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Tally, a startup helping consumers manage credit card debt, is sunsetting its app and pivoting to embed its tech inside the apps and websites of other financial institutions, the company tells Ryan exclusively.

Why it matters: Several consumer-facing fintechs started pivoting to a B2B model or adding embedded finance offerings to diversify their revenue streams.

How it works: Tally's consumer-facing app facilitates the reduction of credit card debt, providing a dashboard that shows consumers' outstanding balances and automating the payment process across multiple cards.

The company also offered lower-interest lines of credit that directly paid cards on a customer's behalf.

Since its launch in 2015, Tally says it has helped users pay down more than $2 billion in credit card debt.

The latest: Now, Tally will provide its credit card repayment technology on a white-label basis to large, publicly traded banks and fintechs.

After two years of development, Tally has launched an SDK for Android, iOS and the web so other financial institutions could embed its tech into their own applications.

It also created an API that will enable partners to build their own apps that tie into Tally's capabilities without using the SDK.

What they're saying: "My goal has always been to get Tally in the hands of all Americans," founder and CEO Jason Brown says.

To get there, he says the company is partnering "with large institutions that already have customers and a desire to provide them with a Tally solution, but don't have the capability to build it themselves."

Friction point: Interest on credit card balances remains a key profit driver for banks. The CFPB reports that major credit card companies charged more than $105 billion in interest in 2022 alone.

However, according to Brown, large institutions realize that, while there is a trade-off in potentially reducing interest income, they want to have more visibility into their customers' financial lives and create more engagement with them.

"Even though many of these FIs make an immense amount of revenue off of people who carry a balance, they are also very motivated to become the central digital experience for their customers," Brown says.

What's next: The company expects its first B2B partner — described by Brown as "a large, publicly traded FI with 65 million customers" — to go live with Tally's embedded technology in its apps in June.

Tally says that while it is sunsetting its consumer offering, it will continue to support existing customers.

"We're not abandoning our existing customers … but going forward, once we launch our first partner, we're going to encourage all of our customers to use Tally through their applications," Brown says.

Zoom in: To help fund the strategic transition, the company says it has raised additional funding from insiders including Andreessen Horowitz, Kleiner Perkins and Sway, bringing total funding to more than $200 million.

Tally last raised $80 million in Series D funding at an $885 million valuation in October 2022.

At that point, it had raised $172 million in total, according to Pitchbook.

1 big thing: Tally pivots to B2B

Illustration of a hand using the Tally logo as a hammer to break the ball on a ball and chain.

Tally is not the only fintech that sees more promise in selling to banks than selling to consumers.

Last November, neobank HMBradley began its pivot away from serving consumers directly.

Like Tally, HMBradley plans to sell the technology it originally built for the consumer market to banks looking to offer new services to their customers.

Several other fintechs have moved to diversify revenues through B2B sales or spin off businesses that could be valuable to other financial institutions.

Publicly traded personal finance startup MoneyLion launched Engine, its B2B financial product marketplace, after acquiring Even Financial in early 2022.

That same year, U.K.-based Starling Bank introduced a B2B product called Engine, a cloud-native, API-based banking platform it sells to incumbents.

Last March, Greenlight launched a partnership program to make its kid-friendly banking services available through other financial institutions.

A few months later, consumer credit card startup Petal raised $35 million to spin out its B2B data analytics subsidiary Prism Data as a standalone entity.

The bottom line: Startups say the uncertain funding environment, increased customer acquisition costs, and a growing willingness among big banks to partner with fintechs are key drivers of this trend.

2. State of play: B2B on the rise

Illustration of hands holding up one hundred dollar bills. Each arm is in a row and getting progressively taller, to indicate growth.

With funding harder to come by and valuations compressed, fintech companies needed to become more capital-efficient. This, in turn, drove some companies to rely on partners to reach their end customers.

Zoom out: Both the number of venture deals and the aggregate amount of venture financing going to fintech startups fell for the second straight year in 2023, according to data from CB Insights.

The number of financing deals for fintech startups declined from a peak of 6,172 in 2021 to 3,801 in 2023.

Meanwhile, the total amount invested by VCs into fintech companies dropped 70% in the same period, from $140.8 billion to $39.2 billion.

"I think founders are saying, 'Well, crap, no one's gonna fund me on this, and I'm not gonna get to profitability on my own. Is there a way I can monetize some things I built?" HMBradley CEO Zach Bruhnke says.

Between the lines: With the cost of acquiring new users rising dramatically, fintechs see partnering with large FIs as a way to reach scale more quickly.

"Being a direct-to-consumer business where you're trying to convince customers one at a time to download your app and spending tens of millions of dollars per month on Facebook ads and TV commercials is not the most efficient way to reach people," Tally CEO Jason Brown says.

"We just don't have finite marketing dollars to go acquire all of America … that acquisition of consumers now has to happen through partnerships," MoneyLion CEO Dee Choubey says.

The other side: While some businesses turn to B2B models to increase distribution, others see it as a way to diversify their revenue streams. MoneyLion was one of those companies.

"As a public company, what we realized was … it's a really hard war to compete directly with JPMorgan Chase, Wells [Fargo], Capital One and others for primary checking accounts," Choubey says.

That led MoneyLion to add a B2B offering through M&A that now makes up about a third of its revenue; more important, it's contributed to an expansion of the company's gross profits.

