Amazon + Barclays = BNPL in UK????; $16.3B bank merger showing that Europeans struggle in the US??????; Providing credit to commerce brands? ??

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Last week (20-24 December), despite being just before Christmas??, was still a hot and exciting week in FinTech.?We will look at Amazon partnering with Barclays for BNPL play in the UK????; bank merger showing that Europeans struggle in the US banking sandbox; providing credit to consumer brands, and other interesting news and developments.

Without further ado, let us dive into what has happened in the financial technology sector last week. Let’s connect the dots.

Amazon + Barclays = BNPL in the UK????

The partnership ???E-commerce giant?Amazon?has teamed up with?Barclays?to make its foray into the booming UK buy now, pay later sector.

Instead of calling it?Buy Now, Pay Later?aka BNPL, Amazon has called the new venture?Instalments.

The USP ???The new payment method can be used on purchases of ￡100 or more on Amazon.co.uk. Customers can?hence spread the cost over several instalments between 3 and 48 months after purchase. Amazon will charge interest over the instalment period, with an annual rate of 10.9%.

The reusable credit account can be used on millions of products, including those from thousands of small and medium businesses selling on Amazon, Amazon said. It must be noted that customers need to meet certain eligibility requirements to apply for an instalment account—for example, they need to be over 18 years of age and have been a UK resident for at least 3 years.

The product is already launched in Germany?last year.

?? THE TAKEAWAY

Following the money.?With the recent partnership, both Amazon & Barclays are following the money. And the money - both from consumers & VCs - is currently going towards BNPL. It’s especially hot in the UK where upstarts like Zilch have managed to achieve massive growth in a super short period of time. But there’s a small catch when it comes to Amazon. The key point of difference to existing BNPL providers like?Klarna?is that Barclays will charge interest over the instalment period, with an annual rate of 10.9%. That’s a lot. On the other hand, Amazon has a huge network & merchant base to advertise this solution to, and if it manages to do it seamlessly, it might be quite a massive cash cow. Because at the end of the day, credit is all about data. And Amazon has tons of it.

$16.3 billion bank merger showing that Europeans struggle in the US??????

The deal ???BNP Paribas?has agreed to sell its San Francisco-based?Bank of the West?to?Bank of Montreal?for $16.3 billion, becoming the latest European lender to exit US retail banking.

The Canadian bank, also known as BMO Financial Group, said it would mainly fund the cash deal through excess capital. It already has a presence in several US states. BNP originally bought Bank of the West in 1979.

US scale?????The combination of the two banks will give Canada-based BMO a significant US scale:

• It adds almost 1.8M new US customers
• It nearly doubles its US branch footprint by including 514 locations.

The tie-up is expected to wrap up by the end of 2022 - regulatory approvals will be needed - with Bank of the West being merged into BMO Harris, which is BMO’s US retail banking arm.

The combination would make BMO Harris the 13th-largest US commercial bank by consolidated assets,?per?Federal Reserve data as of September 30, 2021, with a total figure of about $271.6B.

?? THE TAKEAWAY

Europeans struggle in the US...?BNPL exiting the US is yet another illustration that European banks have been gradually retreating from the US market, having struggled to compete with big nationwide lenders such as JPMorgan Chase, Bank of America, and Wells Fargo. Now, when it comes to the deal itself, the new tie-up could lead BMO to review and rework its US mobile app, which could further boost its US mobile usage growth. One must note here that it’s already growing faster than in Canada, even beyond adding Bank of the West’s customer base.

Providing credit to commerce brands? ??

The money ???Ampla Technologies, a startup that provides financing to small-to-medium sized consumer-facing businesses, announced it has raised $40M in a Series A round of funding co-led by VMG Partners and Forerunner Ventures.

Existing backer Core Innovation Capital also put money in the round.

Shortly before and separately from the equity investment, Ampla has also secured $250M in a debt facility so that it can continue financing brands. The capital infusions bring the New York-based startup’s total funding to $50M in equity and $330M in debt financing since its 2019 inception.

