Atoa Payments, a UK startup leveraging open banking to provide merchants with an alternative to debit card payments, has secured $6.5 million in a seed funding round led by Valar Ventures, which is backed by Peter Thiel.
This latest funding follows a $2.2 million pre-seed round in November, led by Leo Capital and Passion Capital. Atoa contends that Mastercard and Visa have created an effective duopoly in the market, allowing them to maintain net margins as high as 51%, negatively impacting small merchants and their customers.
The startup aims to bypass these major card companies by offering businesses the Atoa app to connect their merchant bank accounts. With a simple five-minute setup, merchants can accept payments via SMS, Pay-by Link, or QR code.
Customers do not need a separate app; they can simply scan the QR code or click on the link, select their bank, and be redirected to their bank’s app to authorize the payment.
Atoa claims its system can reduce payment acceptance costs by up to 70% and facilitate instant payments, eliminating the typical one to two-day wait associated with debit cards.
Cian O’Dowd, COO of Atoa, stated in an interview with The Irish Times: “Most fintechs today are not fundamentally disrupting the market but are merely fitting themselves into the existing frameworks of Visa and Mastercard. They provide appealing user interfaces and stylish metal debit cards, yet the high merchant fees, excessive bureaucracy, and outdated infrastructure persist. Open banking payments, such as those offered by Atoa, signify a significant shift in the global payments sector.”