Financial results from Yapily show that the open banking market is taking off more slowly than many had hoped. Although Yapily is one of the leading API providers and reported 60% revenue growth in 2022, total sales were less than £3m, generating a modest return on the nearly $70m raised from VCs including Sapphire, Lakestar, HV and LocalGlobe.
European retail banks are obliged to offer APIs that authorised providers can use to access account information or generate account-to-account (A2A) payments. Yapily, founded in 2017 by Stefano Vaccino, a former Goldman Sachs exec, is one of a number of businesses formed to aggregate the APIs offered by thousands of individual banks into a single connection. Although this sounds like a winning proposition, competition is fierce and a number of other start-ups offer similar services. These include Truelayer, Token, Tink, Trust.ly, Nuapay, Volt and many more.
Yapily’s API connects with 2000 banks in 19 countries and, management claims, is accessed by over 3.500 software applications provided by its 500 customers. Yapily has a strong position in providing access to open banking payments for Fintechs, which often use its APIs to offer simple A2A transfers for their customers to top-up accounts. Yapily’s customer list includes Payhawk, Guavapay, Pleo and Quickbooks. The links take you to mini case studies on the Yapily website.
Turnover in 2022 was £2.78m. 80% of sales were the UK, where Yapily is based, but European revenues more than doubled to £0.48m. Management says the positive result was driven “by increased demand as the business expanded into new regions” and stepped up its sales and marketing efforts. Yapily bought a German rival, FinAPI in May 2022 for an undisclosed sum.
The modest increase in topline growth has been costly. Administrative expenses ballooned to £23.7m in 2022 from £9.5m the previous year as management spent heavily on “continued investment in product development, sales and marketing… and support functions as the company scales.” Notably, employee costs more than doubled to £14.6m. Yapily now has 158 staff, mainly in London, costing an average of £92K each.
The team has been busy. Management highlighted a growing range of products, a more extensive network of connections to banks and other financial institutions, a 70% increase in customer numbers and a 4.5 times increase in payment volume. The actual payment volume was not disclosed.
The operating loss grew to £21.5m from £8.4m the previous year, reflecting the company’s “deliberate growth strategy” aimed at “seizing substantial market opportunities” in the emerging open banking market. Accumulated losses now stand at £33m.
Yapily had £18m cash at year end after taking an additional £10m investment. JP Morgan reportedly looked at taking a stake in the business but decided against.
The open banking market is going to be big. The only question is when. And the open question for Yapily and its small army of competitors is whether they can afford to wait.