Hello TWIF UK & Europe friends,
Money. What a fantastic pain in the ass it is. The route of all evil some say. On the other hand , lauded Professors like Niall Ferguson point out that “the ascent of money has been essential to the ascent of man." He highlights that credit networks and their evolution have been instrumental in humanities development, unshackling us from the here and now and allowing us to look at the horizon and plan beyond tomorrow. Allowing us not only to solve today’s problem’s but to allow for ambition and to transform the future. By “derisking'“ humanities basic needs, credit allows us to clamber up Maslow’s hierarchy and create a better tomorrow.
But all that depends on… Money. Ensuring we have enough of it today and ensuring we have enough for our future needs has always been the underpinning of western civilisation. Bank’s were really the first successful scaled attempts at innovating on this. A couple of thousand years ago I’m sure some village guard, whose job was to not let anyone into their hold, noticed that a lot of the valuables, just sat there… Just in case. And at some point our enterprising guard surely must have thought, this stuff’s never getting used, why don’t we “lend” ownership of it. And fractional reserve were born. (No I’m not a historian…)
Anyway the point of that is at some point in human history, western civilisation said ‘lets get creative’ with this value, and well, the world transformed, and we continue to innvoate faster and faster. This was all fundamentally achieved by a collective agreement to say your assets could be used by others for a period of time so long as you got a return for your risk. Banking was born and industry began to boom. Millions of lives improved,LFG etc etc..
Now occasionally, this did not work out well. Many’s the nation that has felt the whiplash affect of rampant capitalism. Tulip’s anyone? The roaring 20s? the GFC?… Maybe even Spacex? (who knows!)
Nonetheless, money has been at the centre of it all. Being put to unimaginably innovative uses, often underpinned by ever more unimaginably ‘creative’ financial engineering.
Now I’m not saying its always a good thing. But it’s usually a good thing. And capital like most things, is freshest when it runs free. And becomes stagnant when it lays still doing nothing. Bank’s iterated on this for years. Yes, with the occasionally oopsy. But you don’t make a (good) chocolate cake without cracking a few eggs for the mix. Seriously, I hate those stupid cakes where the sub in olive oil or something. I don’t even like eggs, but for chocolate cakes you gotta have them. They make it more rich and creamy and delish… Um fintechs banks and stuff yes where was I.
Unfortunately, Bank’s can crack a few eggs, but Fintechs, that is a no no. You must protect your eggs. You must protect the shell of client money. The shell being a safeguarding institution (a bank). This is good for the most part, we don’t want just anyone to be able to collect and hold (and get creative with) client money. That would be crazy. But for a lot of the well run and scaling fintechs, lot of fintech, that is the default. Fintechs are not banks. They cannot lend (client) money. And they do to a large extent compete with banks. So, to some extent this market forces successful fintechs into bed with their enemy.
The European Central Bank (ECB) now lets non-bank PSPs get direct access to central-bank-operated payment rails like TARGET. But contrary to our expectations, made clear it will only provide settlement accounts — not safeguarding accounts. So the question put to the EBA was if you are a PI/EMI with a TARGET settlement account, can simply parking client funds in that account count as safeguarding under Article 10 PSD2? The response wasn’t immediate.
So, in Europe, many fintechs heads were turned when they realised they could directly access central banks. What, is safe than storing your client money at a bank, Storing it at a CENTRAL bank. That after all is where the banks that you have to store your money with, store their money! Kerching! Now, elated fintechs across Europe could finally unshackle themselves from the bonds of their gatekeepers, and compete freely in the market. Right?
Don’t be so stupid, this is the EU. Alas, no, after much squirming the central banks realised that whilst yes they are safer than regular banks, it still wasn’t good enough to claim that these funds are “safeguarded”.
They said relevant funds in a central bank account "cannot be considered by itself a safeguarding measure" under Article 10(1). A settlement account is a settlement account; it isn't insulated against the firm's creditors on insolvency, which is the whole point of safeguarding.Indeed central bank money can’t even be deemed client money and so the pressure valve some many fintechs hoped for, was locked tight(ish).
There is a small breeze coming through that door though… The EBA reiterated that the obligation to deposit in a separate account (or central bank, or low-risk assets) only counts for funds still held "by the end of the business day following the day when the funds have been received" — i.e. there's a window in which you are not obliged to safeguard. this is principally because most fintechs offer payment services. In other words, funds on account are (at least supposed to be) already under some kind of forwarding instruction to another location. (this is super dumb IMO as more and more fintechs these day’s present as banks even if they aren’t allowed to advertise the fact). Anyway, continuing on - the EBA basically is saying using users' funds intraday on the TARGET settlement account to settle payment transactions isn't a breach, provided you sweep what remains into a proper safeguarding arrangement by that deadline. That's the liquidity flexibility the industry was angling for, and the EBA didn't shut it down. But then they would’t. Having to safeguard money that you have already sent for processing is dumb. It’s like having to insure having to ensure the contents of a house when the person has taken the contents on a world tour with them.
