JPMorgan cools on deal to back UK fintech startup Yapily

• JPMorgan has cooled a deal to back London fintech startup Yapily, Insider understands.
• Discussions about an injection of $25 million into the startup were at an advanced stage, sources say.
• Yapily, founded in 2017, had been looking to raise new funding for months.

JPMorgan has opted out of pursuing a strategic investment in London fintech Yapily, Insider understands.

Yapily, which is backed by Square and Wise investor Sapphire Ventures, operates in the burgeoning open banking sector. The startup licenses an API to a number of Fortune 500 companies that enables them to take payments from customers without having to go through card issuers like Visa and MasterCard.

The US financial giant had considered a deal that would have seen the bank inject around $25 million into the startup, a London-based source said. However, the bank has decided not to invest in Yapily at this time, two sources with knowledge of the matter said. Talks between JPMorgan and Yapily were first reported by Bloomberg in September.

JPMorgan declined to comment when contacted by Insider. A spokesperson for Yapily said the startup did not comment on market speculation.

A deal between Yapily and JPMorgan had reached an advanced stage, but the financial giant has chosen not to invest in the business, a source said. For now, JPMorgan will partner with U.S. firm Finicity, which Mastercard bought for $825 million in 2020, and Tink, a European open banking startup that Visa bought in 2021, the London-based source said.

The bank’s decision not to invest in fintech does not mean it will not look to work with the UK business in the future, a London-based source familiar with the matter said.

Yapily, which has raised $69 million from investors such as Latitude and Sapphire Ventures to date, had been looking to raise funding for months and is believed to have believed the deal was coming to fruition. The bank’s decision to change its mind late in the proceedings was described as “a kick in the teeth” by an investor close to the process. The startup’s last funding round was a $51 million Series B in July 2021.

The JPMorgan deal could well have depended on a broader funding round with other investors taking shape, a London-based Yapily investor told Insider, meaning the bank could still participate in a future funding round should Yapily move to raise additional capital in the future.

Open banking startups sprang from regulatory changes that forced banks and financial institutions to share customer data, with their permission, with third parties. Services like Yapily connect to a customer’s bank account, then run services on behalf of other businesses, such as loans, business payments and financial management.

The deal’s demise is believed to be a problem for Yapily, but not something that will cause significant problems for the business, the London-based source said. Funding for fintech startups, however, has plunged in 2022. Startups in the industry raised $13.4 billion globally in Q3 2022, down 64% from their peak in Q4 2021, according to Dealroom.

Yapily previously acquired German competitor FinAPI and would likely have used some of the funding to continue its integration of the business given the regulatory and technical costs of such deals.

JPMorgan previously acquired UK wealth management firm Nutmeg and was reportedly on the lookout for other fintech acquisitions amid a decline in valuations for consumer-facing financial services in areas such as trading and savings.