Swan, a French embedded finance startup, secured a Series B investment of €37 million ($39.6 million) led by European venture capital titan Lakestar. This brings the total funds raised by the firm to €58 million. Back in 2021, another venture capital firm, Accel, headed the Series A round for Swan. Using the new financing, Swan plans to broaden its presence in the Netherlands in the short-term, and later move into Italy in 2024.
Lakestar, a major European private equity firm and early investor in fintech unicorn Revolut, has recently given significant backing to the French fintech startup Swan. The new series B investment round has brought Swan's total funding to 58 million euros. Accel, a venture capital firm, was the lead in Swan's series A round last year. Swan CEO and co-founder Nicolas Benady says that it was difficult to integrate banking and financial services with existing platforms that have no financial components. He and his co-founders believed it should be easier to do so, and that it should be possible to have something running by early morning if a big idea is conceived late at night. The capital raised will be used to expand Swan's operations in the Netherlands within the coming months, before taking on the Italian market in 2024. Georgia Watson, a principal in Lakestar's London office, has commented that the firm has been watching Swan for around a year. She believes Swan allows its customers to create new products and revenue lines without having to worry about the regulatory implications, as it can set up embedded financial solutions in as little as two weeks, unlike other competitors whose timescales are several months.
Luca Bocchio, partner at Accel, claimed Swan had established its model was more scalable than its counterparts in the embedded finance world, such as Railsr and Solarisbank, which have had difficulty in their mission to incorporate payments and other financial services directly into companies' platforms. Railsr earlier this year entered bankruptcy protection via a sale to a consortium of investors led by D Squared Capital.
As per Bocchio, Swan is able to manage big volumes of payments and execute know-your-customer (KYC) checks with few personnel. He remarked that banking-as-a-service suppliers normally have to take care of many of their customers, who use their licenses. This requires fulfilling anti-money laundering, KYC and compliance costs for their customers. He remarked that, without having created a completely automated platform, a high volume of requests would be needed, necessitating lots of manual processes.
Bocchio pointed out that Swan is distinguished from its competitors with its skill to process lots of tractions with more automated compliance processes. Railsr was unable to assign the proper amount of people to tackle the challenge of designing an embedded finance experience while considering how to scale it with compliance in mind. When it announced its restructuring, Railsr declared that it had "best-in-class technology" and would "get back to basics and manage the business methodically and constructively." As a result of the fundraising, Swan is set to form associations with more large, multinational businesses utilizing an assertive sales strategy. The company is already working with the French retail chain Carrefour, which employed its technology to roll out a cashback project.
In addition, Swan intends to expand its product offering to include additional payment collection techniques such as direct debit and card payments, along with new lending capabilities. As it implements these new products, Swan anticipates it'll begin to serve new industries like travel, insurance and business-to-business marketplaces.
As reported by Bain Capital Ventures, it is predicted that the portion of payments that are embedded in platforms will increase to 40% in the coming years. According to data from Reportlinker, embedded finance is projected to be a $384.8 billion market by 2029.
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