London-based fintech Thought Machine has doubled its valuation to $2.7 billion as the cloud banking company pulls in institutional investors such as Morgan Stanley and looks to expand its international presence.
The $160mn funding round was led by Singapore-based investor Temasek along with Italian bank Intesa Sanpaolo and US bank Morgan Stanley.
Existing investors including JPMorgan Chase, Lloyds Banking Group and Swedish financial conglomerate SEB also participated.
“This is the mark of a long-term investment: we have left the world of venture capital,” Paul Taylor, founder and CEO, told the Financial Times. “It’s a very hot market – we can never expand so fast to meet the demand for banks.”
Thought Machine, launched in 2014, provides a cloud-based banking infrastructure “vault” to more than 35 banks globally, allowing them to scale up servers and processing power as needed.
Clients range from major lenders such as Morgan Stanley, Lloyds Banking Group, JP Morgan and Standard Chartered to Neobanks Atom Bank and Curve.
He said that at present most of the core banking infrastructure of banks is built in mainframe computers in their premises. Thought Machine can replace this with a cloud server, reducing the need for expensive physical infrastructure. It’s also easy to scale up by bringing in additional processing power from cloud data centers.
In an earnings call in October, JPMorgan Chief Financial Officer Jeremy Bynum said the bank chose Thought Machine to support rapid innovation and flexibility.
The Series D round comes just months after reaching unicorn status following a $200mn round led by Nyca Partners in November.
In addition to expanding into markets including Vietnam, Thailand and Indonesia, Taylor said the company was looking to target business and corporate banking as well as mortgages.
“Many banks have gone beyond the lifecycle on their technology – they are running out of spare parts in terms of people who know how the system works,” he said. “If we don’t change everything, what can go wrong?” of false belief.
Banks’ efforts to modernize technology have become more important as their operations become increasingly digitized. In a video of an internal meeting at Lloyds released in December, group transformation director Nick Williams said its on-premises software was “not fit for purpose”. Lloyds spent more than £4bn on technology between 2018 and 2020, and there’s no suggestion its technology isn’t strong, having one of the lowest outage levels of major lenders.
While the cloud computing market is dominated by Amazon, Alphabet and Microsoft, Taylor said there is still room for specialist fintech.
“You have to focus on what’s key — Google has done really well at the enterprise, but it can’t do everything,” said Taylor, who has worked at a Big Tech company. “There are things like payments, fraud, anti-money laundering, tons of stuff.”
Taylor said Thought Machine had a timeline for a public listing of about three years, after showing a few years of profit and growth, and that it was looking at all options as to where to list.
He said London is a strong contender for the initial public offering.
Britain has sought to make its market more competitive against its counterparts on the Channel and the Atlantic after Brexit, with plans for a new regulatory framework announced in the Financial Services and Markets Bill, as part of the Queen’s speech last week. introduced in.