Making banking open: our investment in Yapily

For fear of revealing my age, I first authored a report on “The Future of eBanking” in the late 1990s. Dot-com mania was in full swing with equity analysts and researchers alike competing to publish ever steeper growth charts. This revolution was going to impact every consumer touchpoint from what is now a graveyard of technologies like WAP phones, smart kiosks and TV banking (despite many incorrect calls, I’m pleased to say even then I was bearish on TV banking).

How would we summarise progress since? Well, based on those giddy predictions, I think we’d have to say disappointing. Whilst Monzo, Revolut, et al. are now making impressive progress in the UK, the major high street banks continue to control current account banking, especially when measuring salaried accounts where true relationships are held. The picture in SME banking is even more depressing although thankfully the likes of Tide point to a brighter future.

However, twenty years on and having witnessed many a false dawn, I can’t help but feel a new era is finally upon us. Whilst pioneering neo banks have validated that consumers do trust “non-banks” with their money, it’s the behind-the-scenes impact of Open Banking which promises true structural change. Born out of the EU’s PSD2 proposal in 2013, developed into a set of standards by UK’s HM Treasury in 2016 and finally mandated by the Competition and Markets Authority (CMA) in 2018, banks have finally been forced to open up their most prized asset — unparalleled volumes of customer data.

With customer consent, allowing outside participants to access this data has almost limitless potential. Imagine entire new methods of credit scoring based on real-time views of a customer’s transactions across all financial products — potentially helping the millions of UK citizens currently declined credit based on black-box models. Or how an app like Citymapper could have a personalised travel budget embedded within its app with prompts to help optimise monthly spends.

The term ‘democratisation’ is overused in startup land but it’s hard to think of a better word to describe the potential power shift from central bank monopolies to developers.

Since I became part of the LocalGlobe team in 2016, we’ve seen numerous startups looking to ride the Open Banking wave. These have varied from D2C consumer propositions to infrastructure plays. On the former, we’re delighted to have invested in Cleo. The latter has always held huge interest (to quote the overused phrase “the picks and shovels behind the gold rush”) but until now, we’ve found nothing that quite ticked the boxes.

Enter Yapily. Yapily gives service providers (could be a fintech, telco, tech company…) an API connection layer to multiple banks with one integration saving them huge amounts of developer time and allowing rapid innovation. Currently connected to 35 banks which in turn provides access to 250m customers, Yapily plans to extend this to over 500 banks by year-end.

At LocalGlobe we’re privileged to have high-quality deal flow from many sources — founders we have backed, angels, later stage funds and industry operators (CTOs, CPOs, etc.). When we got a tip-off from Carlos Gonzalez-Cadenas, COO of GoCardless and LocalGlobe friend about Yapily, let’s say it went pretty high up our list. Further validation came from Michele Trusolino, co-founder of LocalGlobe backed Debut.

When my partner George and I got to meet Stefano Vaccino, founder and CEO, it was clear why Carlos was so positive. Already with a loyal and fast-growing developer community, early fintech users and several enterprise customers, it was a straightforward investment decision.

Thanks to the UK’s progressive approach, it is currently the clear global leader in Open Banking. As Europe prepares for a wave of APIs coming in the summer, countries like Australia, Mexico and Japan are already implementing their own variations, the international potential for Yapily is huge.

Add to this the role Yapily can play in helping accelerate the decentralised finance movement by connecting “old world” banks to “crypto world” developers.

But Yapily’s ambitions extend beyond financial services. Influenced by the work of the Open Data Institute, other industries like pensions and utilities are expected to follow. As the use of cryptocurrencies becomes mainstream and the vision of machine to machine payments becomes real, platforms like Yapily will become the enabling transactional layer.

We’re hugely excited to be working with Stefano, his CTO Joao Martins and the Yapily team. Joining us in the round are HV Holtzbrinck Ventures and angels including Taavet Hirikus (TransferWise Chairman and Co-founder) Ott Kaukver (Twillio CTO) and Roberto Nicastro (former deputy CEO of UniCredit).