Railsr, the fintech formerly known as Railsbank, raises $46 million • TechCrunch

Integrated banking has seen heartbreaking growth in recent years as businesses have turned to APIs to integrate financial services such as credit, payments, and deposits to increase revenue. Today, with the tech finance landscape in turmoil, a company in the integrated finance market has launched a growth cycle that underscores the pressure being felt in this particular area of ​​fintech.

Railsr, the London-based startup that changed its name from Railsbank earlier this year, raised $46 million, a Series C that comes in the form of $26 million in equity and $20 million in debt. The equity share is an inside round, meaning all regular investors, with Anthos Capital leading and Ventura, Outrun Ventures, CreditEase and Moneta also participating. Mars Capital has provided the debt, which CEO and co-founder Nigel Verdon says will be used for the same purposes as equity, but at a lower cost. “Stocks are expensive right now,” he said.

The company does not disclose its exact valuation: Verdon called it “fair value” for the current market and indirectly confirmed that it was down from its Series B a year ago, when it had raised $70 million (also led by Anthos), and Verdon said its valuation was approaching $1 billion, describing it as a “quasi-unicorn”.

“It’s definitely not last year’s valuation,” he said of today’s Serie C. “Prices have dropped dramatically.”

The business is not yet profitable, Verdon noted in a statement today, describing this cycle as “an important milestone on our road to profitability.”

The state of the market, it seems, is not far off from the state of Railsr itself. Its home market currency, the pound, has been shaken against the dollar and many believe the world is on course for a wider recession. Buying activity is slowing at the macro level, even when there are still opportunities to serve customers, even in a more bearish mood.

This all plays out positively and negatively for Railsr.

Verdon said Railsr had suffered a series of layoffs, cutting its workforce earlier this year by around 14%, or 70 people. It has also reduced its operations in South East Asia and Australia, where it now has a “skeletal team” and instead focuses on business in the UK and Europe. “The playbook focuses on our strengths,” he said.

On the other hand, the company appointed a new president, Rick Haythornthwaite, the former president of Mastercard, and revenues increased by 50% in the first half of the year, with growth, albeit less, expected for the second half, the figures according to Verdon being lower. previous projections but still going in the right direction.

Its number of customers, meanwhile, now stands at 300, up from 220 a year ago, who use Railsr’s APIs to power credit, credit cards, loyalty and more traditional banking services. .

The verticals it targets include businesses in the retail, venues, sports and events sectors; as well as other fintechs. It may seem strange that a fintech does not create its own fintech services, but usually it is because the company can focus more on other areas like insurance or payroll and use integrated financial services to expand rapidly into adjacent areas that are not their core. skill. In the case of more direct banking service providers, such as neobanks, the business may focus on personalization and customer service. The bank thus becomes a basic (almost commoditized) product that is easier and faster to integrate with an API rather than starting from scratch.

Railsr cites Wagestream, Aviva and racing car brand McLaren (via QtmPay) as case studies on its site, and also notes that HelloCash, Sodexo and Payine are customers. Partners to provide services and integrations include AWS, Salesforce, Visa, MasterCard and Plaid.

Embedded finance has generally been one of the most bullish areas of the financial services market, so much so that even current research that accounts for the state of the market appears to be positive for its growth. Railsr quotes data from Bain & Company earlier this month that integrated finance was powering some $2.6 trillion in financial transactions in the United States in 2021, and that this figure is expected to continue to grow, to exceed $7 trillion by 2026.

This is one of the reasons why existing investors are ready to back Railsr again.

“It has been a pleasure to see Railsr grow stronger as a challenger to old finance and a creator of the integrated financial economy,” said Meirav Harnoy, co-founder and managing partner of Moneta VC. “Railsr’s customers, technology and people have impressed me since I led the Series A investment round. I can’t wait to see what’s next.

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