Artificial Money

PSD2 (EU) and the Open Banking Standard (UK) are regulations that will require banks and other payment servicing providers to provide APIs that allow third-party solutions to access their customers’ data (with consent). The exact timeline for the enforcement of the regulations is unclear, however, they should be in place by the end of 2018

In short, this means a company will be able to develop an application that combines a user’s financial data from a range of sources (e.g. current account, savings account, loans, credit cards etc.) in order to provide a consolidated view. Applications will be able to take this data a stage further and perform analysis in order to provide insights and suggestions about how to manage their money – That’s the theory anyway.

The reason I mention all this is because I’ve seen a spate of pitches recently that will be heavily dependent on these regulations as their solutions roll out. Right now there are live pitches for Plum Fintech and zuper on Seedrs as well as Folio on CrowdCube. We’ve also had a failed pitch from Ernest. Whilst obviously not identical, they are all very similar, they aim to access your account information in order to help you manage your money better, of course, the buzzword of the moment ‘A.I.’ is mentioned in every pitch but how to differentiate and pick the winner, if there’s to be one?

As I’ve already said, Ernest is out – they’ve already failed to raise. Folio and zuper are struggling, they’re both over the halfway mark but traction appears to be slow with tumbleweed currently rolling across both discussion boards. Plum Fintech on the other hand, is seeing a lot of attention, three pages of discussions and over the 100% mark. Does their product justify the marked difference in the success of their pitch? When I read it when it initially went live I didn’t see anything that particularly stood out, it’s savings focussed and their revenue is expected to come from savings interest (split with savers), fees on investment returns and commission earned from getting customers to switch things like their electricity or gas suppliers. I should also mention that the pitch is a convertible with a 20% discount on valuation at a trigger event (another raise, change of control etc.) or after 12 months (at which time a £4.25m valuation will apply).

Plum Fintech on the other hand, is seeing a lot of attention, three pages of discussions and over the 100% mark. Does their product justify the marked difference in the success of their pitch? When I read it when it initially went live I didn’t see anything that particularly stood out, it’s savings focussed and their revenue is expected to come from savings interest (split with savers), fees on investment returns and commission earned from getting customers to switch things like their electricity or gas suppliers. I should also mention that the pitch is a convertible with a 20% discount on valuation at a trigger event (another raise, change of control etc.) or after 12 months (at which time a £4.25m valuation will apply). Finally, I’ll also mention that Plum features heavily in Seedrs’ current advertising campaign on the London Underground. If I recall, WeSwap and VPAR have also recently featured in Seedrs’ LU advertising and they ended up over funding with 2,961 and 346 investors respectively.

I should also mention that the pitch is a convertible with a 20% discount on the ‘valuation’ at a trigger event (another raise, change of control etc.) or after 12 months (at which time a £4.25m valuation will apply).

Finally, I’ll also mention that Plum features heavily in Seedrs’ current advertising campaign on the London Underground. If I recall, WeSwap and VPAR have also recently featured in Seedrs’ LU advertising and they ended up over funding with 2,961 and 346 investors respectively.

The fact that this is a convertible is enough to put me off, I’m still bitter over the Den convertible. Also, despite the regulations, there’s nothing to say that the APIs offered by banks and payment providers have to follow a specific standard – Whilst they will undoubtedly make things easier for third parties things are unlikely to be simple. At least we’ll get to see what’s going on in 12 months time when they come back for more money.

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