FinTech Zapping - 23rd November

FinTech Whispers

 ??Google Pay’s massive relaunch makes it an all-encompassing money app

Massive announcement by Google, with a new re-engineered experience for Google Pay that aims at becoming the face of how you deal with your financials. Google has added an array of different solutions to make user’s life easier, such as OCR to capture bills information from photos or through their dedicated superegine for data analytics. Google has positioned into the retail market by offering a front solution for users to manage their existing banks accounts, which means that for now they won’t be offering banking services. There is no question on Google’s potential to pretty much become a leader in anything that they do, but it seems to me they are quietly building a super app offering through their telco offering (Google FI), financials (Google Plex) and of course all daily apps that are embedded into our lifes (Maps, Gmail, Search …)

??Starling Bank moves virtually into profit

Fantastic news from the neobank space, as anticipated earlier on the year Starling projections seemed to be in the path for profitability. The UK neobank probably less recognized than its two rivals (Monzo and Revolut) has managed to create a revenue led portfolio of solutions through their Retail and SME offering, marketplace and BaaS solution. It was only last week when we discussed how Starling and Monzo were leading the pools in current account user switches, let’s now see how this materializes on their annual accounts. However we should take this news with caution since profit levels are only expected for the last quarter, which will probably not have a full annual effect until next year.

??Inside Affirm’s IPO filing: A look at its economics, profits and revenue concentration

Another anticipated IPO filing, this time by US leader on BNPL space. We have already discussed several times how the popularity of BNPL solutions have surged since the pandemic outbreak. However, recently there has been a raising concern on the way BNPL companies treat credit losses, and if they clearly communicate users that they are really purchasing a loan when they select the BNPL button. This article (sorry but only half of it is for free) is a great snap shot at Affirm’s financials, which explains the current state of similar companies’ performances and projections.

??Marqeta and Uber enter card issuing partnership

We are probably witnessing a new attempt to become a super app, and this time Uber has partnered with Marqeta for its flexibility and time to market to issue cards through different shapes (tokenized, virtual, physical). The ride hailing company has an average of 100M users through its app ecosystem and now is looking to further engage with customers by issuing banking products. A new revenue stream for the company but also a new engagement method that will help to anchor users to Uber’s products … sounds pretty similar to what Apple did ??

??Cash cards for kids: digital banks race to capture the next generation

Recruiting the next generation of bank account holders, a pretty smart move by challenger/neobanks. On one hand we have a new revenue stream and an additional tied offering for adults with kids, that has multiple purposes from financial education to control spending. On the other hand if we look at this in a more broader sense, in some way FinTechs are cultivating a new way of dealing with finances early in the lives of next generation which means kids that have started using a Neobank Jr account will have a set of standards when dealing with their financials that will probably drive a lot of the decisions that they make early in their adults lives.

FinTech Reflection – The Digitalization of Trade Finance

In today’s world we have at our finger points the option to purchase goods or services around the globe, and Corporations are getting better and better at improving their supply chains to be able to deliver products faster. The final user often oversees all the complexity involved in the purchase of an international good, and I don’t blain them as the net of stakeholders and financial mechanisms involved is a bit of a nightmare.

International trade transactions (Import/Export) have traditionally faced a lot of challenges due to the large number of participants involved, which implies an obvious question: how can I trust any of the counterparts involved will deliver what they promised (e.g. shipping, payments…)? This question is no novelty, as a couple hundred years ago (give it or take) the first Trade Finance (TF) mechanisms were designed, to bring some assurance to international transactions. Those mechanisms (letter of credit, Bank Guarantees, Documentary collections…) designed back then, worked so well that today we are still using them. Of course, they have evolved, but not as much as you think since they are still paper based, hence physical verification is needed which adds a high level of manual interaction resulting in long periods of time to process transactions.

For quite a while now there are having multiples products/platforms aimed at solving some of the above-mentioned inefficiencies through a Trade Finance transaction, however none have been fully successful since there is a fundamental piece that we have not mentioned, any given solution needs to be universally adopted otherwise everything will need to go down in paper. This situation has delayed the transformation of a very traditional industry, narrowing the number of FinTech solutions attempting to digitize the whole process.

To summarize the different digital developments, or better said the different attempts to digitize the Trade Finance business, I would say we can split it into 2 waves:

 1) Electronic Platforms: the first one came in the early 2000s with the first electronic paper solutions brought different tech providers. If we look at the early FinTech space we could spot two of the most recognized names in the field: essDocs and Bolero; However, a lot of the solutions adopted by FIs were provided by more traditional Tech Providers (e.g. Surecomp)

2) Emergence of Smart Technologies: and the second one emerged with the Smart Technologies hype starting in 2015-16, obviously led by Blockchain back then when everyone saw the benefits of implementing the new technology (disintermediation, security, proof of truth, instant processing, digitalization …) however it was based in a pretty nascent technology that had not been scaled at a corporate level, hence the expectations were too high and results in the short/medium term were not fully aligned. From this last wave we have two type of “survivors”:

• DLT driven solutions – provided either by FinTech players that managed to continue developing their solutions and build relationship with corporates and banks (e.g. Wave – a resilient FinTech have evolved their offering and continuously exploring new ways to expand its partnership network) or Bank consortiums creating joint-platforms to explore the benefits of DLT applied to Trade Finance (e.g. Marco Polo, we.trade or Countour – former Voltron)
• Smart Technologies for automation – the second one is focused on those players that have pivoted on other type of Smart Technologies (e.g. AI/ML or RPA) to improve efficiency throughout the Trade Finance value chain, targeting specific use cases bringing more simplicity and real-life application with results in the short term (e.g. Quantexa – AML/KYC; Tradeteq – TF distribution)

For me the digitization of Trade Finance is still on progress and very infant compared to other businesses segments. However, I feel we are in the right track with the different solutions out there from consortiums testing new technologies, the application of AI/ML/RPA to automate or improve parts of the value chain and of course specialized FinTech players targeting the space.