By Kristy Dorsey

London-headquartered fintech Modulr, which employs the majority of its 200 staff at its development hub in Edinburgh, has secured a £9 million investment from PayPal Ventures to develop additional products, grow its team and expand its customer base.

It is the company’s second successful funding round this year, and takes the total amount raised since Modulr was set up in 2016 to £63.3m. Among its other backers are Highland Europe, Frog Capital and Blenheim Chalcot, along with a £10m grant from the Capability and Innovation Fund.

The latest cash injection will lead to the creation of 50 new jobs across the company’s operations, which span Edinburgh, London and Dublin. About 120 of its current workforce is in the Scottish capital.

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Modulr’s API platform is an alternative to traditional wholesale and commercial business payment services, and has been in rising demand as firms have increasingly turned to digital sales during the Covid pandemic. It is used by business and software platforms across the lending, banking, fintech, travel and employment services to embed digital payments into their existing platforms.

PayPal Ventures partner Anil Hansjee said: “More digital businesses are looking to incorporate payments into their existing user experience but either don’t have the expertise or the resources. Modulr is well-positioned to be an enabler of this trend and will undoubtedly expand end-users’ access to fast, reliable and secure financial services.”

During the past year, Modulr became a direct participant in the BACS and Faster Payments schemes, allowing it to settle and hold funds at the Bank of England. It also has direct access to Visa and Mastercard, and was recently granted an electronic money license from the Central Bank of Ireland.

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Chief executive Myles Stephenson said the deal with PayPal Ventures marks an “important milestone”.

“Modulr lowers the barriers to bringing payments into a platform, creating endless new possibilities for our customers while allowing them to focus on their core competencies,” he said. “The investment from PayPal Ventures enhances our ability to execute on that vision.”

In May of this year, Modulr raised £18.9m in a funding round led by growth capital firm Highland Europe. Existing investors Frog Capital, a scale-up specialist, and venture builders Blenheim Chalcot, also provided additional capital.

Modulr processes more than £25 billion worth of payments through its partner clients including Sage, Liberis, Salary Financial and Iwoca.

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The global wholesale and transaction payments market move more than $120 trillion (£91 trillion) annually, which is five times larger than the consumer market. Modulr specifically targets the $2.7 trillion incurred through administrative costs, 80 per cent of which is paid by small businesses.

The company opened its base in Edinburgh in 2018, creating an initial 18 jobs. Modulr opted for Edinburgh after undertaking a review of various technology hubs across Europe, having found London a challenging environment in which to grow a relatively small scale-up business.

Speaking at that time, Mr Stephenson cited Edinburgh’s “excellent” talent pool, extensive financial services sector and access to industry and government support as the basis for selecting the Scottish capital.

Modulr opened its Dublin office in 2019 following Frog Capital’s initial £14m investment in the business. With a licence there that allows the firm to do business anywhere in Europe, the Irish office is acting as a springboard onto the Continent.