The big picture: Forced to do more with less, fintechs see partnering with or selling to banks as a more efficient way to operate their businesses.

3. Funding falls, while CAC rises

None of this matters unless banks actually buy what fintechs are selling — and that's the biggest factor driving the trend toward B2B pivots.

Why it matters: Competition is causing FIs large and small to pursue fintech partnerships.

"There's increasing competition from all directions: from other financial services companies, but also from software companies adding financial services to own more of the customer's financial life," Andreessen Horowitz general partner Angela Strange says.

Yes, but: Banks "realize that they can't build everything themselves … that doesn't make economic sense, and therefore they should partner," Strange says.

Tally CEO Jason Brown says that prior to partnering with others, he saw multiple large banks try to create a similar product internally, but "they ended up not being able to get there. It was too long, too hard, too expensive."

Case in point: Just two years ago, JPMorgan Chase CEO Jamie Dimon bragged that his bank would invest $12 billion in technology.

Despite posting record profits in the prior quarter, that astonishingly large number was met with widespread disapproval among investors on Wall Street.

Since then, JPMorgan has become one of the leading partners for several fintechs, HMBradley CEO Zach Bruhnke says. "Because they're JPMorgan, everyone will bend to their will and their pricing needs, to the point where they get [tech] incredibly cheap."

And that, in turn, has led to FOMO among other banks who feel the need to keep pace.

The bottom line: "If you would have told me five years ago, 'You're going to be selling enterprise software to banks,' I would have said, 'I would rather shove bamboo shoots up my fingernails,'" Bruhnke says. "But also, five years ago, [banks] wouldn't have bought it."

4. Banks become buyers

Illustration of a hand holding a very large bag of money.  

Go deeper into our full database with the Axios Pro Deals Tracker.

• Netgain, a Denver-based software provider for finance and accounting teams, raised $35m led by Summit Partners. https://netgain.tech/

• Bizplay, a Korean expense management and business travel company, raised $22.5m from JB Financial Group. https://axios.link/3J3IrLs

• Agora, a stablecoin issuer, raised $12m in seed funding led by Dragonfly, along with General Catalyst and Robot Ventures. https://axios.link/3J52Qjq

• KreditBee, an Indian digital lender, announced a $9.4m extension to its Series D round. https://axios.link/3vqWOXa

• PrismaStake, an Australian DeFi company, closed a $6m seed round. https://axios.link/3xeFchu

• Condukt, a business verification startup, raised £2.5m in pre-seed funding from Lightspeed and Cocoa. https://axios.link/49oiiSm

• Hapax, an Austin-based AI for financial services, raised $2.6m in pre-seed funding led by RHS Investments. www.askhapax.ai

• Merkle Trade, a decentralized trading platform, raised $2.1m in seed funding. Hashed and Arrington Capital led and were joined by Morningstar Ventures, Amber Group, Aptos Labs, Re7 Capital and Dorahacks. https://axios.link/3vAXj0E

• Bavest, a German B2B fintech, raised €1.1m from ReZoom Capital and Nautic Ventures. https://axios.link/3J2tlWn

• Accel-KKR acquired a majority stake in Aico Group, a financial close software platform for large enterprises. Existing backer Juuri Partners will retain a stake. www.aico.ai

• Petershill at Goldman Sachs Asset Management acquired a minority stake in Kennedy Lewis Investment Management, an opportunistic credit manager, from Azimut Group for $225m. https://axios.link/3TFqrMp

• CVC Capital Partners sold its 5% stake in Asia Commercial Bank, a Vietnamese commercial lender, for $220m. https://axios.link/43Lbq0g

• Paradigm is in talks with investors to raise between $750m and $850m for a new fund. https://axios.link/3J3nTmc

5. Deals!

• Jason Van joined Australian auto-focused payments platform AutoSettle. https://axios.link/49rD0ka

• Jeff Heine was named chief revenue officer at Novidea. He was previously CRO at Betterview. novidea.com

• Jeffrey Guy was named president and COO at Veriff. He was previously COO at DigitalOcean. https://axios.link/3xf1S16

• Gaby Kozakov, formerly VP of research and development at Revuze, was named CTO at Versapay. https://axios.link/3vNh9ps

• Greg Hendrick, CEO of Vantage Group, was appointed to the board of directors at Verisk. https://axios.link/3U21yMa

• Claudia Merkle, an advisory board member of HomeLend, was appointed to the board of Ocwen Financial (NYSE: OCN). https://axios.link/3VILjVJ

• Sandeep Bapat, formerly with Trifecta Capital, was named co-chief investment officer and senior partner at Singularity Growth. https://axios.link/4agPmNb

6. It's personnel

🤔 Situational awareness: Ryan's exclusive on Tally offers the latest evidence of the ongoing shift of fintechs from B2C to B2B. He goes deep on the trend below.

🧠 @Ryan is listening to a "Beats to think to" playlist on Spotify.

😋 @Lucinda was informed she writes a lot about food here. 

🏠 @George is loving having the Pro Deals team under one roof for our retreat.

Thanks to George Moriarty and Rob Reinalda for today's edits.

And thanks to you for reading this edition of Fintech Deals. Please tell your fintech friends about this newsletter. They can sign up here.

Fintech Deals

April 03, 2024

1 big thing: Tally pivots to B2B