FinTech Zapping - 16th November

FinTech Whispers

??Better.com snags $200 million in series D funding for $4 billion valuation

Without question the biggest segment hit by the pandemic across the FinTech space has been the alternative lending space, however there are some subsegments arising strongly. Home loans, a forever To do in the Banks’ UIX backlog, is gaining some traction thanks to its digital only experience, reducing some of the frictions for home buyers. The Home Loans space is on demand now a days, whether it’s for solutions that help unlock home equity (e.g. this week we have seen the announcement of BBVA and Prosper working together to launch a digital home equity service), direct financing to consumers via digital channels (e.g. Molo in the UK raising ￡266m in funding last October) or platforms helping Banks and non FIs to improve the E2E journey (e.g. Roostify partnering with Santander). Also, this latest round steers Better.com on the course towards the land of IPO

??Deel launches crypto payroll tool

The payroll and compliance platform specialized in remote and international employees has partnered with Coinbase to offer workers the possibility to get paid in cryptocurrencies. The idea is to help workers avoid international transfers fees, while getting paid faster. Deel’s new service will support Bitcoin, ether and XRP and it claims to offer “near-instant” withdrawals. This last point is highly relevant, as I would expect to have the flexibility to convert my crypto into fiat at any moment

??Fintech Unicorns Flywire And AvidXchange Are Planning To Go Public In 2021

If on the FinTech M&A space there’s been a surge in activity, on the IPO side I might expect that this year beats all the previous ones, probably since 2014-2015. Like I mentioned last week there is rush for exit activity, among other things to cash out investments. In the first 3 quarters of the year we have seen a lot of news around players filing for an IPO, and others planning to go for it in 2021. If my count is correct, I would say that we have about ~20-25 well recognized FinTechs planning to go public within the next year. The above article focus on two big names from the Payments space, Avidxchange (procure to pay solution rivaling with Bill.com – which btw went public in Dec’2019) and Flywire (cross border payment solution to help companies simplify global payments and receivables process)

?? Railsbank, the Banking-as-a-Service, raises $37M in growth funding

Only in September we learn how the BaaS FinTech made a strategic move to acquire Wirecard UK, while now with this latest funding round the company is planning to fund its international and product development agenda. The idea is to roll out its credit as a service platform in the US and further expand its reach throughout APAC. The role of embedded finance is in high demand now a days, in what is seen as next big thing for FinTech in the next wave

??Finch launches hybrid banking and investing app

Probably not familiar to everyone but this US Fintech was launched in 2019, and in 2020 introduce a hybrid checking and investment app. Finch provides an automatic way for users to invest its current balance … but how is this different than other market players like Stash, Acorns or even Robinhood? Well for starters Finch automatically invest the entire user’s balance, while offering a free option and a more sophisticated one (for a monthly subscription) that allows to do personalized investments. You can check the differences between Finch and big market competitors in their web site (LINK)

FinTech Reflection – Fintech engagement models

There was a time in the past when FinTechs were seen as the competitor, a threat to incumbents (FI and Non-FI) that did not see the point of collaborating with them. Thankfully, rather soon than later this belief diminishes, which up to some extent has deeply helped the industry to further develop and established.

On this post I just want to quickly summarize the 5 engagement models most commonly seen when Banks or Corporates connect with FinTech players. Of course, we could write a whole book and what are the different peculiarities that define each of them, and what are the success factors behind fruitful collaborations but let’s for now focus on identify and summarizing them:

Incubation/Acceleration

• Incumbents form a close engagement (e.g. mentorship, co-working spaces) with FinTechs through incubation labs or accelerator programs. One of the keys that help build a successful collaboration is to understand FinTechs and to embrace their startup culture… behind every failure on this field there’s probably a cultural fit problem, which up to some extent incubators and accelerators can help solve - incubators and accelerators as a baseline for FinTech engagement

Capital Investment

• Probably the channel most used to approach Fintech players, and in some cases a first base action to forge a long a relationship. Incumbents have defined a variety of ways to inflow capital to FinTechs, either by their VC arms or directly from their Innovation units. We are seeing a diverse investment strategy, either by investing smaller tickets into a variety of early stage players, or by placing large funds into more established players

Partnership/Distribution

• I would say at first this was one of the most adopted approaches to interact with Fintech players. The distribution and/or partnership of products though a FinTech partner was quite a novelty 6 or 4 years ago, where an incumbent would rely on its startup counterpart to serve clients. This is was a frictionless collaboration since there’s low level of integration needed, and the incumbent would benefit from partnering with a digital solution.

Co-Creation

• Fast go to market strategy by partnering with a FinTech player to leverage on its technology and flexible structures to launch a product or service. This approach helps incumbents to increase agility, for a better time to market launch while also offers them the possibility to be involved in the products definition up to some extent. I would say this model is a natural evolution from the partnership one. Incumbents are well ahead their digital agenda than they were 4 or 6 years ago, which offers them the possibility to deeply interact with FinTechs to build and re-imaging existing products and services more aligned to their core business needs

Fintegration

• The last mile on Fintech <> Incumbent collaboration, the adoption and integration within the incumbent’s product structure and technology stack still entitles a challenge that some players have been able to achieve with more success than others. Also, here we could group Fintech M&As and how incumbents embed their talent and technology into the organization. In my opinion there is still a long way to go here, as the success is directly correlated with the incumbent’s maturity on its innovation vehicles

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In the same way we have seen how the current situation is driving a surge in FinTech exit activity, incumbents are looking into FinTechs to improve and deliver better digital experiences for their clients. I would like to finish by emphasizing the importance of understanding and embedding both cultures for a successful experience