Fintech inside #5 - 10th Oct, 2020 | Neo Bank Profitability
Hi, Osborne here.
Welcome to the fifth edition of Fintech Inside. Fintech Inside is the front page of Fintech in emerging markets.
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This week had a lot going for Fintech. 17 startups raised funds. India’s regulators introduced new regulations, an NBFC made an offer to acquire a Bank, months-old Uni raised USD 18.5 mn for a credit card platform. Also, a digital bank for the rich was granted a license in UK. Interesting updates from South East Asia and Europe too.
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Diving in
One Big Thought
McKinsey, Fintech and Profitability
Recently McKinsey was in the news for stating that the European Fintech sector is facing an “existential crisis”. Broadly, the report states that because of a drop in funding cause by Covid-19 in 2020, the Fintech sector will need to find profitability and soon, else will perish. The report also claims that the stress cause by Covid-19 has structurally changed how Fintech’s approach profitability.
One may or may not agree with McKinsey here (I don’t), but there is some strong data presented that is helpful to analyse digital banking. See the above image. From a profitability perspective, incumbents steal the show, obviously. Customers of digital banks have only 1.5 products per customer vs incumbents who have 5 products per customer. Further, the digital bank revenue model is still in infancy. Challenger banks starting to reverse on the very foundation they were set up on - no fees and charges for usage. But they need to do that to stay profitable. Further, the breadth of services will need to expand. Do read the whole report - lots more unpacked there.
Neo banks in India have raised a ton of venture capital but have faced several delays to launch. I’ve tracked 11 consumer neo banks but none have launched. It’s only left to be seen what revenue model and product suite they come up with.
Fintech’s Hiring
If you’re a Fintech who’s hiring I’d like to help. Write to me and I’ll put your requirement here.
India
Market Updates:
Paytm, Alibaba-backed Indian payments company that evolved into commerce, cloud and others, has now re-launched it’s “mini app store” as it battles with Google on Google’s Play Store policies Read More
Dukaan, an Indian small business accounting and online store app, has been removed from the Google Play Store after the Karnataka-state High Court granted relief to competitor Khatabook valued at USD 300 mn Read More
BharatPe, Indian small business payments platform, claims to be the largest Fintech lender to small businesses after lending USD 11 mn in Sept, 2020 Read More
Amazon India has launched credit card bill payments via Amazon Pay. This is just another way to increase utility of Amazon Pay Read More
IRDAI, India’s insurance regulator, has released an exposure draft for color coding complexity of health insurance products - red for complex, orange for medium complexity and green for simple. Read More
Reserve Bank of India, India’s central bank, has issued a letter restricting Mauritius entities from bringing foreign direct investment into Indian finance companies Read More
Clix Group, an Indian non bank finance company, has submitted an indicative non-binding offer to acquire Laxmi Vilas Bank. The RBI has not looked kindly at such deals in the past. Will this be an exception? Read More
RBI makes Real Time Gross Settlement (RTGS) payment system available 24x7 from Dec-2020. RTGS is available for payments above INR 200,000 and settlements earlier happened only between 7AM and 6PM Read More
Auto-debits witness a 32% bounce rate in Sep, 2020. Auto-debits are powered by NPCI’s e-NACH system Read More
IRDAI seeks public comments regarding the setting up of Micro Insurance carriers in India. It seems the IRDAI is favouring this development Read More (h/t Rahul Mathur)
RBI also introduced a new “co-origination” model for NBFC’s to co-originate priority sector loans to borrowers. Since this is limited to priority sector lending, I’m not sure how much impact this can have for Indian Fintech’s Read More
Funding Announcements:
Uni (cannot find its website), months-old Indian credit card startup, has raised USD 18.5 mn from Lightspeed India and Accel India. Uni is founded by Nitin Gupta a financial services veteran and founder of PayU India and Ola’s financial services arm Read More
CreditWise Capital, a two wheeler lender, announced its USD 6 mn seed fund raise from several angel investors Read More
ChargeBee, an Indian subscription payments and user management SaaS platform, announced a USD 55 mn fund raise led by Insight Partners with participation from Tiger Global and Steadview Capital Read More
Unocoin, an Indian cryptocurrency exchange, has raised an undisclosed sum from Tim Draper. The fund raise is part of it’s Series A extension Read More
Amazon Pay, Amazon’s Indian payments arm, is likely to raise USD 1.4 bn to compete with Google Pay and PhonePe (Flipkart’s payment arm). The firm actually raised only about USD 96 mn though Read More
Cred, credit card rewards and loyalty platform, is seeking to raise USD 100 mn at valuation of USD 700-800 mn Read More
South East Asia
Market Updates:
Razer Fintech, the fintech arm of gaming hardware company Razer, has partnered with Visa to introduce a virtual prepaid card. It claims to be the first prepaid card in Singapore and will offer cashbacks with no limits. The card has a really cool design and actually lights up! Read More
Singapore gets its first cryptocurrency pegged to the Singapore Dollar. The Stablecoin - XSGD, introduced by payments company Xfers, will be the first travel-rule compliant Stablecoin to prevent money laundering Read More
Bukalapak, an Indonesian ecommerce unicorn, has launched a Fintech arm - Buka Investasi Bersama (BIB), after receiving a mutual fund selling agent license. It has been offering investment services BukaReksa since 2016 in partnership with Bareksa Read More
ZA Bank’s CEO, Rockson Hu, claims that the next big thing for digital banks in Hong Kong will be insurance and wealth management Read More
Venio, a Philippine nano credit platform, has launched nationwide after successful pilots in urban areas of Manila, Cebu and others. Read More
Nium, Singapore-based fintech API platform, has launched in the Middle East Read More
