The newest trend in fintech is technology that enables any company to offer banking services directly. It could also change banking as we know it. This so-called "embedded finance" deconstructs banking into a series of services that can be implemented in countless ways via websites and apps.
Israeli company Unit Finance, a young, vibrant two-year-old fintech startup, is one of the leading suppliers of such technology. It was founded by Itai Damti and Doron Somech, (a co-founder of Israeli foreign exchange technology provider Leverate), who noticed a sharp change in the industry. "The first generation of fintech companies - like Chime or Lending Club - focused on offering one or two digital financial products. The banks, which had the advantage of size and power, worked with them. In the second wave, companies in a variety of sectors - like Shopify, Uber or Lyft - are launching their own financial products," says Damati.
Guarantors for compliance
Unit focuses on the business sector, enabling companies to offer banking services to other businesses or to their employees. With Unit, for example, crowdfunding platform AngelList can offer a package of banking features to start-ups raising capital through its website, including current accounts, credit cards, cash transfers and investment management. Invoicing and financial reporting service Invoice2Go, which serves millions of small businesses in the US, has launched a banking service for businesses connected to its invoicing mechanism, facilitating faster currency transfer and payments based on a dedicated customer club.
After starting 2021 with zero sales, Unit is ending the year with unimaginable momentum: an annual sales rate of $5 million to $10 million, coming from monthly customer subscriptions and commissions on every transaction Unit processes. In the past few months alone, the number of transactions involving the company has doubled, deposits have quadrupled, and the number of accounts and credit cards has risen six-fold.
Unit is not alone. It competes with leading services like Rails Bank, Aion Bank, and even with traditional banks that have developed similar services, such as DBS, Green Dot and Standard Chartered. But its specialization makes the product more worthwhile for customers to implement: Unit serves as a guarantor for the customer's compliance with the strict regulatory conditions of banking and financial supervision. It has also recruited, as its Chief Compliance Officer, Amanda Swoverland, a senior US banker with experience in compliance who has served as risk manager for several major banks and fintech companies.
"Many companies in the field have shied away from dealing with regulation, but it was precisely their focus on it that made companies like PayPal and Twilio giants in their fields," says Damati. This is clearly reflected by the fact that a quarter of Unit’s 50 employees work in regulation on behalf of customers. "Instead of 2,000 companies recruiting 10,000 compliance officers, a company like Unit with 50 employees can do it more efficiently for them."
Unit Finance
- Business: A banking and payment API (application programming interface)
- History: Founded in 2019 by Itai Damti (CEO) and Doron Somech (CTO).
- Stats: The company, which employs 50 people and is valued at $251 million (according to PitchBook), raised $70 million, including from Accel, Aleph and TLV Partners. Revenue in 2021 is expected to be $ 5-10 million.
Published by Globes, Israel business news - en.globes.co.il - on December 7, 2021.
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