Published: September 16, 2024
Abound, the British fintech, announces a £800mn fundraise that allows it to reach more consumers and help them to access loans and save money through the firm’s use of artificial intelligence and open banking data.
The London-based fintech Abound announced that it had raised £800mn, bringing its total funding up to £1.3bn. The fundraise was one of Europe’s largest in the first half of 2024, second only to the automated driving startup Wayve.
As Gerald Chappell, CEO and co-founder of Abound, tells EMEA Finance, the funding round was a mixture of debt and equity, while the investors were a mix of VC funds and global banks. It includes a multi-year asset-backed debt financing arrangement from Citi, along with a Series B equity round led by early-stage investor GSR Ventures.
“It gives us the firepower to expand into new markets both domestically and internationally,” says Chappell. “Over the next few years, our aim is to continue building Abound in the UK and take what we've learnt here global.”
A financial x-ray
Abound is a credit technology company that uses artificial intelligence (AI) to determine customers’ unique financial situation. Through scanning their banking transaction data that provides a kind of financial ‘x-ray’, the technology provides an accurate determination of how much a person can afford to repay each month. That in turn means fewer credit defaults, around 75% fewer than the industry standard Abound claims, and lower interest rates for consumers.
“When we appear on price comparison websites, 48% of the time we're the only offer or the cheapest offer by at least 10% APR [For example, a consumer could see an offer of 24.8% APR against an average of 27.5% APR from other lenders]. These cost savings can equate to hundreds of pounds saved over the duration of the loan,” says Chappell.
While traditional credit checks are accurate on average, they are rarely correct on a case-by-case basis. That’s because they rely on estimates gleaned from population data – a blunt tool when it comes to individuals. Abound’s technology, called Render, integrates open banking into its credit decision engine, enabling lenders to understand their applicants better.
At present, it is thought that around 15 million people in the UK struggle to borrow for unexpected costs. Their low credit scores mean they are offered credit only at very high interest rates. Abound wants to change this situation, providing loans at rates people can actually afford to repay. The company offers loans between £1,000 and £10,000 repayable for up to five years, with a 24.8% APR (representative). To date, it has issued over £300mn in loans.
As well as lending directly to consumers, Abound via Render works with companies across Europe that are looking to function as lenders themselves. Some of these are high street banks, which have been using the technology to open up new markets, improve their credit performance and minimise fraud. There are remittance companies and IVF insurers that are lending for the first time after engaging with the firm.
“Render allows any company to lend, regardless of whether they have before or not,” explains Chappell. “Each Render client has different needs, and we can help them across credit decisioning, distribution, compliance and regulatory, servicing, and in some cases even provide debt funding.”
Turbocharging growth