Last Week in Lending - Tuesday, 4 July

Nubank ’s CEO explains what the US could learn from the Latam fintech scene, the importance of credit, and how to weather volatility

David Vélez , the CEO of Nubank joined TechCrunch ’s podcast, Equity, to chat about how Nubank has grown so successfully amidst changing interest rates, how Brazilian digital payments have leapfrogged the US, and the importance of inclusion. What stood out to me? The focus on credit underwriting throughout the conversation. When asked about how Nubank delivered record profits, Velez said: “70% of all the profits in financial services in Latin America come from credit. So you cannot build a large financial services business if you don't crack credit.” He also has some great insights about expanding credit to underserved, low-income communities.?

Listen to the podcast (or read the transcript!)

Robinhood moves into the credit card space with the acquisition of X1

Robinhood announced on Thursday that it was acquiring X1, a no-fee credit card startup, for $95 million in cash. This acquisition gets Robinhood into the credit card business with the interchange fee revenue that comes with it. Notably, X1 has a unique model, which allows it to underwrite customers based on their income rather than their credit scores.?

See why Robinhood acquired X1

Report highlights the future of fintech in Africa

Great report from Lucidity Insights highlights the massive opportunity for financial services in Africa. Three reasons why fintech is poised to explode? The high penetration of mobile phones, the opportunity for financial inclusion, and the demand for digital banking. A few other key points that stood out to me:

• 57% of Africans are “unbanked,” living without a bank account or digital wallet.
• More than 70% of Africa’s GDP is created by SMEs, but more than half of these business owners require funding that they cannot access or apply for, because they are unbanked or without any credit history.
• Kareem Abdel Aziz, the Global Lead of Digital Payments investments at IFC predicts: “The last decade was defined in bridging the access gap in financial services, the next decade will be defined in integrating financial services into day to day economic transactions.”?
• Great examples about how Moove , NowNow and others have adopted unique approaches to credit assessment to deliver for underserved segments. Also good to see Taktile customers Kuda and Branch International referenced in the report!

Find out more about the future of African fintech

EU announces proposal for PSD3, PSR, and the future of digital banking

The EU issued its proposals for the reform of the EU’s payments market. Coming 7 years after PSD2, these proposals aim to improve consumer protection and support competition by providing a greater choice of payment providers. The proposal includes: a system to check IBANS, a platform to enable payment service providers to share fraud-related information, and common rules on open banking interfaces for data sharing and customer control over data. The proposals have been welcomed by industry groups, but are not yet final. Next, the published documents will be examined by the European Commission and undergo a review by both the Council and the European Parliament. I will be watching this closely and keep you updated!

See how Europe proposes modernizing payment services and open banking

Visa acquires Latam core banking and cards platform Pismo for $1B

Last week, Visa announced plans to acquire Pismo, a Brazilian payments infrastructure startup, for $1B in cash — one of the largest fintech M&A deals of the year.?This acquisition enables Visa to offer core banking and issuer processing for credit, debit, prepaid and commercial cards using cloud-based APIs and strengthens it's position in Latam, which has a huge fintech opportunity. This was a competitive deal so will be interesting to see how it plays out.

See more about the deal