Marc Andreessen has said that software is eating the world. But is banking eating software?
After all, it seems nearly every consumer-facing company these days has a rewards program, or saves your credit card or bank account number, or somehow connects to your wallet through your smartphone. But who's building the tools to connect all those pipes together, to make sure the money and points go where they need to go, so you get your free Starbucks coffee at the right time?
The digital banking and challenger bank space is heating up fast, and Moov sees a space to help those companies grow and achieve their missions — from behind the scenes.
Moov is a one-of-kind banking-as-a-service startup: by building out financial products like ACH payments or wires, Moov allows digital banking companies to implement those features more easily, as opposed to building them in-house. The company is also the only open source platform for banking infrastructure, meaning that developers can collaborate, either on GitHub or Moov’s Slack channel for developers.
Moov co-founder and CEO Wade Arnold has been immersed in fintech long enough to know what the industry was lacking. Before founding Moov, Arnold was the founder of white label digital banking platform Banno, where he met his future co-founder, Bob Smith. After a stint as a managing director at Jack Henry, Arnold joined financial services startup BillGO, eventually becoming the company’s EVP of technology. It was those experiences at Banno and BillGO that ultimately led to Moov, says Arnold.
“Companies were spending lots of time integrating into these backend legacy systems which were necessary for them to build their greater go-to-market strategy,” Arnold said. “Moov's approach was, why don't we make it so that all these fintechs don't need to figure out how to connect to mainframes anymore?”
The alternative for companies who want banking built into their apps is the in-house approach, which Arnold says could take more time without a modular, open source approach.
“Our typical customer is usually large,” Arnold said. “We're not normally speaking with startups. And frequently they brought things in-house. Maybe they've used something from Oracle or IBM, SAP or one of the large financial technology providers. And they've tried to augment that to make it work for their unique use case. So they're looking for more modularity, more flexibility, and that's how they end up chatting with Moov.”
Although Arnold says Moov has no direct competitors, open source banking is becoming an increasingly crowded space. Big tech, for example, is embracing open source software more than ever. Some recent acquisitions point to this trend: In 2018, Microsoft bought code hosting platform GitHub for $7.5 billion. That same year, Salesforce bought software company MuleSoft for $6.5 billion, and the year after, IBM bought open source software company Red Hat for $34 billion.
It’s not just big tech — big banks have been following suit. Goldman Sachs, JPMorgan Chase, Capital One, and Deutsche Bank have all incorporated open source software into backend projects. JPMorgan Chase, for example, released code for its Alloy initiative on GitHub.
There’s also a growing amount of venture capital in the industry, mainly flowing to startups specializing in open source APIs. Plaid, which currently has $309.3 million in funding, is backed by the likes of Spark Ventures, Index Ventures, Kleiner Perkins, and Goldman Sachs. Then there’s Sweden-based Tink, which is backed by Dawn Ventures and PayPal, among others, and has $308.4 million in funding.
Moov’s approach got the attention of investors at Andreessen Horowitz, which led a $27 million Series A round in December. The raise follows a $5.5 million seed round led by Matt Harris of Bain Capital in August. Angela Strange and Peter Levine, who are both general partners at a16z, co-led the Series A. With the new cash influx, Moov plans to expand its engineering team and build its brand. Arnold says that overhauling payment structure for a large company takes time, so clients should be confident that Moov isn’t folding anytime soon.
According to Arnold, Strange’s expertise in fintech and Levine’s background in open source technology were ideal for Moov. After all, it was Strange — who joined Moov’s board along with Harris — who once declared, “Every company will be a fintech company.”
“To have a single firm that had this balance between financial services and open source and enterprise software, it just seemed like they understood the challenge that we were taking on better than most,” Arnold said.
Arnold also finds that COVID has brought some other silver linings to Moov, especially in terms of fundraising and hiring. The Iowa-based company would normally recruit from a local talent pool, but now, Arnold says, they can recruit from anywhere in the world. As for fundraising, founders and VCs have complained that Zoom meetings lack the intimacy and depth that an in-person meeting would. Arnold, however, says he’s been able to meet with more investors (including a16z) using Zoom, all without having to fly across the country.
“We've been able to meet with more people because of that,” Arnold said. “Because you didn't have to be in person and you were doing it over Zoom, you were able to pitch eight companies in one day that are all from coast to coast.”
Although Arnold and Smith founded Moov back in 2018, the pandemic accelerated demand for what they were building. As Moov grows, Arnold thinks the demand won’t just be coming from fintech startups, but consumer-facing companies in industries ranging from e-commerce to food delivery.
One of Arnold’s favorite examples is Starbucks. When the coffee chain overhauled its payment systems for customers, it seemed as if it would become more of a bank than a cafe, with customers paying for drinks using gift cards, store accounts, or rewards systems. Arnold envisions Moov building banking-like infrastructure into all sorts of companies.
“We see a proliferation of the Uber of neighborhood lawn mowers to whatever the next great startups are going to be,” Arnold said. “To allow those payments to be easier for developers to add that feature to their platform is going to be key for that proliferation to happen.”