A fintech helping banks enter the cloud hits $1 billion valuation in JPMorgan-backed investment

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  • British fintech start-up Thought Machine has raised $200 million in a funding round led by Nyca Partners.
  • The round, backed by JPMorgan Chase, Standard Chartered and ING, gives Thought Machine a valuation above $1 billion.
  • Thought Machine says its software helps large banks move from outdated IT infrastructure to a modern, cloud-based platform.

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LONDON — British fintech start-up Thought Machine has raised $200 million in a new round of funding, raising its valuation above the coveted $1 billion.

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The cash injection was led by Nykaa Partners, a US-based venture capital firm that had previously placed bets on companies including Affirm and Revolut, with additional backing from major lenders including JPMorgan Chase, Standard Chartered and ING.

Existing investors Lloyd’s Banking Group, Eurazio and SEB also raised their stake.

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Founded in 2014 by former Google engineer Paul Taylor, Thought Machine says its software helps large banks move from legacy IT infrastructure to modern, cloud-based platforms.

The firm counts many of its big-name banking supporters as clients. For example, in the US, it has a deal with JPMorgan to replace the company’s core retail banking system. In the UK, Thought Machine has a similar deal with Lloyd’s.

Taylor said that his firm’s mission is “not small,” and that achieving its goals requires substantial investment. Although Thought Machine is now making “tens of millions” of pounds in revenue, it is not yet profitable, he said. The company makes its income from multi-year software subscription deals.

“It’s a wonderful time to be an entrepreneur,” Taylor told Businesshala in an interview. “There is more money available than ever before.”

“It means that, here in the UK, we can actually manufacture A world-class company, rather than always having our hands on our shoulders in Silicon Valley.”

Thought Machine plans to use the fresh cash to expand internationally. The firm opened an office in New York earlier this year, with about 20 employees leading its US expansion.

Thought Machine is also setting up shop in new Asian markets such as Malaysia and Japan. Nearly half of Thought Machine’s business now comes from Asia, the firm’s CEO said. Globally it numbers around 500 people.

The company competes with the likes of Mambu, which was valued at more than $2 billion in its most recent funding round, as well as 10x Future Technologies, the fintech venture of former Barclays CEO Antony Jenkins. 10x is also backed by JP Morgan.

Thought Machine is one of several new business-focused fintechs looking to partner rather than disrupt the world’s banking giants. Banks are facing increasing competition from several new digital entrants such as Chime, Revolt and N26.

As of now, these challengers have yet to make a significant dent in the existing market share. But they are gaining significant traction with consumers and garnering plenty of funding from venture capitalists willing to subsidize substantial losses in favor of rapid growth.

Banks are not sitting silently. Many have attempted to roll out their own standalone digital banking products to varying degrees of success.

JPMorgan recently launched a digital-only version of its Chase brand in the UK, while Credit Suisse launched a new banking app called CSX in Switzerland.

However, many lenders have stumbled in their digital transformation journey. For example, RBS discontinued its Bo online banking brand last year.

“Our goal is not to pick winners in space,” Taylor said. “Our goal is that, if anyone wants to launch a cloud-based bank, we are available and they can use our platform.”

When asked if there is a possibility of an initial public offering, the thought machine founder said it is likely to go public in about three years.

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