The USP ???Ampla’s flagship product aims to provide (even pre-revenue) businesses with working capital so they can do things like purchase inventory and spend on marketing.

Ampla currently works with SMBs in the consumer brand industry across both e-commerce and retail channels. Its “proprietary” data-driven underwriting tool takes the entire business into account?and provides “fully transparent” interest rates with no hidden fees and larger credit limits.

?? THE TAKEAWAY

Neglected vertical.?Providing credit is a big game for startups, and banks have long been too stingy with funds. The key point here is that unlike raising venture money, the working capital is non-dilutive. This makes this financing option so attractive. Seeing a gap in the market, a number of startups providing alternative financing have emerged in recent years, including Clearco and Settle, among others. Ampla wants to be one of the leading players claiming that its differentiator is that it provides businesses with a line of credit that includes “omnichannel” revenue streams in underwriting. That’s something worth watching for sure.

Extra Reads & Quick Bites for Curious Minds??

• Credit builder for SMEs ???SME credit lender?Cashplus?is launching a credit builder tool for small and medium-sized businesses aimed at helping the 65% of UK startups that are refused credit. Called the Business Creditbuilder, the tool aims to help firms build their credit score while paying their standard account fees. The tool, which is free to Cashplus business account holders, has been developed with credit reporting company Equifax.
• Digital payments on the rise ?? Visa?has released a new?study, showing that consumers are increasingly turning to digital payments to send money around the world. The new Visa data highlights growing digital adoption to improve daily lives in the global payments ecosystem. Almost a quarter (23%) of surveyed US adults have sent money from the US to another country and nearly two-thirds (65%) of those remittance users plan to send money to another country to celebrate the holiday season, according to the study. Digital remittances are the preferred method, with digital-only transactions already being the most popular and a majority (59%) of the remittance users surveyed saying they have sent or plan to send money using digital-only platforms. Globally, it is estimated that 800 million people receive money from family or friends to pay for food, utilities, and education, as per Visa’s study.
• Open Banking 3.0 ???Interbank payments in the U.K., such as Bacs and the Faster Payments Service (FPS), used to pay wages, pay bills or transfer money to a friend, accounted for nearly ￡7T in 2020. The U.K. is now planning to replace the underlying infrastructure for the New Payments Architecture (NPA), which may be in place by 2024. The U.K. began its open banking revolution in 2017 with the adoption of antitrust remedies against the nine largest banks, compelling them to provide access to account holders’ data to third parties. The U.K. also created a new regulator, the Payment Systems Regulator (PSR), and a new operator, Pay.UK, tasked with the promotion of competition and innovation in the payment sector. Also in 2017, the U.K. announced the creation of the NPA, aimed to modernize the UK's retail payment infrastructure. The NPA “is the payment industry’s proposed way of organizing the clearing and settlement of most interbank payments in the future, including those that currently use Bacs and Faster Payments,” according to the PSR.

Money Moves??

• International money service provider?OFX Group Limited?has announced an agreement to acquire?Firma, a global foreign exchange service. The sale will go forward for $98M.
• Tiger Global Management has jumped into the booming Pakistan startup market with an investment in small business-focused digital bookkeeping platform?CreditBook. Tiger Global and Firstminute Capital led the CreditBook fundraising round, which totaled $11M.
• Taptap Send, a community-focused cross-border financial platform, has announced a $65M Series B funding round.
• Vietnam-based e-wallet?MoMo?has raised another $170M in its latest Series E funding round led by Japanese bank?Mizuho.

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P.S.?You might enjoy my earlier pieces as well:

???A Wise pitch deck that led to London’s biggest and most successful direct listing ever

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About: I am?a business developer, sales professional, FinTech strategist, as well as Cryptocurrency and Blockchain enthusiast. I'm highly passionate about Financial Technology and Digital Innovation, and strongly believe that it will change the world for the better. Apart from my daily job at a global payments startup where I'm leading the company's expansion into Europe, I'm an active member of the FinTech community and a TechFin evangelist.

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