Global recessions have a habit of stalling the tech startup sector and the innovation it brings, but for open banking pioneer Tink, the large wing of Visa is shielding its ambition from harm.
In fact, rather than slim down, Tink currently has an ambitious plan to expand internationally. The Swedish company, which was acquired for £1.8bn by Visa in 2021, is adding to its invisible services, which provide vital banking infrastructure that helps the global finance system tick in the age of open banking.
In 2013, Tink launched aggregation technology to collect bank data, such as account details and savings rates, from multiple sources, and built it into an app. Its initial offering, aimed at consumers, could be downloaded and connected to any bank, and collect a person’s complete financial profile through a single app. After picking up half a million users with a B2C model, it decided to target banks through B2B in 2017, with a platform they could use to build their own open banking services.
This was just before open banking regulation came into force in 2018, in the form of the EU’s Payment Services Directive 2 (PSD2). Its introduction was set out in 2015, and when implemented, the regulation enabled third parties to access the customer data held by banks via application programming interfaces (APIs), if customer consent is granted, and offer services using this information.
It meant, for example, a company with the consumer’s consent could take a payment directly from their account without them leaving its website. In the UK, the Open Banking Regulation, which was introduced by the Competition and Markets Authority (CMA) in 2018, is PSD2’s equivalent.
Until then, Tink was mainly a business providing data to banks and merchants using its infrastructure, providing bank-to-bank connectivity, but open banking meant Tink, along with other specialists, had a head start.
Today, Tink has four parts to its business offering; onboarding using account information data to onboard customers, risk decisioning services which assess transaction data in a person’s account to automate decisions on affordability of products, loyalty programmes and customer lifecycle services, and payment initiation. All of this is underpinned by the Tink technology.
Visa allows Tink to continue its growth journey
Tom Pope, the senior vice-president of payments and platforms who was at Tink when it was acquired, said the company now benefits from Visa’s “benevolent ownership” as well as its global footprint.
“Having a big, strong owner like Visa during the current economic climate is very helpful,” he told Computer Weekly. “We are in a market where valuations are being slashed – a lot of companies are being forced to cut costs, which fortunately doesn’t apply to us.”
Tink employed about 450 people before it was acquired by Visa, and it now has about 650, 60% of which work purely in technology with most of its IT operations in Sweden and Poland.
Pope said Visa’s ownership is also important for giving confidence to Tink’s customer base of banks, merchants and payments companies.
But where big, strong owners can stunt the growth of tech startups is when they impose their corporate processes on them. Pope said this has not happened at Tink because “Visa understands what it means to buy a tech-led company”.
“There are so many examples in the market of large companies buying small companies and swamping them with their tools, processes and ways of working, but then what happens over a few years is that the small company has lost loads of staff, which in tech-led companies is what it’s all about,” he said. “If you start losing your best and brightest engineers, it’s the beginning of the end of the company, and I have seen this play out.”
According to Pope, Visa recognised it has something early in its growth, which is growing fast, and to achieve, it needs its best people to stay. “Visa realised Tink needed a degree of independence,” he said. “There is alignment where it makes sense, such as cyber security, finance processes and things like that underneath, but there are areas where we are independent.
“For example, there is a big thrust of work going on currently to bring Visa and Tink in line from a security perspective,” said Pope. “Visa operates some of the most robust IT infrastructure, and Tink was pretty good before, but we are bringing it up to the Visa standard.”
But outside of business operations alignment, Tink has the independence it needs to continue its pioneering of the growing open banking sector. Now, with Visa’s deep pockets, it’s able to take a long-term view of the future.
In at the start and for the long term
When Tink launched, open banking wasn’t a thing, although it was actually providing it in all but name through its data services, which allowed users to see account data from across the banking industry.
Open banking is a global growth story with some hotspots, including the UK.
In the UK, for example, about 4,800 people work in open banking, and the industry raised more than £886m last year, according to a report from independent advocacy group the Coalition for a Digital Economy. Figures from Open Banking Ltd (OBL) revealed that more than seven million people in the UK used open banking last year.
Tink is not resting on its laurels, according to Pope. “Nothing has been announced yet, but we are aggressively pursuing a bunch of expansion initiatives,” he said.
This not only includes international expansion, but the introduction of more services using the same connectivity that Tink has with banks. This includes payment services where Tink has introduced a wider suite of payment options.
Pope said there has been a real shift in Europe over the past five years towards account-to-account-based payments, known as Pay by Bank, where money is moved directly from a payer’s bank account to a payee’s bank account without the need for intermediaries. Tink enables this through its technology.
He said Tink also plans to be “investing heavily” in being in the flow of funds, which means money moves to its account first in a transaction, without any difference for the customer, allowing Tink to offer services such as refunds and providing it with more up-to-date data so it can offer better reporting.
Optimising the user experience, reducing the number of steps on the journey and developing products to guarantee real-time fund transfers are other areas Tink is investing in.
It is not just consumers that are harnessing open banking technology. In March, the OBL revealed that 16% of UK SMEs now use open banking, compared with 11% of consumers.
It said 75,000 SMEs already use open banking, many as part of their accounting software to import transaction data, and are also taking advantage of the ability to view more than one bank account in the same place, known as account information services. A total of 79% of SMEs are receiving real-time insights for cashflow and forecasting through these services.
In contrast, consumers are widely using payment initiation services, allow them to move money. This can be to top up wallets or pay credit card bills.
The OBL said there were 68.2 million open banking payments in 2022, compared with 25.2 million in 2021, with month-on-month growth of 10%. It estimated that up to 11% of digitally enabled consumers and small businesses used open banking in March 2022. This figure has increased from 9-10% in March 2021.