Fed Goes Offline; Square is Doubling Down on Crypto; Klarna to Raise $1B at a $31B Valuation, and More

Hey, ?? FinTech enthusiasts & entrepreneurs! Trust you are all keeping well and safe. Another big week in Finance & Technology... The best Weekly FinTech Digest yet is out!

P.S. Before we dive into what happened in FinTech last week, check out my Connecting the Dots Newsletter, where you will get much more. Every Week????

Last week (22-26 February) was another great week in FinTech. The BIG BAD news of the week - “operational error” got Fed to go offline, turning virtually the whole US financial system off for several hours. Further, Buy Now, Pay Later is getting hotter every month - Klarna will soon raise $1 billion, tripling its valuation to $31 billion, while Affirm launched the BNPL payment card; Square is doubling down on crypto, and other super interesting news and developments.

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

Fed Goes Offline

The Federal Reserve’s system that allows financial institutions to send money back and forth electronically went down for several hours Wednesday.

The “operational error,” as the Fed described it, impacted multiple services, including its pivotal automated clearinghouse system, which connects depository and related institutions sending electronic credit and debit transfers.

Along with the Fed ACH service, other systems impacted included Check 21, FedCash, Fedwire, and the national settlement service.

THE TAKEAWAY

Centralized systems are… well, prove to central errors… ???♂? Although the systems were off for ‘only’ several hours, it’s a clear indication that the US definitely needs a more reliable, faster, and efficient way to do business when it comes to all things finance and money. Maybe blockchain is here to help? ??

Square is Doubling Down on Crypto

Square posted major volume and revenue growth driven mostly by Cash App's crypto service. Now it’s looking to ramp up its crypto offerings further with its massive Bitcoin investment.

Jack Dorsey’s Square has processed $32 billion in gross payment volume (GPV) in Q4 2020, posting a 12% increase from Q4 2019, according to it its latest earnings release. Square's growth is similar to the previous quarter when it processed $31.7 billion in GPV as it bounced back from the initial impact of the coronavirus pandemic.

Square's Cash App was the absolute winner of Q4: the peer-to-peer payments app closed out December with 36 million active customers, surging 50% YoY—likely driven by the increased momentum of its crypto trading service. Square is now looking to strengthen its crypto business by investing a massive $170 million in Bitcoin, following its $50 million investment in October, according to the company's earnings call.

THE TAKEAWAY

As more consumers are exploring crypto, Square is winning. Cash App's Bitcoin revenues skyrocketed nearly 900% year over year (YoY) in Q4, reaching a value of $1.76 billion. More importantly, app engagement is growing - more than 3 million users bought or sold cryptocurrencies using Cash App in 2020, according to Square CEO Jack Dorsey. With the growing platform engagement and leveraging digital assets as a priority, Square is well-positioned to continue to be among the key players leveraging the new age of finance.

Klarna to Raise $1B at a $31B Valuation

Swedish BNPL giant Klarna is expected to announce new funding in the coming days that will value the company at $31 billion, Bloomberg reported. The amount is around three times more than what the company was valued at after its last round in September.

Klarna is expected to announce new funding in the coming days that will value the company at $31 billion, according to Bloomberg. The amount is around 3 times more than what the company was valued at after its last round in September.

The new fundraise will be around $800 million to $1 billion, according to unnamed spokespeople Bloomberg cited.

Existing investors are part of the round ahead of a potential public listing in 2022.

With the new funding, Klarna is likely to remain Europe’s most valuable startup after payments business Checkout.com was valued at $15 billion.

THE TAKEAWAY

BNPL was hot, the COVID-19 pandemic made it even hotter. Klarna continues to grow, finding growth both in their US expansion and in part because of the coronavirus pandemic that has accelerated the shift towards online commerce. Yet, as noted earlier, increasing regulatory concerns is a risk factor, especially when it comes to younger consumers who carelessly spend more than they can afford.

Extra Reads & Quick Bites for Curious Minds??

• The Saudi Central Bank (SAMA) has launched the ‘sarie’ instant payment system.
• Toast, which makes software used by restaurant operators, is considering to IPO this year, and it could value the company at as much as $20B.
• TransferWise rebrand to Wise to reflect the broader change of the company beyond its original roots as a money transfer company.

??Money Moves??

• M&T Bank Corp is closing in on an acquisition deal to buy People’s United Financial for more than $7B, The Wall Street Journal reported on Monday, citing sources.
• Orka Technology Group has raised ￡29M in its latest funding round, a capital that will be used to fuel the growth of its earned wage access product Orka Pay.
• Germany-based challenger bank Penta raises €7.5M to top up Series B.
• Wallapop, a Spain-based virtual marketplace that lets people resell their used items, has raised €157M.

Quote of the Week/Food for Thought??

Now that’s a serious argument… ????

Graph of the Week ??

Square is doubling down on crypto.

Week in Brief

The Federal Reserve’s system that allows financial institutions to send money back and forth electronically went down for several hours Wednesday.

Square posted major volume and revenue growth driven mostly by Cash App's crypto service. Now it’s looking to ramp up its crypto offerings further with its massive Bitcoin investment.

Swedish BNPL giant Klarna is expected to announce new funding in the coming days that will value the company at $31 billion, Bloomberg reported. The amount is around three times more than what the company was valued at after its last round in September.

Continue reading by subscribing to Connecting the Dots Newsletter. You will receive fresh news about FinTech with hot takeaways every week.

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

?? Making Sense of Tesla's $1.5B Bitcoin Buy

?? Robinhood: Robbing the Poor to Give to the Rich? A Story about the Fragility of the Brand

?? Cutting Through the Noise: Bitcoin Fundamentals & Why it Was Created

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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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