A fintech startup backed by Goldman Sachs has unveiled ambitious plans to make emoji friendly social payments as popular in Europe as they are in China, where nearly $3 trillion was sent via WeChat and Alipay last year.
Circle lets users send payments to each other via its WhatsApp-style chat app and iMessage. It is now letting users do this across borders with no fees ahead of a raft of planned new features as it ramps up its efforts to make sending cash as easy as sending an email.
“When we founded the company several years ago, tech was converging that would make money work the way the internet works, in particular blockchain and artificial intelligence would radically change the way money works. And we’re there now,” founder Jeremy Allaire told City A.M.
Circle first launched in the UK in April last year and has raised $136m to date from top venture investors such as Accel Partners, IDG Capital Partners, General Catalyst and tech company Baidu, in addition to Goldman Sachs.
The fintech firm, which has revealed it handled more than $1bn of payments last year among several figures on its growth, is using AI to automate checks and assess risk on transfers, allowing users to make transfers of unlimited value to and from different countries.
“[AI] automates the system that enables us to reduce friction. There used to be a weekly limit of £300, but we found that discourages payments - we just needed more information to mitigate risk,” he said. “Now we can automatically request information without human review for the vast majority of customers,” said Allaire, who previously founded online video company Brightcove.
It will also use AI in new features it plans to roll out for credit and lending, as well as savings and investments. “AI for assessing risk can be applied in interesting ways to credit decisions,” he said.
“There’s tremendous capability in the digital asset space. Increasingly interest in digital assets is from retail investors all around the world, from private wealth manages to family offices. We’re exploring whether the mainstream consumer is interested in storing value in these assets and how to offer that to consumers which other financial investment providers traditionally don’t have.”
Hargreaves Lansdown recently made bitcoin investments available to retail investors in the latest signal of growing interest amid the cryptocurrency’s value hitting huge new highs in recent weeks.
The startup also said it is now part of the Faster Payments network in the UK and Sepa across Europe, reducing the time taken for “cashing out” from Circle to another account for customers.
Circle also plans to open source its technology called Spark, letting anyone create a fee-free digital wallet in an effort to create open standards and protocol for digital payments in a similar fashion to those established in the early days of the internet.
It has moved to Ethereum, a distributed ledger, from the bitcoin blockchain for Spark, which Allaire said “took a lot of the promise [of bitcoin blockchain] and delivered on it” especially with smart contracts.
“Making it open source means that any financial institution can do it . The goal is, we don’t want just Circle-to-Circle payments, we want one digital wallet to another digital wallet, from Alipay to Paytm,” said Allaire. It also works with Swift, the global money transfer network used by the world's biggest banks.
Interoperability is technically possible in same way as text and email, he said, which work regardless of whether you're with Gmail or Yahoo Mail, EE or Vodafone.
After launching in the UK, Circle rolled out to Ireland and Spain late last year. It is available in 15 other markets across Europe such as France and Germany where it has experienced “very healthy growth” without an official launch, and in many Alliare described it as “viral”.
Launching in these new markets could come as soon as next month in places where it’s already “gaining traction”. Word of mouth and customer referrals have driven growth rather than “investment in huge paid ads” he said.
Circle now has customers “in the seven figures”, but it is not making the specific number public. In the 12 months to May that number grew more than 1,000 per cent and in the UK it is growing at an average monthly rate of 50 per cent.
“The social payments space is wide open here [in Europe and the US],” said Allaire.
“There’s a high bar of entry, it’s a regulated field,” he said of the lag behind China. “But I think it’s changing. There’s a lot happening, but it’s still early even with Venmo which has a lot of adoption in US. But it should be like China. There are 800m people in the US and Europe.
Americans, largely millennials as with Circle, transfer more than $1bn a month with PayPal's Venmo and Apple recently announced it will add peer-to-peer payments to the iPhone in a major signal of the potential of social payments.
“Apple’s move does underscore that this space is a battleground for consumer bank account. I’m surprised there aren't more focused on it. A lot of focus is on challenger banks - building accounts. From our perspective, that’s interesting, but it’s more how you share value regardless of the account used. It’s more than just launching a consumer bank account. We certainly think it’s very valuable to build a franchise.”
And that franchise is how Circle plans to make money while offering users fee-free transfers.
"Over the past several years we have built out our treasury and trading operations in digital assets and other currencies. That has grown significantly," said Allaire, adding that it directly traded $41bn in digital assets in May. "It's growing fast and generating meaningful cash flow for us, enabling us to offer free services in other aspects. Our long-term strategy is to make the p2p payment experience a free services."