Klarna to replace workers with AI to drive profits ??; ?? gears up to offer payments and banking services ??; BNPL's Best Day Ever on Cyber Monday ??

?? Hey, Linas here! Welcome to a ?? monthly free edition ?? of my daily newsletter. Each day I focus on 3 stories that are making a difference in the financial technology space. Coupled with things worth watching & most important money movements, it’s the only newsletter you need for all things when Finance meets Tech.

If you’re not a subscriber, here’s what you missed last month:

1. The Ultimate LTV/CAC Calculation Template ?? [use this to maximize business growth]
2. FinTech giants seek growth through strategic M&As ???? [two interesting deals + valuable resources to turn every M&A into a success]
3. Adyen to boost Klarna's growth as acquiring bank ?? [why this is a major win for Adyen + deep dives into both Klarna & Adyen]
4. The Ultimate KPI Dashboard Templates for All Your Needs ?? [use this to elevate your decision-making]
5. Amazon Drops Venmo ?? [why it made sense & what happened + what’s next & some deeper dives]
6. Revolut to go all-in on mortgages ??
7. Wise continues changing the game for banks ??
8. Coinbase launches free global crypto transfers via messaging links ??
9. N26 forecasts profitability in 2024 ??
10. The end of physical cash in Brazil ??????
11. Google Pay Later: Google adds BNPL to mobile wallet ??
12. Nubank & Circle partner up to unlock stablecoin potential in Brazil ????
13. ABN Amro bets on BUX M&A to boost digital offering ??
14. Elon Musk’s ?? receives more money transmitter licenses ??
15. DaveGPT empowers 10M members with personalized AI Assistance ????
16. Apple offers to let rivals access its NFC tech in EU antitrust case ??
17. Apex Fintech confidentially files for US IPO ??
18. BlackRock bets Big on AI ?? [why it’s huge + more bonus reads on AI + Finance]

and more! Don't miss out and join the community here????

December was another super interesting month in the world of Blockchain & Cryptocurrency. We will look at Klarna which aims to replace workers with AI to drive profits (a strategy that works + deeper dives into Klarna & AI + Finance); ?? gearing up to offer payments and banking services (more licenses & why they matter + some deeper dives into how Elon Musk is building PayPal 2.0); Cyber Monday which was BNPL’s best day ever (latest data + some bonus dives into two BNPL giants), and other interesting news and developments.

Without further ado, let us dive into what happened in the Blockchain & Crypto sector last month. Let’s connect the dots.

Klarna to replace workers with AI to drive profits ??

The news ??? FinTech giant Klarna recently instituted a hiring freeze for roles outside of engineering as part of a push towards profitability driven by artificial intelligence.

The Swedish Buy Now, Pay Later (BNPL) provider does not currently have plans for layoffs but expects staff numbers to organically shrink as people leave and are not replaced.

Let’s take a quick look at this.

More on this ?? This hiring freeze comes on the heels of 10% staff cuts made in May 2022. Klarna has been focused on tightening lending standards, cutting costs, and diversifying revenue streams to finally achieve consistent profitability.

These efforts now appear to be paying dividends. Klarna posted its first profitable quarter since 2019 in Q3 2022, earning SEK 130 million.

ICYMI: Klarna's remarkable comeback: how the FinTech giant went from valuation collapse to potential 2024 IPO ?? [latest numbers, how we got here, and what’s next + a look at how leveraging AI Klarna is building the Google of Shopping]

The US market also saw its fourth consecutive quarter of gross profit growth. Klarna CEO Sebastian Siemiatkowski credits the company's AI advancements as a key driver of this performance.

?? THE TAKEAWAY

What’s next? ?? It’s clear that by relying more heavily on AI, Klarna aims to increase efficiency, continue reducing labor costs, and sustain this newfound profit trajectory. If successful, this strategy could position the company for a strong IPO in 2023. However, this focus on AI and automation presents risks as well. Klarna will need to ensure its tech delivers as promised and does not negatively impact customer experience. More importantly, maintaining growth while slashing jobs also poses challenges. Zooming out, one thing is clear - Klarna isn’t the first and definitely not the last company that’s implementing AI to drive efficiency and slash costs. A whole paradigm shift is just around the corner.

