Monedo Files For for Bankruptcy; Klarna Hits $10.65B Valuation; Affirm Raises $500M; Razer, Gaming Hardware Maker, Aims to Build a Bank

Last week (14-18 September) was yet another interesting week in FinTech this year. A German FinTech Monedo once backed by PayPal investor Peter Thiel, has filed for bankruptcy after failing to recover from the economic effects of the Coronavirus pandemic; Affirm, Max Levchin's buy now, pay later credit card alternative, has raised $500 million in a Series G funding; SWIFT, a global provider of secure financial messaging services, announced that its cross-border platform will be retooled to enable financial institutions to deliver instant transactions, and much more!

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

German FinTech Monedo Files For for Bankruptcy

A German FinTech once backed by PayPal investor Peter Thiel, has filed for bankruptcy after failing to recover from the economic effects of the Coronavirus pandemic.

Monedo, an online lender, was one of the most highly valued FinTech startups in Germany with high profile backers like Thiel, JC Flowers and the global media firm Naspers.

But it was reported by online news site Sifted that Monedo filed an insolvency claim in a German court last week and a Hamburg law firm Brinkmann & Partner had been appointed to manage the proceedings.

The company was founded in 2012 under the name Kreditech and originally focused on providing microcredit loans. By 2017 the startup was valued at over €230m but its valuation had plunged by December 2018 thanks to some major defaulters in Russia and India. This prompted a management resuffle and the appointment of a new managing director David Chan and a new CFO Mariusz Dabrowski.

Another stratgeic reboot was needed in March 2020 as the company changed its name to Monedo and also switched direction to focus on algo-powered loans and a greater use of machine learning in its underwriting process.

But the onset of the Coronavirus pandemic and the reduction in risk appetite among lenders scuppered any chance of a recovery for Monedo.

Klarna Hits $10.65B Valuation After $650M New Funding

Swedish buy now, pay later outfit Klarna has raised $650 million in an equity funding round, at a post money valuation of $10.65 billion, ranking the firm as the highest valued private fintech in Europe, and the fourth highest worldwide.

The funding round is led by Silver Lake, alongside GIC - Singapore’s sovereign wealth fund - as well as funds and accounts managed by BlackRock and HMI Capital.

Concurrently, Merian Chrysalis, TCV, Northzone and Bonnier have acquired shares from existing shareholders. They will join current investors such as Sequoia Capital, Dragoneer, Permira, Commonwealth Bank of Australia, Bestseller Group and Ant Group in supporting Klarna’s future growth.

Klarna’s direct to consumer app has more than 12 million monthly active users worldwide, with 55,000 daily downloads.

Earlier this year, Klarna acquired Italian BNPL firm Moneymour and launched a savings account for German consumers using online deposit marketplace Raisin.

However, the firm has been burning cash in its attempts to break out of its home market, with US expansion plans proving a particular drain. The firm reported a $93 million loss in 2019 (from a $10 million profit the year before) as the scale of its ambitions hit the bottom line.

The new cash will go to a renewed effort to break into the United States, where the company now claims more than 9 million consumers.

After adding more than 35,000 new retailers during the first half of 2020, Klarna says it has become the pay later partner of choice for the top 100 highest grossing merchants in the US.

As a result, business appears to be a on a rebound, with volume and revenue for the first half of 2020 growing 44% and 36% year-on-year to more than $22 billion and $466 million respectively.

Sebastian Siemiatkowski, co-founder and CEO of Klarna, said:

We are at a true inflection point in both retail and finance. The shift to online retail is now truly supercharged and there is a very tangible change in the behaviour of consumers who are now actively seeking services which offer convenience, flexibility and control in how they pay and an overall superior shopping experience. Klarna’s unique proposition, consumer preference and global retailer network will prove an excellent platform for further growth.

Veem Raises $31M

Cross-border business payments startup Veem has raised $31 million in a funding round led by the VC division of Truist Financial Corporation.

The round was joined by MUFG Innovation Partners and AB Ventures as well as existing investors GV, Goldman Sachs, Kleiner Perkins, Silicon Valley Bank, National Australia Bank Ventures and Trend Forward Capital.

Veem has won over 225,000 customers to its proprietary multi-rail technology, which routes transactions to more than 100 countries through different methods, including card, treasury accounts, blockchain, and the Swift network.

The firm says its secure, trackable transactions combined with seamless integrations with business applications such as QuickBooks, Xero and NetSuite, enable firms to save time and money, while mitigating risks associated with international funds transfers.

The new funding will be used to develop a channel partner programme to widen Veem’s geographic footprint as well as to expand the company's product suite.

Marwan Forzley, CEO of Veem, commented:

This funding round marks an important milestone for the company, putting us in an ideal position to build out our channel partner program and prepare for Veem’s next stage of global growth. Our channel partner network serves as our vehicle to better commercialize our product offering and further expand upon our market development efforts.

Affirm Raises $500M

Affirm, Max Levchin's buy now, pay later credit card alternative, has raised $500 million in a Series G funding round led by GIC and Durable Capital Partners.

Lightspeed Venture Partners, Wellington Management Company, Baillie Gifford, Spark Capital, Founders Fund, and Fidelity Management & Research Company joined the round for Affirm, which has now raised over $1.3 billion to date.

