Why We Invested In Fidel API: Building The Next Foundational Platform For Fintech Applications
By Merritt Hummer, Partner at Bain Capital Ventures
2021 was a banner year for fintech: global funding to fintech companies hit an all-time high of $132 billion and the sector produced more than a dozen IPOs not including SPACs. The aggregate market cap of public fintech companies exceeds $600 billion. Just a handful of years ago, there were hardly enough public fintech companies to comprise an index at all.
What changed? In part, a new paradigm emerged around data ownership that spawned an explosion of innovation. Historically, data captured by financial institutions was siloed and regarded as the property of the financial institution. Today, the consumer is deemed to be the rightful owner of her financial data. The shift from institutional to consumer ownership of data propelled the open architecture movement in financial services that increasingly enables data sharing within and across institutions and fintech companies.
Much of the value creation in fintech over the last decade can be traced to the emergence of API platforms. APIs enable third-party developers to build applications on top of traditional financial institutions. There are APIs to securely transmit data from myriad financial institutions to end users of that data, whether they be consumers, businesses, or other financial institutions. These “pipes” constitute the new plumbing of the financial internet.
Several of the earliest API platforms focused on bank authorization and connectivity, most notably Plaid. But there’s a problem with bank account data: it is an imperfect, incomplete lens into a consumer’s financial life. Anna Delvey’s bank account will reveal her cash balance and aggregate historical cash flows, but it won’t tell you that she spent a small fortune on Farfetch moments ago. Bank data’s limitations are twofold: first, the data is not real time (your cash balance only changes when bills are due, not when charges are made) and second, it lacks granularity (you see credit card bills in aggregate, not at the merchant level). As a result, the applications of bank data are inherently constrained to those that don’t require real time, granular spend data. Further, and notwithstanding open banking regulations in various jurisdictions, bank API connectivity is of irregular quality and suffers from frequent broken connections. On the whole, these challenges make banking data a poor foundation on which to build a company.
Today, BCV is thrilled to announce that we are leading Fidel API’s $65 million Series B round. Our investment thesis for Fidel API can be distilled to a simple idea: Fidel API is to card data what Plaid is to bank data. Just as Plaid accesses a consumer’s bank account data (either by screen scraping or via direct integration with the bank), Fidel API accesses a consumer’s credit and debit card data (only through direct integrations with the major card networks). Fidel API’s platform makes it simple to stream real time, high fidelity card transaction data from Visa, Mastercard, and American Express, augmented and made even more valuable when synthesized with additional third party data sources.
The potential use cases of such data are vast. One is to power merchant loyalty programs. Antiquated merchant loyalty programs often rely on private-label card programs, which suffer from low enrollment. With Fidel API, consumers don’t have to open merchant-specific cards; they can use any card of their choosing and merchants can automatically reward them for their purchases. Fidel API enables instant gratification to consumers in the form of points or cash back, reinforcing loyalty to those merchants.
But loyalty programs are just the beginning. Developers can leverage the platform for countless card-centric applications including expense management, personal financial management, tax filings, accounting services, insurance claims reimbursement, and more. Expense management platforms use Fidel API to process purchases on enrolled employee cards, grant instant expense approvals, and reimburse employees immediately for approved purchases–all without filing an expense report. Insurers use Fidel API for instant claims reimbursement when a consumer makes a charge at an approved medical office. Personal finance apps use Fidel API to understand a consumer’s spend patterns and make better recommendations. Retailers may offer instant coupons and digital receipts at checkout. The list goes on. We can’t fully anticipate all of the ways in which this platform will be used in the future.
Our team first met co-founder and CEO Dev Subrata two years ago and we have closely followed the company’s progress since then. We have been impressed by the strength of their technology, pace of execution, and deep relationships with the card networks. Fidel API is on a mission to “make money programmable” and we are delighted to partner with them in achieving that goal. We couldn’t be more excited to back such an ambitious, energetic, and thoughtful team. Welcome to the BCV family, Fidel API!
