Currencycloud, maker of APIs for remittance startups, raises £20M led by GV

Another fintech startup has raised a growth round to tap into the estimated $25 trillion market for money transfers. London-based Currencycloud, which builds tools for payment companies to use by way of an API to enable remittances and money exchanges across borders, has raised £20 million ($25 million) in a Series D round of funding led by Google’s GV, its first fintech investment in Europe.

The news comes one day after U.S.-based Veem (formerly Align Commerce) raised $24 million to expand its international remittance services. GV also participated in that funding round.

It brings the total raised by Currencycloud to around $61 million, with other investors in this round including previous backers Notion Capital, Sapphire Ventures, Rakuten FinTech Fund, and Anthemis.

Currencycloud today works with about 200 customers in 35 countries, which CEO and co-founder Mike Laven said in an interview translates to “millions” of companies and individuals processing payments, with about $25 billion in payments processed to date through its platform. Its customers range from startups like Azimo and Revolut through to larger companies like Travelex and Standard Bank.

In the large and fragmented world of money transfers — incumbents include Western Union and MoneyGram; and the very wide pool of startups includes Veem, WorldRemit (valued at $500 million), Xoom (acquired by PayPal in 2015 for $890 million), Azimo, Regalii, Remitly and TransferWise (valued at $1 billion+) — Currencycloud’s particular niche is that it’s building the mechanics for how to move money between specific markets without ever selling that service to end users itself.

Instead, it packages its remittance infrastructure — finding exchange rates, transferring funds between two end points and meeting local compliance at both ends — by way of an API that is used by hundreds of other remittance companies to create services for individuals abroad to send money to family back home (wherever that might be); or for businesses to pay money to each other; and so on.

The issue of fragmentation, and the complexities of the interconnections to make money transfers work correctly, were one reason why GV was interested in backing the company.

“It’s a huge problem to solve, not just switching currency but moving across borders and staying true to compliance,” said Tom Hulme, a partner for GV in London, in an interview. As with the growth of so many other markets, he noted, “now it’s all about developers,” meaning that complexity is being solved by technical solutions, and Currencycloud is providing the tools to help do that.

The opportunity is also big enough that the small margin that Currencycloud makes on each transaction is, in aggregate, enough to propel the company’s business forward.

The company is not disclosing current revenues or valuation in this round, but a few years ago, when Currencycloud raised $10 million in 2014, it noted that it made only $3 million on transfers of about $400 million in a year, working out to 0.75 percent margin. Fast-forward to today; Laven told me that it processed $6 billion last year. Working out a similar percentage, this means revenues would have grown to $45 million (that’s assuming the percentages have stayed constant).

This latest round will be used to continue building out Currencycloud’s business, specifically by building out its business in the U.S. to court more customers on that side of the pond, both in terms of companies served and infrastructure.

“The U.S. cares more about transfers to Canada, Latin America than Europe does,” said Laven in an interview. “Europe cares about Great Britain.” Both regions have equal interest in other regions like Asia and Africa, he added.

The other aspect needed to grow the U.S. business is to improve what he called “24/7 infrastructure” simply to make sure that there is support for customers wherever they may be.

The company had been aiming to raise only about £16 million, he said, and in the end expanded that to £20 million and could have easily added more, “but we didn’t want to give up the equity.”

In fact, Laven said that while there’s been a big question mark hanging over what might happen to startups in the U.K. in the wake of Brexit, from what he’s seen, there is still a lot of opportunity.

“I think the climate is okay right now for raising money,” he said. “There was no Brexit pushback. My feeling is that things are okay right now, no evidence of a wait-and-see attitude. We’re a solid company with a good track record and people didn’t have any concerns other than the normal due diligence concerns.”