UK payments startup Atoa is announcing the conclusion of its seed funding round of US$ 6.5m. Offering a fairer way to pay, the fintech offers small- to medium-sized retail businesses on the UK high street a faster, cheaper and more secure alternative to accepting card payments, using account-to-account payments. The announcement comes hot on the heels of the ‘Axe the Card Tax’ campaign that has called for regulators to cap Visa and Mastercard’s card fees for businesses.
Atoa’s latest round of funding was led by Valar Ventures, a US fund backed by the co-founder of PayPal, Peter Thiel. Valar Ventures has previously backed fintechs such as Wise, Xero, and N26 in Europe. Atoa’s previous investors, including Monzo and Tide backer Passion Capital, and Singapore based Leo Capital (having experience of card alternative models in India and Asia) have also continued their support in this round.
Fighting Visa and Mastercard’s stranglehold on the high street
Unfavourable economic conditions, the pandemic and repeated rises in inflation have hit UK SMBs hard. No relief has been offered from paymasters Visa and Mastercard though, who continue to operate on profit margins as high as 67% and 75% respectively. In fact, the Coalition for a Digital Economy (COADEC) found that the cost of payments has risen up to 44% since 2016.
Atoa allows consumers to pay in-store using an instant bank transfer, saving merchants from crippling payment fees, almost immediate set-up and improved cash flow. In order to pay in-store with Atoa, consumers do not need to download any new mobile application and can simply approve the payment via their existing banking app.
Dora Maries owns Holimed Beauty, a successful beauty business in London. She says: “For a small business like mine, Atoa is a game changer. We’ve been using Atoa for nearly a year now. It’s so nice to see that there are still systems on the market that do not rip you off with high transaction fees. With low fees, immediate payment and settlement, and amazing customer service, Atoa is literally everything my business needs.”
In the UK, £850 billion worth of debit card transactions are processed every year. Currently, Mastercard and Visa collectively hold more than 98% of the market. Atoa allows consumers and businesses to bypass obsolete payment stacks through open banking and account-to-account payments saving merchants up to 70% on transactions.
This is unlike most fintechs which do not fundamentally disrupt the market but instead merely slot themselves onto the existing rails of Visa and Mastercard.
80% of consumers in the UK have a banking app on their phone. Atoa enables consumers to pay via their UK mobile banking app directly and securely without downloading an additional application.
Businesses can download the Atoa app, securely connect their merchant bank account and begin to take payments after a 5-minute set-up process. They can accept payments via SMS, Pay-by Link or by displaying a QR code on their Atoa App or physical QR stand next to their till. Instore payments can be processed simply by scanning the merchant QR code, selecting which account you’d like to pay from and approving the amount.
Small businesses all over the UK want cheaper alternatives to card payments, explains Robert Dighero of Passion Capital. “For businesses on the high street, every penny counts. Businesses need fairer solutions that improve cash flow and keep prices down for their customers. Open banking payments with Atoa could make a significant impact to their bottom line.”
Since its launch in June 2022, Atoa has built upon its position as a trusted payment provider to small businesses across the UK and has seen 60% month-on-month growth in payments processed. This seed round takes the total raised to $8.6 million. Atoa plans to stay on this trajectory by continuing to target in-person SME payments.