FinTech Zapping - 10th November

FinTech Whispers

 ??Apple ‘an emerging contender in the fintech space

This cannot be a surprise for anyone, as we all know how Tech Giants are pushing FI products pivoting on their loyal customer base and tied to their core offering. The Cupertino’s company FI offering is shaping quite nicely, and the current global circumstances are playing on their favor specially in the US where contactless payments had yet to pick up. The article estimates that Apple Pay could represent $1B in revenues for Apple, which could double in the next two years if the contactless payments adoption continues. Apple is betting strongly on the payment arena, as we have seen with its latest fintech acquisition (Mobeewave – more info below) a SoftPOS company that is set to help the tech company conquer last mile payments

??Fintech-As-A-Service Platform Arcus Secures Funding for Expansion & Partnerships in Latin America

The Fintech provides core banking infrastructure for other Fintechs and FIs, in fact Rappi Pay runs on Arcus’s platform. This latest funding will help the Mexican fintech to expand through LatAm in a relatively new space that is becoming quite competitive. The Open Banking playground will increase exponentially in the near term, where big foreign names have already put their eyes on the market

?? Starling and Monzo top the charts for current account switchers

The two UK neobanks are leading in net account switching in Q2’20, which may indicate an increase need for digital and remote solutions by UK retail consumers. The most cited reasons for account switching were online banking facilities, mobile banking offering and better customer services … good news for the entire neobank community as those three components are the core of their offering

??Fintech in Latin America: A Beacon of Resilience

LatAm has been an emerging playground for Fintech players for the last 6 years, but it has been only the last 3 when the market has boomed (80% of total funding in the space has been raised during this time). The smartphone penetration, surge in ecommerce and regulation pushed by governments have helped to the emergence and establishment of FinTech solutions across LatAm. Even in today’s global crisis FinTechs have demonstrated continuous growth and innovation contributing to the digitalization of financial services while helping to serve the unbanked

??Vivid Money raises $17.6 million for its European challenger bank

If last week we briefly discussed the differences non-profitable vs profitable banks, this week we have the news on a new neobanks raising strongly. Vivid which has started operating this year, its now offering a full array of solutions from current account to trading services. The company seems to have embraced the revenue led product offering, although if we look at its subscription plans there is little different between the free and paid option which will definitely have an impact on their revenue projections

??BONUS NEWS

This week we have seen the Spanish Senate approving a new law for a much needed Financial Innovation sandbox. There is still a long way ahead, let’s say it like this we got our construction license and now we need to put our efforts to find the right people to carry out the whole project ??

FinTech Reflection – FinTech M&A deal activity (Q3 2020)

I know that this year probably ~80% of the news, articles or blogs that we read or write have a Covid component and sometimes can be suffocating. The truth is the global and universal character of the pandemic has hit every single dimension across all industries. Early in March we realize this, and we wanted to put together our thoughts and vision, on what would be the impact of Covid across the FinTech space.

Among the many assumptions and predictions, one thing that came clear is that we will most likely witness a pretty busy year in terms of M&As (in the short term it was difficult to determine the IPO activity, but the variables also indicated a strong possibility that there was going to be an increase as well – e.g. for Q3’20 we have Lemonade and nCino). Allow me to quickly enumerate some of the factors contributing to this situation:

• Early stage deals dry up – probably one the most important indicators if we look at funding or deals activity. Throughout the year we have seen a sharp reduction (10-15% compared to last year) in number of early stage deals, directly imposing a glass ceiling on these company’s survival. This situation offers a great opportunity for M&A, but of course the early stage ecosystem is complex, and it requires deep knowledge and understanding for a successful transaction
• Massive funding for stablished players – the other side of the coin has been seen in mature players, receiving massive funding from investors securing its position and making a move to further consolidate in the space. Some players have also taken the opportunity to move forward and acquire players to expand its capabilities, market reach or simply to consolidate
• Different market outlook – we have seen varying impact levels across the FinTech space, from positive to negative, all them contributing to an increase in M&A deals. For those segments more affected (e.g. lending) this is a good opportunity to “go shopping” and acquire a player at a smaller ticket. Also, for those other clusters experimenting a positive impact (e.g. technology and support – serving the FI ecosystem, or enablers) we can also see a growing interest to build up capabilities to stay ahead the digital race
• Investors pushing for an exit – under the current circumstances the need to cash out investments has been a priority, and for some players (that were not actually performing bad) this has been the case