Affirm partners 6000 merchants helping them drive sales, grow average order value, and increase repurchase rates through its point of sale buy now, pay later option.

In July it scored an exclusive deal with e-commerce marketplace Shopify and is now introducing an interest-free biweekly payment product for transactions as low as $50.

Levchin commented:

Alongside this new capital, our latest product is another step towards becoming as ubiquitous as credit cards - Affirm is now an even more attractive payment option for everyday wants and needs.

Razer, Gaming Hardware Maker, Aims to Build a Bank

Razer, best known for gaming hardware, is eyeing banking licenses in the US and EU.

Razer, best known as a company that sells hardware for computer gaming, is considering expanding its financial services presence to the US and Europe, per PYMNTS.

It aims to serve "the underserved youth and millennials segment," as well as entrepreneurs and small businesses. Early this year, the California-based company applied for a banking license in Singapore, where it had already entered financial services with a virtual wallet and merchant services. Razer views its financial business as its key growth initiative outside of cloud-based gaming.

Elbowing into neobank territory is risky for a new entrant. Razer's payments services make sense within the gaming world as platforms for in-game commerce, and to some extent, as affinity programs for the company's customers and merchants that want to sell related content and services.

But the "Youth Bank'' it plans to start and grow on the strength of its brand is an exceptional departure from its core business. With Razer's global ambitions, it would face over two dozen established neobanks in a market that's grossly unprofitable. After entry into the US and Europe, it would compete with heavyweights like Chime, Revolut, and N26.

With their financial services ambitions, large consumer brands don't leave much room for smaller players. Razer is one of many nonbanks around the globe offering or looking to offer banking products. Razer's application for a Singapore banking license came just as Ant Financial applied for the same—after both Ant and Tencent received banking licenses in Hong Kong.

Square Launches On Demand Payroll

The new "Instant Payments" offering lets employers fund payroll in close to real time.

Square Inc. on Tuesday announced the launch of two new features the company says will make payroll easier for employers and employees alike.

The new "Instant Payments" offering lets employers fund payroll in close to real time, eliminating the lag between when funds leave an employer's account and when those funds arrive in employees' accounts, which Square says can stretch to as much as four business days. The lag has the effect of depriving an employer of the use of the funds in order to provide them to workers in time.

"Instant Payments allows Square Payroll customers to fund their payroll using the money in their Square Balance, where sales they process via Square are stored. By expanding the functionality of an employer’s Square Balance and enabling sellers to select it as a payment source, Square receives confirmation of payroll funds instantly and can initiate payouts to employees immediately," Tuesday’s news release states. "Team members and contractors who have elected to be paid via Cash App receive their pay within minutes, while those paid via direct deposit get their pay as soon as the next business day."

Square also unveiled a service called "On-Demand Pay" to give workers faster access to wages than they typically have under electronic payment setups.

According to Square, there are 80 million hourly workers in the United States.

SWIFT To Create New Cross-Border Real-Time Rails

SWIFT, a global provider of secure financial messaging services, announced that its cross-border platform will be retooled to enable financial institutions to deliver instant transactions.

Over the next two years, the Belgium-based cooperative said the initiative will provide transaction management services. The new approach promises to create new value-added services to support business growth.

SWIFT said its platform will improve interactions between financial institutions, optimize speed and provide transparency and predictability from one account to another anywhere.

The move has the potential to provide instant transactions between 4 billion accounts serviced by financial institutions across SWIFT’s network, the company added.

Dubbed the next-generation digital platform, it is expected to use an application programming interface API, a computing interface which defines interactions between multiple software intermediaries, and cloud technology to provide common processing services.

“We are innovating the underlying infrastructure that financial institutions use to make transactions run even faster end-to-end, and at the same time further reducing costs for the community through industry-shared services in the areas of cyber, fraud and compliance," said Javier Pérez-Tasso, SWIFT’s CEO, in a statement. “We will introduce data innovation that embeds risk and control elements expected from SWIFT, creating peace of mind for business-critical operations. Combining these elements, we are creating a broad platform with faster technology and smarter and better services that the industry can trust as a foundation for innovation towards their own end-clients.”

SWIFT said the planned platform will leverage its reach across more than 11,000 institutions in 200 countries.

Continue reading on other top stories and get the Weekly FinTech Digest to your inbox every Friday by subscribing to Connecting the Dots Newsletter.

Week in Brief

A German FinTech once backed by PayPal investor Peter Thiel, has filed for bankruptcy after failing to recover from the economic effects of the Coronavirus pandemic.

Swedish buy now, pay later outfit Klarna has raised $650 million in an equity funding round, at a post money valuation of $10.65 billion, ranking the firm as the highest valued private fintech in Europe, and the fourth highest worldwide.

Cross-border business payments startup Veem has raised $31 million in a funding round led by the VC division of Truist Financial Corporation.

Affirm, Max Levchin's buy now, pay later credit card alternative, has raised $500 million in a Series G funding round led by GIC and Durable Capital Partners.

Razer, best known for gaming hardware, is eyeing banking licenses in the US and EU.

The new "Instant Payments" offering by Square lets employers fund payroll in close to real time.

SWIFT, a global provider of secure financial messaging services, announced that its cross-border platform will be retooled to enable financial institutions to deliver instant transactions.

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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 company's expansion into Europe , I'm an active member of FinTech community and a TechFin evangelist.

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