PayPal teams up with Apple Pay to break down its walled garden ????; Finally: Goldman sells troubled FinTech lender GreenSky??& More! ??

?? Hey, Linas here! Welcome to a ?? weekly 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.

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1. The Most Comprehensive Financial Health Monitor & Forecasting Template ?? [use this and transform financial management from a daunting task into an empowering journey]
2. Is Banking-as-a-Service over? ?? [what happened to Synapse & what should others expect + some bonus reads]
3. Will Rainforest give Stripe a run for its money? ?? [why it’s a company you must keep your eye on + some solid bonus reads]
4. The Great FTX Heist: how executives looted $8B in customer funds ??
5. JPMorgan pioneers blockchain collateral settlement with BlackRock & Barclays ????
6. FinTech M&As don't stop: 3 deals in a single day ??
7. The cryptocurrency bull market is already here ??
8. BNPL - a blessing in disguise? ??
9. Block cuts staff ??

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Last week (9-13 October) was another intense and super hot week in FinTech. We will look at PayPal which teamed up with Apple Pay to break down its walled garden (what it’s all about & why it’s a win-win for both parties + a closer look at PayPal); Goldman Sachs that finally managed to sell troubled FinTech lender GreenSky (what it means for Goldman + how Apple could have plaid a role); banks that face uncharted waters as deposits plunge & mortgages stall (what’s happening & what’s next), 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.

PayPal teams up with Apple Pay to break down its walled garden ????

The news ??? FinTech giant PayPal is now allowing users to add their PayPal and Venmo debit and credit cards to Apple Wallet for use with 苹果 Pay.

This move marks a shift in strategy for PayPal, which has previously operated within its own closed ecosystem.

Let’s take a quick look at this.

More on this ?? By opening up to Apple Pay, PayPal gives its users more payment flexibility. With Apple Pay's growing user base - estimates expect 45.8% of iOS users to use it this year - allowing PayPal cards enables the company to capture more of this spend.

While PayPal loses out on some transaction fees, the potential loyalty boost by having its cards top-of-wallet could make up for this over the long term.

For Apple, the partnership brings incremental revenue through fees, as well as valuable new spending data. This data could help Apple better understand users who split purchases between Apple Pay and other wallets like PayPal.

?? THE TAKEAWAY

Looking ahead ?? Going forward, we may see PayPal continue to break down its walled garden by enabling more third-party digital wallets. The company likely hopes these moves will increase engagement with its own cards and services. However, PayPal must be careful not to erode too much differentiation. Striking the right balance will be key to growing its user base while maintaining competitive edges.

ICYMI: PayPal launches a stablecoin ?? [can it be a game-changer & define the future of finance? + more bonus reads]

Finally: Goldman Sachs sells troubled FinTech lender GreenSky ????

The news ??? Goldman Sachs has agreed to sell its stake in GreenSky, the financial technology lender it acquired just last year, to a group of investors led by private equity firm Sixth Street Partners.

The sale marks an end to Goldman's ill-fated foray into consumer lending and an attempt to refocus on its core investment banking and trading businesses.

Let’s take a look.

More on this ?? We can remember that 高盛 purchased Atlanta-based GreenSky in 2021 for $1.7 billion, hoping to use the company's digital lending platform for home improvements as the basis for a new consumer banking arm. However, rising interest rates and slowing home sales quickly dampened demand for GreenSky's lending products. The company lost nearly $3 billion over three years, becoming a drag on Goldman's earnings. Ouch… ??

Faced with mounting losses, Goldman began looking at how it could get rid of GreenSky earlier this year. The deal is finally sealed and it will sell the lending platform and its portfolio of outstanding loans to the Sixth Street-led consortium for an undisclosed sum.

Goldman warned it will take a $62 million write-down in the third quarter related to the sale.

GS will operate GreenSky until the sale closes next year.