Now, let’s look at the M&A activity and because I don’t want to repeat some of the most well recognized transactions of 2020 (e.g. Sofi > Galileo; Visa >Plaid – actually trendy now a days; Intuit > Creditkarma; SalesForce > Vlocity), we shall focus on some important transactions from Q3’20 by subsegment: 

SME lending

Enova acquired Ondeck for $90M

• The US SME lender once IPOed at a valuation of $1.3B but ever since then the company has tried pretty much everything with no success. Enova has acquired Ondeck for practically nothing, incorporating its technology and industry knowhow to its offering

Amex acquired Kabbage (terms not disclosed)

• Another important player in the SME lending space acquired, but in this case Kabbage have done a formidable job through out the years. The US FinTech manage to stay private, while growing its business through partnerships with banks and direct business to customers. It has been an activate participant in PPP program where they have processed ~$7B in loans. Strategic move for Amex, that adds more muscle to its SMBs offering

Acquiring Solutions

Apple acquired Mobeewave for $100M

• The Curpertino company has acquired the Canadian FinTech in a move to further conquer last mile payments. Mobeewave will for sure help to transform iPhones in POS terminals, following the emerging payment trend that we discussed a couple weeks ago around SoftPOS solutions

Verifone acquired 2checkout (terms not disclosed)

• eCommerce activity has surged dramatically and now more than ever the need for online checkout solutions is key to move ahead. Verifone has strategically move towards this end by adding 2checkout tech and talent to its company

Digital Retail Payments

Worldremit acquired Sendwave for $500M

• The digital remittance FinTech has moved to expand its geographic reach across Africa and APAC. Sendwave is a leading cross border payment company with deep roots across Africa, and an emerging player in APAC

Paysafe acquired Openbucks (terms not disclosed)

• Paysafe, a company dedicated to providing alternative payment solutions has acquired Openbucks, a payment gateway that allows merchants to accept gift cards as payment (the company has a focused on the gaming industry)

Neobanks

Nubank acquired Easynvest (terms not discloed)

• It seems the most valued neobank in the world its making moves to get into the investment space. Nubank has acquired Easynvest, a brokerage platform that would help the Brazilian neobank dive into a new vertical, where there are not too many competitors in Latam yet

Neon acquired Magliano Investment (terms not discloed)

• It looks like Brazilian neobanks will be releasing soon its investment offering, which might be the next big thing. Neon has acquired a long-time industry broker to democratize access to investment for its customer base

Technology

Docusign acquired Liveoak for $38M

• Second acquisition on the year for the authentication Fintech, acquiring Liveoak Tech a specialist player on the e-notary space. Right after the announcement Docusign released its latest product called Docusign Notary

Tink acquired Instantator (terms not disclosed)

• Instantor follows the acquisition or Eurobits, another effort by Tink to expand geographically while enhancing its offering. The credit-decision FinTech will be a perfect addition to Tink’s strategy to continuing invest in intelligent data services built on open technology

Trading & Investment

Empower retirement acquired Personal Capital for $1B

• One of the first digital wealth management platforms in the space will help the second largest retirement service provider in the US, on its transition towards digital transformation

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There have some exciting transactions and of course there is a lot more behind each one of them. My view is that we will see more coming, as the FinTech canvas will experience a market concentration where several players will grow by acquiring others ... let's bring the topic up early next year to review that has happened in Q4 ;-)