With the news that Facebook has been talking to financial services startups in the UK about launching e-money services, one of the companies that powers payments for those startups has raised a round of funding. The Currency Cloud, which provides an API that end user-facing companies use for cross-currency transfers, has raised a $10 million Series B round of funding from existing investors Atlas Venture, Anthemis Group, Notion Capital and XAnge Private Equity. Silicon Valley Bank also provided an unspecified, further line of capital.
Mike Laven, the CEO of Currency Cloud, says that the funding will be used to expand the London-based, European-heavy business internationally, and specifically into the the U.S.
Currently the startup is processing around $400 million of payments each month with payment processing currently growing a twelvefold rate year-on-year.
The margin on that, however, is fairly small: last year (2013), revenues totalled $3 million and he says he expects this to grow 150%-200% this year (in other words, reaching revenues of up to $9 million. Like many other financial services startups like Stripe, another others based on B2B/API plays, the game is one of economies of scale.
What does Currency Cloud do? The company effectively competes against banks to win business from financial services companies whose business is to transfer and exchange money for others, be they individuals or other businesses. Banks currently control some 85% of international payments transfers.
Like many startups that are looking to disrupt traditional players, Currency Cloud’s advantages are that it is smaller and therefore faster-moving in terms of how it adds new features and adapts to working with others; and the use of technology based around APIs to integrate and work with online businesses.
“Part of our concept is to be very startup friendly,” Laven says. “In that sense we talk to and look at how we can go to other partner firms to be global broadly across the marketplace.” He says that part of what Currency Cloud does is invest in automation and reconciliation as part of the API, another way it differentiates from banks.
Its customers include all three of the companies that were named in the Facebook report yesterday — TransferWise, Moni Technologies and Azimo — plus others including Payoneer and Kantox on the payments front; e-commerce providers like Sofort, Zippcard; and even online banks like Fidor Bank and MedBank.
Laven tells me that while his company certainly touches companies that have been approached by Facebook, it sounds like for now Facebook will be happy to work with outsourced partners for the service and doesn’t want to take on any of the same kinds of functions itself — that is, become a direct customer of a company like Currency Cloud.
“We are not part of the Facebook dialogue,” Laven says.
Although Stripe, another API-based startup in the world of online transactions, also recently started to make moves to widen its international scope and it, too, positions itself as a way for merchants to cut out some of their dealings with banks, Laven describes what his company does as “complementary” to the California-based payments startup.
“They stand between the consumer and the merchant, while we are B2B, between merchants and other merchants,” he says. “Or, in case of a TransferWise or Azimo, we deal with them, not their customers.”
This latest round brings the total raised by The Currency Cloud to $19 million since 2012.
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