Bank of Korea, Korea’s central bank, will begin distributing its digital currency as part of its digital currency pilot which will go on till Dec-2021 Read More
Study finds that new banking account creation frauds in APAC increased to 13% Read More
Fincy, a Singapore-based blockchain payments app, is pulling out of Myanmar amid allegations that its app is being used for gambling and other illegal activities Read More
Philippine Central Bank is considering a limit on the total number of digital banks that operate in the country Read More
Funding Announcement:
Sygnum Group and SBI Ventures (earlier part of SoftBank Group) are partnering to launch an early stage fund for digital asset opportunities in South East Asia and Europe Read More
Ten Fintech’s have been selected as part of Accenture’s Fintech Innovation Lab APAC Read More
Lanturn, Singapore based cloud corporate services (tax filing, accounting and so on) for small businesses, announced a USD 3 mn fund raise from East Ventures and CoCoon Ignite Ventures Read More
Europe
Market Updates:
Monument, a digital bank for the rich, was granted a restricted banking license in UK. Monument caters to customers with minimum net worth of GBP 250,000 Read More
Amazon and American Express have launched a co-branded credit card for small businesses in UK to solve their cash flow issues. It’s interesting that Amazon has taken the credit card route as opposed to the working capital loan route as it has in other markets Read More
Fasset, UK-based blockchain platform, has received approval from Bahrain’s Fintech Regulatory Sandbox to launch its service for tokenisation of hard assets in the country Read More
Miconex, a Scottish gift card issuer, is expanding its gift card program to US and Canada. Miconex currently has 45 programs live primarily in England, Scotland, Wales and Northern Ireland Read More
Starling Bank, UK-based challenger bank for businesses, has announced that it will plant a tree for every customer referral it receives. Read More
The European Central Bank is making serious moves to launching its cryptocurrency-based Digital Euro. After trademarking “Digital Euro” last week, it is now arranging a meeting of its members and a public consultation of the risks. Read More
Monese, a European consumer challenger bank, is migrating is banking back end to ThoughtMachine’s Vault cloud banking platform. Monese is present in 31 countries. Read More
UK’s small businesses say that banks are refusing to disburse “Bounce Back” loans intended to help small businesses deal with Covid-related business stress. These loans are government-backed and value can be up to USD 65,000 for up to nine years Read More
Loqbox, a UK-based credit improvement platform, is expanding to the US. The platform gamifies credit score improvement and has won several awards Read More
UK users using open banking-enabled products has doubled since Jan-2020 to 2 million primarily because of Covid Read More
Currensea, a British cross-border payments platform, has introduced an open banking debit card for small businesses. The debit card will come at EUR 5 monthly subscription providing 0% FX charges, 16 inter bank currencies and more Read More
Idemia, a French “augmented identity” platform, has introduced a global accelerator program for cards. This new program allows a rapid process from cardholder onboarding - to card issuance Read More
Revolut, European banking services platform, has launched a smart subscriptions feature that tracks all recurring payments in one place Read More
German lawmakers are proposing to give BaFin, Germany’s financial regulator, more oversight & investigative powers in the wake of the Wirecard scandal Read More
BitPanda, a Vienna-based cryptocurrency exchange has launched the world’s first cryptocurrency index - BitPanda Crypto Index (BCI) Read More
Funding Announcements:
Avaloq, a Swiss banking-as-a-service technology platform, is being acquired by Japanese electronics retailer NEC for USD 2.2 bn. Avaloq has customers in 30 countries. Read More
Pynk, a London-based social investing app, has raised USD 2.2 mn via crowd funding. Pynk will be launching later this year. Read More
Nexi, an Italian payments platform, is merging with SIA, a french payments major, for USD 5.4 bn. The combined entity will be the largest European payments company valued at USD 17.6 bn Read More
Genesis Global, a UK-based low code fintech platform, has raised strategic investment from Citi Bank Read More
B-North, a Manchester-based small business lender, has raised GBP 1 mn as it nears a banking license Read More
Macy’s, the US fashion retailer, has invested an undisclosed sum in Klarna, European buy-now-pay-later unicorn. Read More
AccessFintech, an Israeli SaaS platform for workflows and data collaboration, raised USD 20 mn from Dawn Capital along with participation from JP Morgan, Citi and Goldman Sachs Read More
Joko, Paris-based cashback and rewards platform, has raised EUR 10 mn. The Fintech claims to have 500,000 users and 1,000 retailers Read More
Other Notable Nuggets
Ecommerce Account Takeover Fraud Jumps to 378% Since the Start of COVID-19 Pandemic
Square’s CashApp is facing scammers stealing money from Customers
Inside two-and-a-half years of WhatsApp Payments hell (behind paywall)
Plaid introduces on boarding “links” and Venmo introduces Credit Cards
Douugh, a US NeoBank, has listed on the Australian Stock Exchange
NCR, a US-based banking software and services platform has introduced digital-first ATM
Enabling the enablers: what to consider when building best-in-class API-led fintech companies
Crowded Indonesia Market: 51 Licensed E-Money Providers
Tipalti, US-based accounts payable automation co., has raised USD 150 mn at USD 2 bn valuation
Unqork, US-based no-code application dev. platform raised USD 207 mn at USD 2 bn valuation
Citi Bank in US was fined USD 400 mn for faulty risk management systems
Lufax, China’s largest wealth management platform, files for US IPO. It’s last valuation was USD 38 bn (2018)
Analysis of Root Insurance’ (US-based car insurance carrier) S-1 by Rahul Mathur
Affirm files it’s US IPO documents with SEC confidentially for its review
Square has purchased USD 50 mn worth of Bitcoin and will report it on the balance sheet
InsurTech updates this past week by Rahul Mathur
That’s all folks
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