A lot of startups have been raising money for credit cards and other financing businesses lately.
Now Jiko has debit card technology that has convinced Upfront Ventures, Radical Impact, Social Capital and others to invest $7.7 million in a Series A. The Oakland, Calif.-based business markets itself as a secure place to save your money, while also offering at least .5 percent cash back on debit transactions.
Jiko calls itself a “personal bank,” although it operates differently than a traditional bank account. It’s not an FDIC-insured bank. Instead, money from Jiko accounts is invested into U.S. Treasuries, which co-founder and CEO Stephane Lintner hopes will result in the highest yield.
Jiko has “all the features of a functional bank just with way more efficiency,” claims Lintner. It’s a “building block that allows you to reclaim control over your data and your money.”
At this point in time, the account is housed by a bank that we’re partnering up with,” he explained. But “at some point, we will be purchasing that bank.”
Jiko makes money when users swipe their debit card, getting a commission from the merchant. It then repays customers with a designated cash-back percentage, and he says that “early adopters, people who help us promote, they’ll be entitled to more.”
He claims that Jiko is more secure than some of the other financial accounts, because “we’re not sitting on top of the bank’s ecosystem.” Lintner is hoping that people will view Jiko as a technology company.
Yves Sisteron, managing partner at Upfront Ventures, said the team invested because “Jiko is fundamentally changing the banking system architecture and the customer banking relationship in ways that are safer and more rewarding for users.” He also touted the founders’ prior work experience at banks like Goldman Sachs and J.P. Morgan.
But some may question whether it makes sense to trust your money in a startup that doesn’t have FDIC guarantees.
Lintner says that “if U.S. government defaults on its debt, you could lose your money,” but says that would likely mean the environment is bad enough that people shouldn’t trust FDIC-insured banks either.
Right now, the product is in beta. It is aiming to make this available to the general public early next year.