ICYMI: Ritual raises $25M to make AI decentralized ?? [the USP & why this is very interesting]

Generative AI will make Finance Autonomous ???? [taking a big picture view on the changes taking place now & what’s next + more deeper dives into AI & Finance]

?? gears up to offer payments and banking services ??

The news ??? Money never sleeps. So does Elon Musk whose grand vision for X is coming closer to reality as the platform secures more money transmitter licenses across US states. During the same week.

With the latest approval from Pennsylvania, X now has the green light to facilitate money transfers in 13 states so far. Solid work ??

Let’s take a look at this.

More on this ?? This basically lays the foundation for X to introduce peer-to-peer payment capabilities soon, allowing users to send money to each other within the app.

The move essentially replicates services offered by the likes of PayPal and Venmo, positioning X as a major competitor in the digital payments arena.

If you’re closely following the space (or actively reading my newsletter ??), you know that Musk has been vocal about morphing X into an "everything app" akin to China's Weixin/WeChat , where users can conduct ride-hailing, merchant payments, and even access banking services.

He now expects the rollout of new financial features by the end of 2024.

?? THE TAKEAWAY

Looking ahead ?? We must note that the licensing efforts began before Musk acquired Twitter, starting with less stringent states. Obviously, X still faces significant trust issues around Musk himself that could impact its payments push. Nonetheless, payments and banking could hugely diversify X's revenues beyond just advertising, especially given the recent advertiser exodus. If X can gain enough regulatory approvals and public trust, it could fundamentally transform into a one-stop shop for messaging, transactions, and daily financial needs — the fruit of Musk's ambitious vision. X may soon be much more than a social network.

ICYMI: Elon Musk’s ?? receives more money transmitter licenses ?? [why it matters & what’s next + a deeper dive into how Musk wants to replace your bank account within 1 year]

BNPL's Best Day Ever on Cyber Monday ??

The news ??? Buy Now, Pay Later (BNPL) service providers had their highest-grossing day ever on Cyber Monday 2023, processing a whopping $940 million in payments for online purchases.

That represents a massive 42.5% increase over 2022, according to Adobe Analytics data.

Let’s take a look at this.

More on this ?? BNPL users are buying more per order as well, with 11% more items per BNPL order compared to last year. Clearly, consumers are relying on installment purchasing to stretch their holiday budgets amid economic uncertainty.

BNPL enables larger cart sizes while spacing out payments interest-free, which makes it an ideal choice for people looking to have some spare cash now.

Winners ?? Leading BNPL providers Klarna and Afterpay prepared for the holiday sales surge by enhancing their apps and features. Their foresight paid off, with Afterpay seeing a 19% year-over-year jump in Cyber Weekend transactions.

App usage alone climbed 16%. Not bad ??

Demand drivers ?? Consumers cite budgeting help as a top reason for choosing BNPL, along with accessing credit if they can't qualify for cards. BNPL loans sidestep high credit card interest rates.

But with BNPL's growth, providers must balance opportunities with risks. If some portion of BNPL borrowers default, providers' revenues suffer. Delinquencies may rise given 40% of Afterpay users and a third of all BNPL consumers have subprime credit scores under 620.

Still, the services democratize access to credit otherwise unavailable.

?? THE TAKEAWAY

What’s next? ?? BNPL's banner Cyber Monday bodes well for solid holiday sales contributions. But post-holiday loan performance bears monitoring to gauge any deterioration of borrower repayment patterns. If more consumers overextend themselves, 2024 may bring a BNPL debt hangover. Despite that, both Affirm and Klarna seem to be well-positioned to handle that. Still bullish.

