Apple’s fintech strategy; FedNow is under the "radar" of Stripe; 2023 Business payments barometer;

In this edition:

1?? Apple’s fintech strategy

2?? UK fintech unicorn GoCardless lays off 15% of staff

3?? FIS snaps up BaaS startup Bond

4?? Embedded financial services exist in many categories

5?? FedNow is under the "radar" of Stripe

6?? Venmo and Cash App are under pressure

7?? 2023 Business Payments Barometer

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Apple’s fintech strategy

Apple‘s high-yield savings account, unveiled in April through a partnership with Goldman Sachs, reached almost $1B in deposits in the first 4 days alone and 240,000 accounts in the first week.

This wasn’t the first time Apple has sent waves across the fintech landscape. Since Apple’s foray into the space almost a decade ago, the company has been gradually shaping itself into a fintech giant.

While products like Apple Pay and Apple Card laid the foundation for Apple’s fintech strategy, it has relied heavily on partnerships to drive growth in the adoption and scope of its offerings. The company has inked deals with banks, buy now, pay later (BNPL) players, card issuers, payment gateways, and spend management platforms to reach further into the sector.

Source CB Insights

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UK fintech unicorn GoCardless lays off 15% of staff

UK payments company GoCardless is cutting its global headcount by 15%, making it the latest in a string of fast-growing fintech unicorns to prioritise profitability amid a funding drought.

CEO Hiroki Takeuchi announced the full cost-reduction plan to employees today, and published it on the company’s website this afternoon. He aims to reduce the company’s cost base by around 15%.

“In light of the current economic environment, we have decided to focus our efforts on the core areas of our business and reduce our investment in initiatives with longer-term payback,” Takeuchi wrote.

Around 135 roles will be cut, reducing the fintech’s overall headcount to below 800, according to his post.

Roles in the UK, US, Australia and New Zealand will be affected, but the company is not planning on making any redundancies in France. GoCardless is also moving 15 roles from the UK to Riga.

The fintech, which was last valued at $2.1bn in a $312m Series G funding round in February 2022, is also planning to cut its senior leadership team by around 25%. “We believe that a smaller group is more suitable to lead a smaller organisation,” Takeuchi wrote.

Employees will be sent an internal notification letter by 6pm today for British staff and by 9am tomorrow in Australia and New Zealand, letting them know how likely their role is to be cut. GoCardless will let individuals know the final decision “over the coming weeks”, Takeuchi’s message said.

Source Sifted

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FIS snaps up BaaS startup Bond

Consolidation continues apace in the world of fintech. FIS, the fintech giant that runs a wide range of payment, banking and investment services, has acquired Bond, a startup that specializes in embedded finance.

FIS is not sharing how much it paid for Bond, a San Francisco-based BaaS (banking-as-a-service) startup. But as a point of reference, PitchBook notes that Bond was valued at $182 million the last time it raised money, in 2020. Since 2019, Bond has raised a total of $42 million in funding, according to Crunchbase.

It has an impressive list of backers. Coatue Management led the company’s last round, a $32 million Series A in 2020, which also included participation from Mastercard, Goldman Sachs, Canaan Partners, B Capital Group and former Morgan Stanley CEO John Mack.

According to an internal memo by FIS viewed by TechCrunch, the FIS and Bond leadership teams “will determine how the two companies will work together,” including how FIS will bring Bond’s capabilities into FIS’s existing relationships.

It’s not clear what the financial state of play was at Bond, but it’s notable that it hadn’t raised money since 2020, and amid a decline in fintech venture funding in particular, M&A may have become an interesting option for the startup.

Not every M&A deal works out well, of course, with the biggest often being the hardest to digest. FIS made one of the largest-ever acquisitions in the world of payments when it acquired WorldPay for about $43 billion in 2019. That deal never really came up trumps, though. In February of this year, FIS confirmed that it would be spinning WorldPay off.

Source Techcrunch

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Embedded financial services exist in many categories

Embedded banking

Integrating banking services into non-financial products, offering customers seamless transactions and banking information through API’s.

Vivid Money is a German neo bank that strives to address retail banking issues in Europe. It offers banking features ranging from multicurrency accounts to stock and crypto investments. To provide such banking services, Vivid partnered with Solaris. Via Solaris’ Digital Banking API, Vivid can offer its users numerous sub-accounts, each with their own individual IBAN. Solaris also supports multi-currency accounts for Vivid, enabling users to save, spend and withdraw cash abroad in over one hundred different currencies. Building on Solaris’ cloud-based Banking-as-a-Service platform, Vivid scaled its customer base to over five hundred thousand in less than two years.

Embedded payments

Seamless payment solutions as a part of a non-financial company’s platform, often seen in online shopping or mobile applications.

Zettle by PayPal is a financial technology company for small businesses, owned by PayPal . Zettle offers a range of financial tools for small businesses including payments, mobile point of sale, funding, and partner applications. Zettle brought convenience to its customers by eliminating the need to manually reconcile their Point-of-Sale systems (POS) with its accounting system. The company provides an integration that allows their customers to synchronise their two system at automated intervals of their choosing.

