Swan, an in-built financial startup from France, has secured EUR 37 million ($39.6 million) in a Series B backed by leading European VC, Lakestar. With this latest financing, the total amount raised by Swan has amounted to EUR 58 million. On top of that, Accel, another VC firm, led their Series A investment earlier in 2021. The new funds will be first used for the expansion of Swan's operations in the Netherlands in the near future, before tapping into Italian market two years later.
European venture capital firm, Lakestar, who previously supported fintech unicorn Revolut, has now invested in French fintech startup Swan. Swan raised a new Series B round of 58 million euros - Accel, another venture capital firm, had previously led Swan's Series A round at the start of 2021. Speaking to CNBC, Swan CEO and co-founder Nicolas Benady shared that their mission was to make it easier to integrate banking and other financial services into existing platforms without any financial components. He emphasised that if somebody has a new big idea, it should be easy to set up the necessary banking infrastructure in no time.
Swan will initially use the recently raised funds to expand into the Dutch market in the coming months, before entering the Italian market in 2024. Benady noted that, due to the Dutch payments system, iDEAL, launching digital banking and payment capabilities there is more complex than in other countries. Georgia Watson, a principal at Lakestar based in the firm's London office, assured that the firm had been tracking Swan for about a year and praised their ability to quickly set up embedded financial solutions with businesses in as little as two weeks compared to the lengthy time for other competitors.
Luca Bocchio, partner at Accel, noted that Swan had demonstrated its model was more capable of scaling than the ones employed by competitors in the embedded finance sector, such as Railsr and Solarisbank, who have been faced with difficulties in attempting to link payments and other financial services directly to companies' platforms. Railsr recently filed for bankruptcy protection and was purchased by a consortium of investors headed by D Squared Capital.
According to Bocchio, Swan is adept at processing large volumes of payments and conducting know-your-customer (KYC) checks with few employees. “Banking-as-a-service providers usually have to manage a lot of customers who are piggybacking on their licenses. They must take care of anti-money laundering, KYC and compliance matters for their customers,” he explained. “This implies a high volume of requests when you haven’t established a fully automated system. It requires you to have a lot of manual processes.”
Bocchio then went on to point out where Swan diverged from its competitors; their capacity for managing an abundance of transactions utilizing more automated compliance processes. As Railsr put it when it declared its repayment system, they had “best-in-class technology” and were “going back to basics and managing the business in a constructive manner.” In the wake of this fundraising, Swan plans to pursue more agreements with major multinational corporations and execute an assertive sales approach. The company already works with the French retail chain Carrefour, who used their technology to create a cashback project.
The firm is looking to expand its product offerings to include new payment collecting techniques like direct debit and card payments, as well as lending capabilities. As these new products are deployed, Swan expects to cater to new industries like travel, insurance, and business-to-business marketplaces.
Bain Capital Ventures reported that the amount of payments embedded in platforms is expected to reach 40% in the upcoming years. Reportlinker also predicted that the embedded finance market will be worth $384.8 billion by 2029.
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