TrueLayer, the generously funded open banking unicorn, indicated just how costly its expansion plans have been. According to documents posted at UK Companies House, Truelayer Group reported group operating losses widening to £61m in 2022 on revenues of just £4m.
Founded by Franceso Simoneschi in 2016, TrueLayer is backed by a stellar rosta of investors including Stripe, Tiger Global and Anthemis. It has received funding of $272m in total (Crunchbase) with its $130m round in 2021 valuing the business at $1bn.
The London-based fintech is investing at pace to establish a large claim in the crowded market for open banking payments. Along with its competitors – Tink, Token, Volt, Yapily etc – the company aggregates connections to thousands of banks into a single API. This allows merchants to offer consumers the option to pay from almost any bank through a single connection with TrueLayer. Clients include Cazoo, Coinbase and Revolut.
Although TrueLayer is live 21 countries, it claims market leadership in four – UK, Ireland, Spain and France – and “significant share” in Germany and Netherlands. It has an EMI license in the UK and PI licence in in Dublin.
Management highlight two major product launches.
- Variable Recurring Payments (VRP) – TrueLayer was first to market in the UK with recurring payment through its single open banking API as an alternative to direct debit and card on file. Merchants benefit from faster settlement.
- Identity data – Signup+ widens TrueLayer’s proposition beyond payment initiation by making bank-sourced identity data available through its API. This simplifies customer onboarding by removing the need for additional verification checks. I used it to sign-up for Plum and can report the customer experience was indeed seamless.
TrueLayer is growing – revenues were up 56% in 2022 and payment volume was 2.8x higher than the previous year – but total sales of £4.14m are modest for a business boasting “annualised total payment volume” of $35bn. As context, a specialist eCommerce merchant acquirer with similar processing volume would be making net revenue of $75m-$150m depending on its risk appetite.
This modest growth has come at considerable financial cost. Administrative expenses were up 88% to £63.4m driven by higher spend on employees – up 99% to £46.4m. Staff numbers ballooned to 434 at an average cost per staff member is £106K. Management trimmed its employee base by 10% at the end of 2022 with the CEO saying “we are now operating in a very different context and more challenging market conditions.”
TrueLayer’s operating loss rose from £31m in 2021 to £61m in 2022. Fortunately, the business is well financed and had £96m net cash at year end.
If shoppers do shift quickly from cards to open banking, the prize for API providers such as Truelayer could be significant. But the market is growing more slowly than many hoped and competition between the specialist players is reported to be ferocious. Consolidation is inevitable and likely to favour businesses, like TrueLayer, with wealthy and committed backers.