Visa and Mastercard payments are convenient for customers but can cost merchants high processing fees. Atoa Payment wants to provide a cheaper alternative that is still easy for customers to use. The London-based fintech announced today that it raised $2.2 million in the pre-seed grant.
The game was led by Leo Capital and Passion Capital, with participation from donor investors like GoCardless and Nested co-founder Matt Robinson, Moon Capital Ventures, and MarketFinance co-founder Anil Stocker.
Atoa co-founder Sid Narayanan informed TechCrunch that he and co-founders Cian O’Dowd and Arun Rajkumar developed the concept for Atoa after trading their previous startup, expense management platform KlearCard, to Singapore fintech Validus in 2021.
Their barber originally bore card payments and started asking for cash payments or bank transfers because he liked to lower his card processing fees, which were around 1.6%. Narayanan and O’Dowd used card option gains after living in Singapore and saw an option to use the UK open banking costs pile to build a Visa and Mastercard alternative, Narayanan told TechCrunch.
Mastercard and Visa charge fences can cost small retailers and their clients net margins of 51%, with card machine fees of about 1.75%, Narayanan said. Atoa, on the other hand, charges a fixed percentage fee billable to merchants each month to 70% lower than debit cards. It also does not hardware rentals, service fees, or PCI attestation of compliance charges.
To operate Atoa, traders download an app that links to their bank statements. Customers don’t require to download Atoa’s app to utilize the assistance. Instead, they can use Atoa, a UK mobile banking app. According to Narayanan, the prevalence of grown-ups, or about 80% in the UK. already have a mobile banking app on their phone, pulling the basis of friction. Merchants send a link for payment by SMS or PayBay or offer a QR code to scan.
To incentivize more customers to use Atoa, the startup also plans to add rewards and loyalty benefits, like digital scratch cards that let them get cash rewards into their existing UK bank accounts.
Once customers pay with Atoa, merchants receive payment instantly through Instant Bank Pay. They also get funds in their bank account rights instead of waiting for up to 1 to 2 business days.
Any customer with a UK mobile banking app on their phone can securely pay a merchant who is using Atoa. Requiring a separate consumer app the customer simply scans the merchant QR code, clicks on the link sent by the merchant, selects their bank, and then redirects to their existing mobile bank app to approve the payments meaning that the merchant receives the funds instantly.
Sid Narayanan, Co-Founder of Atoa Payment said, grateful to have the support and partnership of such strong investors validating our plans to split the card charge duopoly in the UK and to improve cash flows and economics for the country’s small merchants. At a time of record inflation and amid a cost-of-living crisis, the UK small and medium merchants struggling to contain their costs, provide great service to the customers, and maintain profit margins. Atoa is here to empower merchants and improve their cash flow and bottom line.
Atoa Instant Bank Pay allows small merchants to receive payments at a flat fee up to 70% cheaper than card machines provided by SumUp, Zettle, or Square. The merchants then receive funds in their bank accounts instantly instead of having to wait 1-2 days usual case with card machines and debit cards. Atoa involves no contract, no hardware fees, and no chargeback fraud risk (all payments approve via the bank app and Strong Customer Authentication).
By difference, little retailers today are locked into contracts and typically have far from transparent fees to pay including authorization fees, hardware fees, and PCI compliance fees, and all eat into their margins. Hardware fees can be as high as £29/per month.
Robert Dighero, Partner at Passion Capital, spoke to Atoa to come to the UK market at the right time to leverage open banking and bring to small and medium-sized merchants a truly viable alternative to payment cards and card machines that e deployed in-store within minutes. We’re happy to operate with the Atoa team after their first fintech success and look forward to partnering with them as they achieve even greater heights with Atoa.
Shwetank Verma, Partner at Leo Capital, said Leve the playing field for independent, small and medium-sized merchants is an obvious opportunity that benefits everyone, not least consumers. We have seen this business model succeed in India and SEA and looking forward to working with the Atoa team to help them build another thriving business in a massively expanding market.
Since going live in June, the company has experienced more than 100% month-on-month growth in terms of total payment Volume (TPV) and the number of merchant customers. Over time, the founders’ ambitions to become a mainstream small business-friendly payment method replacing payment cards.
Atoa co-found by Sid Narayanan, Cian O’Dowd, and Arun Rajkumar, who all previously founded Singapore-based fintech, KlearCard, which was acquired last year by Validus. Their first successful enterprise motivated them to seek even greater heights and a more significant impact and to concentrate on one of the largest merchant vendor markets in the world, the UK. After confirming their pre-seed grant round, the co-founders relocated to the UK and achieved outstanding traction in the summer of 2022.