ICYMI: Strong growth & profitability: Affirm is becoming a force to be reckoned with ?? [strong growth & profitability is making me optimistic + some bonus dives into Affirm]

Klarna's remarkable comeback: how the FinTech giant went from valuation collapse to potential 2024 IPO ?? [latest numbers, how we got here, and what’s next + a look at how leveraging AI Klarna is building the Google of Shopping]

Extra Reads & Quick Bites for Curious Minds ??

• More AI in banks ?? CaixaBank has assembled a 100+ person cross-functional task force dedicated solely to deploying generative AI across internal services and customer offerings. Working alongside Microsoft and Accenture from Madrid and Barcelona offices, the team encompasses various CaixaBank departments and its tech subsidiary. The Microsoft partnership provides early access to GPT models and a secure test environment. Initial focus areas showing promise include optimizing digital customer service and enhancing risk analytics. Other explorations cover automating code/documentation generation and testing for new tech features. Multiple working groups are developing real-world use cases where generative AI can elevate employee and customer experiences. CaixaBank expects to start an organization-wide rollout in 2024. ICYMI: DaveGPT empowers 10M members with personalized AI Assistance ???? [what’s the value add & what’s next + some bonus reads about AI + Finance, and the building blocks of AI Bank of The Future]
• Coinbase spotted ?? Cryptocurrency exchange Coinbase is launching international spot markets outside the US to expand global user access. Via its Coinbase International Exchange unit, the company envisions becoming a cornerstone of the global crypto ecosystem with industry-redefining yet trustworthy capabilities. Since launching in May 2023, the exchange has onboarded over 100 institutions and delivered $10 billion in perpetual futures volume in Q3 alone. Now with the addition of international spot trading, Coinbase aims to significantly lower latency barriers and provide an enhanced trading experience worldwide. Launching in phases, BTC and ETH trading against USDC will first open via API to non-US institutions only on December 14th to establish liquidity foundations before later expanding to more assets, features, and users. As part of Coinbase’s global expansion strategy, the international exchange also offers issuers and crypto players a compliant alternative to perceived uncertainties of US platforms. ICYMI: Coinbase stock soars to 18-month high ?? [what’s happening + recap of their latest numbers, what’s the most important stat & why I’m bullish on them]
• Robinhood in EU ???? US financial services company Robinhood has launched its crypto trading app in the European Union. The custodial platform offers users a monthly Bitcoin rebate based on trading volume. New users can earn up to 1 BTC for signing up and referrals. General Manager Johann Kerbrat sees crypto as shaping the future of finance and aligning with Robinhood's mission to make finance accessible. The EU's crypto regulations also fit Robinhood 's commitment to compliant crypto operations. Key benefits include Bitcoin rebates, transparency, and the ability to earn BTC. As a publicly traded US company with security measures, Robinhood Crypto is now available to eligible 18+ EU citizens on iOS and Android. ICYMI: Third time lucky? Robinhood launches in the UK ???? [& why Google sold all its stake at Robinhood]

Money Moves ??

• GFO-X, a crypto derivatives venue regulated in the UK, announced a $30M Series B round led by M&G Investments —?the $332B asset management arm of the pensions giant.
• UK InsurTech startup CatX has successfully raised $2.7M in seed funding as the company looks to bridge the gap between supply and demand in the reinsurance sector.
• Crypto data platform?Shadow?secured $9M in a seed funding round led by?Paradigm?to expand its engineering team as it aims to simplify data handling on?Ethereum.

Continue reading by subscribing to Linas's Newsletter. You will receive fresh news about FinTech with hot takeaways every day.

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

?? Top Resources for Startup Founders, CEOs, Investors & VCs ??

?? The Future of Finance: 10 FinTech & FinServ M&A predictions for 2024 ??

?? 10 FinTech and Finance stocks to include in your portfolio for 2024 ?? | Part I

?? The Future of Finance: 10 FinTech & FinServ M&A predictions for 2024 ??

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About: I am a business developer, sales professional, and FinTech strategist, as well as a 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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