So money, the fantastic pain in the ass, continues to be a fintechs greatest opportunity and challenge. For growing businesses, safeguarding becomes a bigger and bigger challenge. User’s choose fintech’s because they offer an advantage over traditioanl banks. Its often, lower fee’s, speed, and better functionality. But to be able to deliver on this, fintechs need to be able to innovate. And as they win more customers, the demand for safeguarding becomes a bigger and bigger cost of equity. I’d say (for most fintechs)that 50% of investor funds after Series C is simply to support the growing obligation for safeguaring. It might not say it on the investment memorandum or the pitch deck, but the realist is, as more users trust big fintech, big fintech can’t monetise that trust the way a bank can. So they have to raise spare capital just to park it for capital adequacy and safeguarding rules.
This is a problem that wont go away. Insurance has had a sniff. And it didn’t like the aroma. Lenders too, but the whilst a rolling line of credit could in theory work, lenders simply can’t take the risk whilst the Risk free rate grows and grows across western govt debt.
So I was thinking - could a cooperative form? A series of fintechs in it for the mutual benefit. Fintechs biggest problems don’t tend to be permanent liquidity issues. Like Amazon before them, they just need capacity for activity spikes. But where amazon were able to amortise a gigantic capex to deliver AWS as a revenue generating permanent solution, fintechs have no such opportunity.
Fintechs have different capacity spikes at different times of the year. Remittance firms for example. Sure you have seasonal averages, but you can bet middle eastern remittance have a different spike cadence than west african ones, who have different to Caribbean and Philippine routes and so on. Challenger banks have different demographic needs. BaaS Players too An Uber drivers payment activity probably doesn’t match an Intuit accounts end of year activity. Could they collectively combine to solve each others problems - Not easily for sure, but when has anything easy ever been worth it?
I wonder, could they all club together and handle internal lending - or a pooled capital resource they could all call on to manage safeguarding. I’m sure there is a lot of kinks to work out, but I think in the age of AI - we’ll see an attempt sooner rather than later.
Please find another week of fintech news, financings and exits below!
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Exits/Acquisitions
Highlights below of deals since the last post in the fintech space across the UK & Europe. Deal data powered by Dealroom.
Nuvei agreed to buy Payoneer for roughly $2.75B, at $7.40/share in cash, building a global cross-border payments platform.
Adyen agreed to acquire billing platform Orb for $335M, merging billing with payments for enterprise merchants.
Barclays is buying GoHenry's UK kids-banking business from Acorns; terms undisclosed, closing in Q4, to win younger customers
Finastra sold its Universal Banking (Essence core) unit to PE firm Pollen Street Capital; terms undisclosed, to refocus on payments and lending.
Wise acquired expat-guidance site Expatica, which drew over 7 million visits in 2025, to reach customers earlier in the relocation journey.
Funding/Financing 💸
Flagright raised a $12.5M Series A led by Infinity Ventures to scale its AI financial-crime compliance platform in the US.
Behavox took $175M in preferred equity from HPS Investment Partners, part of BlackRock — its first equity raise since 2020 — to fund growth and M&A
Festina Finance secured over €25M growth investment from Birchway Capital, valuing it at ~€200M, to push its pension/life-insurance platform into the UK.
Warren closed a €10M seed led by Motive Ventures to grow its Belgian workplace-pension platform and prep a European rollout.
Green-Got raised €8M via Crowdcube, drawing 5,286 investors in 52 minutes — a platform record — to build its own banking and payment rails
El Dorado raised a $9M Series A led by Paradigm, with Coinbase Ventures and Verda Ventures, to scale its LatAm cross-border payments app.
Trace Finance raised a $32M Series A led by CoinFund to expand regulated stablecoin settlement rails across LatAm and APAC.
Range closed an oversubscribed $8.3M Series A to deepen its stablecoin/fiat transaction-monitoring tools.
Financing/Facilities
OakNorth and Fintex Capital launched a UK specialty-finance alliance, with £20m already deployed together.
Mollie committed €350m of its own capital to complete its 30-country EEA build-out — a self-funded commitment, not a raise.
Product Launches
Santander, BBVA and CaixaBank went live with FrauDfense Check, a shared-intelligence platform to stop fraud before money leaves an account.
NymCard launched nCore FullStack, one platform for issuing, lending, settlement, fraud and reconciliation.
Modulr added commercial VRP to its Collections Hub, letting businesses collect varying amounts on one sign-off.
FV Bank launched a unified platform merging stablecoin settlement, custody and payments with banking rails
Coinbase launched Coinbase for Agents, letting AI agents trade and pay from your account within set limits.
Fidelity launched the Reserves Digital Fund, a money-market vehicle for GENIUS Act-compliant stablecoin reserves.
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Longer Reads 📜
Bank of England backs down on stablecoin holding caps, sets £40bn issuance limit - CoinDesk
Thanks for reading!
