Microsoft + Finastra = the future of Lending ??; Current taps DeFi in a bid that hybrid is the future of finance ??; A neobank for gamers?!??

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Last week (11-15 April) was another super exciting and hot week in FinTech.?It is especially important as it suggests what will be the key drivers for the future of lending, finance, and challenger banking sectors. Hence, we will look at Microsoft & Finastra’s BaaS partnership that signifies what the future of Lending is; Current tapping DeFi in a bid that?hybrid is the future of finance; a neobank for gamers, and other interesting news and developments.

Without further ado, let us dive into what happened in the financial technology sector last week. Let’s connect the dots.

Microsoft & Finastra’s BaaS Partnership signifies what the future of Lending is ??

The deal ???Open banking platform?Finastra?has formed a Banking-as-a-Service (BaaS) collaboration with tech giant Microsoft to provide access to finance for SMEs using Microsoft Dynamics 365, a cloud-based enterprise software platform.

More on this ???Under the deal, users will be able to unlock lending options within Dynamics 365, using information already stored on the business management platform. Finastra says the ability to provide banks with additional information, including accounts receivable and payable records, will improve lending decisions and time to cash for SMEs

The service is initially being launched in the US, tapping into Finastra’s expansive network of over 5,000 financial institutions.

?? THE TAKEAWAY

All-in-one.?This partnership demonstrates the huge benefit that embedded and contextual finance can bring to the industry and the respective businesses. A recent report from PYMNTS found that while more than half of SMBs believe that an all-in-one payment platform can save them time and improve visibility into cash flows, 56% believe that the solution could be difficult to integrate with existing AP and AR systems. Well, this is changing with the help of embedding finance, and open banking, among other things, and Microsoft/Finastra deal perfectly illustrates that. The future of lending is embedded and contextual.

Current taps DeFi in a bid that?hybrid is the future of finance ??

The news ???US neobank?Current?plans to incorporate elements of decentralized finance aka?DeFi?into its consumer-focused lineup by rolling them out on a “hybrid finance” basis, according to American Banker reports.

The USP ???Founded in 2015,?Current?began its life as a teen debit card controlled by parents, but later expanded to offer personal checking accounts powered by the same underlying banking technology. Like a range of modern-day “neobanks,” or digital banks, the Current app offers a baseline of standard features like free overdrafts, no minimum balance requirements, faster direct deposits, instant spending notifications, banking insights, free ATMs, check deposits using your phone’s camera and more.

In April 2021, Current raised $220M in a Series D funding round, valuing the challenger bank at $2.2 billion.

HyFi? ???HyFi, or hybrid finance is a combination of decentralized finance & centralized finance. DeFi enables consumers and companies to engage in peer-to-peer (P2P) transactions without going through financial institution (FI) intermediaries. Instead, the technology relies on blockchain recordings and stablecoins to support activities.

Traditional banking activities fall under what is called centralized finance (CeFi).

Current is hence pursuing a blend of both worlds, trying to expose their customers to aspects of both DeFi and traditional banking.

Current has been experimenting with DeFi since 2018. Yet, today might be the perfect time to unlock value & differentiate itself from the competition. Here’s the takeaway:

?? THE TAKEAWAY

Trying to bring the best of both worlds.?In a nutshell, by partnering up with companies like Acala (a decentralized finance platform built on the Polkadot blockchain network) & Compound Labs (which develops the Compound protocol, an autonomous interest rate protocol), Current wants to bring DeFi to everyday’s neobank user (they reportedly count >3M users as of today). The offering should start with high yield saving accounts, but opportunities are nearly endless - Acala’s suite of cross-chain financial applications alone include trading, issuing self-serviced loans, becoming liquidity providers, accessing staking derivatives, and earning high-interest yield on their digital assets.?Zooming out, the hybrid finance approach could help shore up Current’s competitive standing with younger consumers (its average customer age is 27). The neobank can therefore market hybrid offerings to its target demographic and push for retention of its existing customers. Current can also position hybrid finance as a more accessible way to provide attractive investment returns. If hybrid is the future of finance, Current definitely wants to be the key that unlocks it.

