customer bank details are no longer shared, fraud is far lower. What’s more, the Faster Payments Network allows it to process payments in real-time.
Banked completed its initial product build at the end of 2019, just three months after the introduction of PSD2. It went through a pilot with initial clients in Q1 2020 and went live in Q2. The company’s first phase clients include a car finance company, a trading platform and charities such as NHS charity HEROES. All pilot clients moved into the live stage. Since the start of the Covid-19 outbreak, Banked has also won its first larger contract with a FTSE-listed international conglomerate.
Part of the reason for Banked’s early success is the strength of its team. CEO and Cofounder Brad Goodall is a repeat fintech entrepreneur who built a greenfield digital bank with Virgin Money and served as the CEO of tech consultancy QMV. Both Brad and COO and Cofounder Neil Ambler are alumni of 10x Future Technologies. The company has also attracted high-profile backers such as Indeed.com co-founder Paul Forster.