Hello Fintech Friends,
Signups for this newsletter have climbed over the last few weeks, so I would love to take a moment to solicit any content from readers that should be featured in it. Feel free to send leads anytime to firstname.lastname@example.org; there are developments in fintech every week that elude me, when they should get recognition in this newsletter. Thank you all for reading and responding.
An additional thank you to Charley Ma, who gave valuable advice and feedback in the transition of this newsletter to Substack.
Please enjoy another week of fintech and banking news below.
Quote of the week
“We are increasingly trying to move from being strictly focused on payments, to being focused on the movement of funds for any purpose around the world. As big as Visa is in terms of the bank accounts that we can reach, we’re not as big as we need to be if we want to be a formidable player in money movement around the world.”
- Al Kelly, CEO, Visa (source)
Open role spotlight
From Charley Ma, long-time Plaid NYC Growth Manager, Plaid is hiring for Growth Enterprise roles in both New York and San Francisco. Enterprise a big priority for Plaid, which is the dominant financial data aggregator in the US, allowing consumers to connect their financial information to new services.
Read of the week
This week, Governing.com runs an interesting profile that highlights the possible impact of fintech on grassroots business growth and financial inclusion, based on the partnership of Rochester, NY with online microlender Kiva.
“As New York’s third-largest city finds its industrial giants continuing to downsize, a unique, no-interest loan program based on crowdfunding is stimulating a business revival at the grass-roots level.”
In banking and credit card news, the week began with a story that could fit neatly into the credit card and fintech sections of this newsletter. Visa will acquire Plaid for $5.3 billion, about 2x the $2.65 billion valuation it achieved at its last round, a December 2018 Series C. Visa will finance the purchase with $4.9 billion in cash on-hand and $400 million in stock incentives. Here is their investor presentation on the acquisition.
The acquisition has been covered ad nauseum this week (RIP inbox), so there is not much more to add. Ben Thompson wrote on the deal at Stratechery (one of his rare fintech articles). Business Insider covered potential benefits to Plaid (global expansion) and Visa (go-to Open Banking provider). Fortune noted the product cross-sell opportunities. Bloomberg Law opined that this may legitimize fintechs in their fight to gain access to user financial data. Fortune discussed Visa’s use case for Plaid’s payment rails.
My (personal) thoughts are that this is a picks-and-shovels bet on fintech by Visa - their investor deck shows that they believe in fintech as a category, so a B2B fintech services business makes sense. Additionally, for the past few years many public companies have been conducting stock buybacks, viewed by some as an admission that they cannot innovate by investing in R&D; this acquisition offsets that Innovator’s Dilemma narrative for Visa. It also mitigates pressure on Visa from a potentially competitive ACH product. (If I can self-indulge for a second, my 2018 predictions are far outperforming my 2014 ones.)
You have to feel a little for the Visa team that unveiled their Tap to Phone contactless payments product on the same day as the Plaid news broke.
Elsewhere in banking, JPMorgan Chase ended 2019 with impressive consumer banking growth: a 6% YoY increase in customers, but a 12% jump in digital users. Chase attributed the growth to high investment in tech and 70 branch openings - in a time when most banks are closing branches. Chase is also significantly hiking annual fees on its signature Sapphire Reserve card. Wells Fargo, meanwhile, is struggling to update its legacy outdated digital experience for web and mobile users. And, while Bank of America beat analyst expectations for its trading business, its consumer banking division sagged, with drops in retail banking profit and net interest income on deposits.
Goldman Sachs’ Marcus retail bank got a mobile app this week. The bank cited the app as its future digital storefront, which will allow it to engage and retain users, as well as cross-sell retail banking products, more effectively in the future, and take market share from other retail banks. Expect to hear more from Goldman, which recently broke out Consumer and Wealth Management in earnings, at the bank’s first Investor Day on Jan 29th.
In open banking news, India’s Icici Bank opened an API marketplace with 250 APIs for third-parties to connect with the bank’s services.
More banks are contracting with large tech companies to improve their infrastructure. The two latest are Spanish Banco Sabadell, with IBM, and UK subsidiary TSB, with Big Blue. And Spanish bank BBVA is working with mobile identity verification provider Nok Nok Labs to introduce biometric verification for accountholders.
Australian P&N Bank, meanwhile, disclosed a data breach that exposed customer account and balance information.
American federal financial regulators are looking into making stock exchange data cheaper and less tightly controlled by big exchanges.
ZA Bank, the licensed digital bank in Hong Kong, is entering the market with an aggressive introductory interest rate of 6% APY on deposits for some clients. And the city of Hong Kong hit a major milestone, as half of the city’s population signed up for its Faster Payment System to bolster financial technology.
RBS and Natwest banks in the UK are the latest in the trend to hike up overdraft fees, leading some customers paying 2x in interest.
And lastly, Equifax this week agreed to a $1.38 billion settlement in the lawsuit related to its 2017 data breach of 145 million accounts.
In fintech news this week, Shopify launched Shopify Capital, which offers micro-loans to entrepreneurs on its platform of up to $200 when they link a bank account.
Techcrunch profiles Copilot, a mobile-first personal financial management by-subscription app aiming to displace financial advisors.
UK neobank Starling Bank introduced a raft of new features for business customers this week: unsecured loans up to £250,000, overdraft limits up to £150,000, and a Business Toolkit, with tools for monitoring SMB cash-flow, invoices, and tax and VAT. Australian neobank Xinja meanwhile introduced a new savings account with a 2.25% APY on deposits, high for the country’s consumer banks.
Payments transfer fintech TransferGo inked a partnership with CurrencyCloud to enable cross-border payments, bringing it into 14 new markets early into 2020.
New York City lawmakers and public citizens are proposing the creation of a ‘public Venmo’ digital banking app to enable financial inclusion for the unbanked.
And lastly, Uber is making changes to its rewards program, crediting all rewards to Uber Cash in February and relaunching its co-branded card with Barclays with new rewards.
- Secfi, a ‘pre-wealth management’ platform built to help startup employees navigate their equity grants from grant to IPO, closed $550 million in new funding to grow.
- Supply chain payment software solution Tradeshift secured a $240 million mixture of equity and debt, in an effort to offset its IPO timing.
- Lydia, the ubiquitous French mobile payments app, which has expanded into a fintech marketplace, raised a $45 million Series B to continue growth internationally.
- Publicly-listed Australian fintech Wisr raised $31 million in a new share sale.
- Thai remittances blockchain startup Lightnet raised $31.2 million in funding to tackle the southeast Asian cross-border payments market.
- Millennial-focused neobanking platform epiFi raised $13.2 million in seed capital to grow its product offering and market.
- Autenti, a Polish fintech startup focused on electronic signature and documents, raised £3.4 million from a consortium of Polish banks.
- Visa invested an undisclosed sum in financial services data security and tokenization startup Very Good Security.
Exits and M&A
- Visa announced that it will acquire Plaid for $5.3 billion.
- German banking and savings startup Raisin will acquire Choice Financial Solutions in order to expand into the US market.
- Russia is considering a secondary offering of shares in state bank VTB Bank.
From Chenni Xu, at Ant Financial:
Ant Financial will be holding its first-ever fintech conference from April 23 to 25. It will be the largest fintech conference in Asia, with up to 30,000 participants, featuring predominantly Chinese companies. The conference will be held in Shanghai at the Bund.