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Exclusive: Knot API raises $10M from Amex, Plaid amid deposit war

Aug 3, 2023
Illustration of an origami heart made from paper money.

Illustration: Aïda Amer/Axios

Knot API, a startup that aims to help fintechs and banks maintain deposits, raised $10 million in Series A funding led by Nava Ventures, CEO Rory O'Reilly tells Axios exclusively.

Why it matters: Thanks to advances in mobile banking, rising interest rates, and a recent banking crisis, customers are increasingly shopping their capital around — an issue Knot is seeking to help fix.

Zoom in: Plaid, Amex Ventures, former American Express CEO Kenneth Chenault, Jason Robins (CEO of Draftkings), and Jason Mikula (author of Fintech Business Weekly) also invested in the round.

Details: Banks and fintech startups have sought to entice customers recently by hiking up yields on savings accounts (Apple notably launched one with a 4.15% annual yield). That's made adding deposits costly for banks.

  • Selling to banks and fintechs, Knot's main product allows customers at those institutions to switch payment methods at merchants like Netflix and Amazon to a new card, all in one go, within the bank's app.
  • Another product allows customers to cancel and manage subscriptions, also within the bank's app.

What they're saying: "We come in after customers have already signed up to make sure that they don't end up churning, because these banks are paying hundreds, if not thousands of dollars, to acquire and retain a customer," O'Reilly says.

Of note: Fintechs and financial institutions would also be able to switch bank partners or payments processors more easily with Knot's technology — a rising need given the recent banking as a service crisis.

Context: The growth of digital banking has made deposits less sticky. The turmoil that hit regional banks earlier this year exacerbated the issue of customers shopping around.

  • Neobanks, meanwhile, have historically struggled to become the primary account — a problem O'Reilly knows well. His last startup, a challenger bank dubbed Millions, gathered 50,000 customers but had trouble getting users to spend repeatedly on the card.

Between the lines: If Knot's card-switching technology becomes industry standard, it could in fact make it easier for customers to switch their primary account. Which puts financial institutions under more pressure to be more than just a place to store money.

  • As an example, Knot is exploring products that would help customers negotiate on bills.
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