Abound Raises $601 Million to Fund Open Banking Business

British lender Abound has raised $600 million to tap into increased interest in open banking.

The funding, reported Monday (March 6) by TechCrunch, will help the company finance loans, draw customers to its platform and build out its technology, which uses a mix of open banking data and machine learning algorithms to produce what the company called a better credit score.

“We see ourselves as going beyond credit scoring,” CEO and Co-founder Gerald Chappell told TechCrunch, describing the transaction data that his company uses to build its artificial intelligence (AI)-based risk and lending profiles as “financial X-rays.” These help Abound “understand true affordability” when deciding which customers get loans.

The company’s funding came weeks after the United Kingdom reached an open banking milestone, with 10% of the country’s population using open banking in January, and the number of active U.K. open banking users surpassing the 7 million mark, according to figures from Open Banking Limited (OBL).

Commenting on the milestone, OBL Chair Marion King said the technology has not only been “good for the nation,” but has also helped drive competition and allowed consumers and small and medium-sized businesses (SMBs) “to benefit from new and innovative ways to manage their financial lives.”

However, PYMNTS has noted that there has been some divided opinions about the success of open banking.

For example, Laurent Descout, co-founder and CEO of Spanish B2B neobank NEO, argued that most of the investments made by financial institutions to upgrade their systems did not take the needs of corporate clients into account.

From a corporate treasurer point of view, it’s either you have everything or it’s useless if you just have part of it,” Descout told PYMNTS in an interview.

“And that’s the problem of open banking,” he said. “It’s way too fragmented, and I don’t think that will change soon. Unfortunately, there’s been a lot of talking but very limited application so far.”

And Andy Mielczarek, co-founder and CEO of U.K. digital bank Chetwood, argued in an interview last year that the technology introduces friction into the customer journey and has performed below expectations since its introduction five years ago.

In a conversation with PYMNTS’ Karen Webster this month, The Bank of London Chief Markets Officer Shaunt Sarkissian said time, investment and legislation will be needed for open banking in the U.K. and European Union to really take off.

He said the slow rate of adoption in the U.K. is due to a lack of creativity among FinTech firms, many of which thought they could to leverage the access they had to consumer financial data to “create a million different business models that don’t exist today.”

However, traditional banks were already offering many of those solutions, Sarkissian explained, leading consumers who had planned to leave traditional banks to make a U-turn.

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