Embedded insurance

Insurance products as a part of customer journeys and interfaces operated by banks, fintech companies, or non-financial entities.

Rewire is an online Israeli financial service provider for migrant workers. The company bets in building the first neo bank tailored for the unique cross-border needs of migrants worldwide. Insurance is one of the ways Rewire brings value to its customers. Rewire believes that modern digital trends such as bundling services and embedded finance opportunities are shaping the industry landscape and requiring FinTech companies to reinvent the way their services are offered and used.

Embedded lending

Loan application, risk, and credit assessments as a step in the customer journey when making purchases online, often offered in relation to big items i.e., cars.

DNB is betting on partnerships with car manufacturers. DNB has entered into an exclusive agreement on the integration of car financing in Polestar's digital buying journey for new cars. As early as 2009, DNB started work on exploring new forms of distribution for car financing. As a result, the bank has long explored innovative solutions related to technology, collaboration, and partnership.

Source Cicero Consulting - Part of Itera

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The Fintech Enablement Platform

Pursuing an embedded finance or fintech strategy requires most financial institutions to deploy new technology infrastructure, specifically, a fintech enablement platform that acts as a central nervous system for digital financial products and services. A fintech enablement platform helps reduce complexity and accelerate the launch, servicing, and expansion of financial solutions.

Fintech enablement platforms include prebuilt and modifiable:

1) product definitions and servicing capabilities,

2) data models that sit on top of existing data sources,

3) customer journeys that make use of embedded automation,

4) SaaS ecosystem connectors that are orchestrated in customer journeys and bring external innovation into the mix, and

5) maker tools that allow non-technical resources to create, service, and update solutions.

Source FintechOS

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FedNow is under the "radar" of Stripe

Read Key Points

At this time, Stripe is not focusing on developing any products associated with FedNow, the instant payments system created by the Federal Reserve that has generated significant anticipation.

Why it matters: This news is significant as the introduction of FedNow has sparked discussions and concerns about its impact on the fintech industry.

Banks are set to have direct access to FedNow when it launches in July, there are concerns that the faster and more cost-effective network could give them an advantage over fintech companies.

The Financial Technology Association, which represents fintechs like Stripe and Block, has called for the network to be made more accessible to fintechs, not just licensed banks. However, some fintechs see potential in the new system, with Fika Ventures' TX Zhuo suggesting it could increase fintech innovation for independent contractors assuming FedNow reaches scale.

"We're tracking it closely," President of Product and Business Will Gaybrick says, noting the company is not actively working on anything related to FedNow. " I really do think real-time payments are going to be a big deal." If, for instance, only 30% of banks support FedNow, then it's unlikely to become a priority for merchants to adopt the system.

Reference Axios

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Venmo and Cash App are under pressure

On Thursday, Senate Democrats called on PayPal and Cash App to improve their security measures for users who send and receive money through their peer-to-peer payment apps according to CNBC.

The lawmakers said that the companies have failed to update their “consumer protection policies” in response to the surge in customer demand for the platform. They also said that the companies have not done enough to prevent users from being harmed by the services.

PayPal admitted in its yearly report that Venmo users may keep trying to use the app for money laundering, evading sanctions and other illicit activities, and that its current methods to prevent fraud “may not work well in finding and stopping fraud, especially new and changing types of fraud or with new or expanded products.”

In its annual report, Block stated that it may not have the ability to “address or reduce” the risks that it has identified or that may arise under its risk management procedures.

The legislators referred to a Consumer Reports survey from January that revealed that 9% of P2P users who used the service weekly had fallen prey to fraud and 12% had mistakenly sent money to someone else. They also mentioned a 2022 report by the Pew Research Center that showed that P2P users who were Black or Hispanic had a scam rate that was double that of white users.

Reference CNBC

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2023 Business Payments Barometer

So, what does the 2023 Business Payments Barometer tell us about corporates’ experience since our last report?

Despite the macro-environment, an uncertain economy, ever-increasing fraud and a payments landscape in flux, companies appear resilient in weathering the storm fronts.

They have a good handle on their cash management and feel optimistic about experimenting with new payment types, changing payment terms, and looking for ways to better protect their business payments. Perhaps braving the pandemic’s unimaginable impact has helped companies be more flexible and position themselves for any crisis.

That said, businesses are clearly not viewing the world through rosetinted glasses.

Technology is set to influence businesses over the next 12 months, and while generally seen as beneficial and a driver of productivity, adopting these innovative solutions can be challenging for companies. For many, it’s due to the cost; for some, it’s the pace of technology advances; for others, it’s about having the time, skill and capacity to understand and implement those solutions.

One thing is clear, there remains a lack of understanding and preparation around the upcoming regulations, new payment infrastructures and systems – all of which are driving digitization. This year’s report highlights how businesses are grappling with these changes and provides financial decision-makers with deeper insight.

It’ll come as no surprise that fraud risks and losses are ever-increasing. Staying a step ahead of criminals – both inside and outside the business – is a never-ending task. This report shows which types of fraud impact businesses the most, which sized companies were hit the hardest, and their ability to recuperate lost funds.

Source Bottomline