A neobank for gamers?! ??

Stealth mode ?? Mana, a new US neobank, is launching with a focus on gamers that includes a slew of incentives to join. The newcomer was only founded in 2021 but already has seed funding worth more than $7M.

The company has opened a waitlist and plans to make itself available to the general public in the summer of 2022.

The USP ???The neobank offers two tiers for users: a free version and a subscription version called Mana Pro, which costs $119.95 annually, or $9.99 each month. However, people who join the waitlist can get the paid tier at a discounted $69.95 annual price.

Customers can use Mana’s app to do reward redemptions in exchange for items like gift cards, in-game currency, and game keys.

?? THE TAKEAWAY

Super narrow focus.?It’s important to know your target market irrespective of the industry you are in, but it’s even more important to do so in case you are building a vertical neobank. It seems that Mana has studied its target audience in depth. Their affinity audience represents a sizable potential market, and Mana’s perks, tailored to its passion, could help it quickly gain a following. Mana’s total addressable market is 122.2M in the US alone where the average spending related to video games has increased by 8% in 2021. That’s pretty huge. Hence, targeting gamers, in particular, helps Mana sign up millennial and Gen Z customers. Zooming out, by melding banking with gaming, which plays a significant part in its target demographic’s lives, Mana will also be able to quickly foster engagement, paving the way for cross-selling in the future. So watch them out as this is going to be one of the most interesting neobanks to date.

Extra Reads & Quick Bites for Curious Minds??

• Indian exit?????US-based BNPL provider?Sezzle ?has informed merchants of its decision and requested them to deactivate the service from their respective websites. Sezzle is shutting down its India operations from 9 April 2022 as part of a restructuring exercise in line with its parent company. During its business in India, the company has partnered with more than 1,000 brands in India, including the likes of Titan, Fastrack, and Plum. It was working closely with direct-to-consumer (D2C) brands. Sezzle’s parent company?Zip?still operates in India though.
• Cutting losses ???Monese has reduced its losses by 18% year-on-year to report a ￡31.1M loss in 2020, helped by a cut in marketing and customer acquisition spend and job cuts. The digital banking service reported revenues of ￡16.3M in the year ending December 31, 2020, up from ￡10.3M the year previous. It said its uptick in revenues was driven by an increase in customer numbers, primarily in the UK.?When break-even????
• From MoMo to Banking ???The?Central Bank of Nigeria ?has approved the license for?MTN ’s Mobile Money (MoMo) payment service bank in the country, extending its services to wider banking operations. The new banking license granted to MTN should allow the company to explore additional growth opportunities presented by the country’s unbanked and underserviced population.?Mobile money represents an electronic service that enables users to send and receive money instantly, make payments, and handle additional transactions using their mobile phones. The system is already popular in a series of African markets where MTN operates, including Cameroon, the Democratic Republic of Congo, Ghana, and Zambia.?Since its launch in August 2019, MTN Nigeria’s mobile money service has attracted around 9.4 million users, proving the population’s willingness to switch to a digital economy and accept mobile payments as a popular alternative payment method across the country.

Money Moves??

• Voyager Innovations, the technology company behind the Philippine's money transfer app PayMaya and neobank Maya Bank, has raised $210M at a unicorn valuation of $1.4B.
• Re:cap, a Berlin-based digital funding platform that enables institutional investors to invest in the recurring revenue streams of companies, has extended its seed funding round to $15M with support from Abu Dhabi's Mubadal capital.
• Nigerian gig economy fintech startup?ImaliPay?has raised a $3M seed round to deepen its financial services infrastructure across Kenya, Nigeria, and South Africa.

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:

?? Bitcoin in 2021: a story in 5 graphs, and what might come in 2022

???A Wise pitch deck that led to London’s biggest and most successful direct listing ever

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