PayPal invests in another Swedish company - Tink.
WIth Swedish iZettle, the acquisition cost PayPal $2.2bn (£1.6bn), this time they didn't go so crazy. PayPal invested €10 million in another Swedish FinTech - tech start-up Tink.
Tink's platform is used to help banks and technology companies access financial data in an easy way. The firm is connected to thousands of banks and is looking to expand its network further so that it can provide more information for others that are looking to develop products and services based on information they get from banks.
The Swedish firm also wants to use the European Union's new Payments Services Directive 2 which allows third parties to use entities' financial data but without banks as an intermediary.
And this is where it gets interesting. Within investors we have mostly banks - Nordea, dutch ABN Amro...and now PayPal. On the one hand PayPal is also a bank (license in Luxemburg) but actually is FinTech, payment provider - the bank's enemy. Even tho, all those entities joined forces and plan to take the opportunity connected with PSD2.
Let's think why PayPal invested in such entity? In my head – the reason why is: Consumer Lending. Well, "screen scrapping" is the easiest way to score client since you have access to his/hers bank account. That technology is widely used by e-lending platforms including for example Kreditech.
Kreditech is using (and is in the same group - Naspers) Kontomatic. The technology is used to score and KYC customers and internally is called "screen scrapping" which literally is: downloading clients bank statement and scoring customer/KYC him/her based on activities within the bank account.
Most Kontomatic's clients are banks and fintechs who use technology to run a KYC without asking for ID etc.. – which simplifies on-boarding process significantly and of course to access financial data and score clients (to grant a loan).
What value will bring Tink to PayPal now, since Consumer Lending is for now out of PayPal's scope? PayPal could use open banking for easier and more secure on-boarding for sure. Another obvious use case would be to check your bank balance prior to initiating a debit card payment or use your transaction history in relation to PayPal Credit (kind of Consumer lending).
Jennifer Marriner, VP of global markets and partnerships of PayPal said::
“Open banking is transforming financial services, allowing customers to more easily move and manage their money. Tink has developed the infrastructure and data services for this new financial world and we’re excited to work together to continue to democratise financial services”.
Interesting to see how it will proceed with a support of such a giant like PayPal. As in the announcement, Tink will use the funds from PayPal to expand its team. In a funding round in February it gathered €56 million from investors like Nordea and ABN Amro Group NV, so additional €10 million is not a jackpot, but definitely can boost the business. Fingers crossed!