Zoom out ?? The deal caps off a rocky period for Goldman and CEO David Solomon, who pushed the consumer banking expansion despite resistance internally. Investors criticized the foray as an expensive distraction, urging Goldman to refocus on investment banking and trading, historically its main profit engines.

The criticism was apparently valid as in recent months, Goldman has been winding down Marcus, its direct-to-consumer lending arm, laying off hundreds of workers in the process. We can remember that Marcus was launched in 2016 as Goldman's first major retail banking initiative, but it struggled to gain traction while racking up billions in losses.

?? THE TAKEAWAY

What’s next? ?? First and foremost, the sale of GreenSky reorients Goldman firmly back towards its Wall Street businesses. This will please investors who want GS to stick to its core competencies in complex dealmaking and trading. On top of that, shedding the company should free up capital and leadership attention to drive better returns in investment banking and trading. However, it also closes the book on the company's ambitions to diversify into Main Street lending (but they learned it the hard way that they don’t know how to do it). Looking at the broader FinTech sector, Goldman's stumbles highlight the difficulties of competing with pure-play lending disruptors like Affirm and Upstart. Large banks face challenges innovating at startup speed, especially in fickle consumer markets. This has thus forced incumbents into partnerships or acquisitions to gain FinTech expertise, with varying degrees of success. Unfortunately, Goldman Sachs has failed both at partnerships and M&As when it comes to FinTech.

Apple could have fixed that…

ICYMI: Apple should have bought Goldman Sachs’ PFM unit. Here’s why ?? [+ more reads & dives]

Banks face uncharted waters as deposits plunge and mortgages stall ?????

Following the money ?? United States banks are sailing into uncharted waters as the Federal Reserve's interest rate hikes upend core business lines.

Let’s take a look.

More on this ?? According to an S&P Global analysis, banks suffered a record $872 billion outflow of deposits in the past year. Meanwhile, mortgage demand has dropped to lows not seen since 1995. Ouch.

The impact ?? The deposit drain signals mounting stress for banks. Over the 12 months ending June 30, deposits industry-wide fell 4.3% to $17.3 trillion. That’s a lot, when you think about it…

The four largest banks - JPMorgan Chase, Bank of America, Wells Fargo, and Citim- accounted for 30% of the plunge. Among the biggest losers was Charles Schwab, which saw deposits tumble 31% largely due to outflows from brokerage accounts. Damn.

Rising rates have also quashed mortgage demand. Applications were down 27% versus last year, with refinancing especially hard hit at a 21% decline.

The average 30-year fixed mortgage rate recently topped 7.4%, not seen since the early 2000s. Though higher rates typically moderate home prices, this time supply shortages have kept prices elevated even as fewer buyers can afford purchases.

?? THE TAKEAWAY

What’s next? ?? The deposit and mortgage trends highlight how the Fed's storm of rate hikes continues thundering through the economy in unpredictable ways. Tighter credit conditions may weigh on hiring and growth, outcomes the Fed has already acknowledged. Yet with the economy proving resilient so far, the central bank appears willing to risk further rate increases. Let’s wait and see how it goes.

For banks, the shifting landscape will require adjusting strategies and expectations. Reduced deposits limit their ability to fund new loans and generate interest income. And the mortgage market may remain depressed for the foreseeable future if rates stay elevated. Having said that, the industry could see consolidation as weaker banks struggle to adapt. But nimble players could also view the volatility as a chance to gain share (hint: JPM is always watching ??). But either way, one thing is clear - US banks face a prolonged voyage through choppy waters. Buckle up!

Extra Reads & Quick Bites for Curious Minds ??

• Klarna loves AI ???? BNPL giant Klarna has unveiled an AI tool that allows shoppers to take a picture of things and styles in their surroundings, instantly find out where to buy them, and get the best deal in the firm's app. The shopping lens tool can visually identify over 10 million items - from clothing to home décor and electronics- and match these with over 50 million store offers in Klarna 's search and compare tool. The feature is available in the US, UK, Germany, Sweden, Denmark and Norway. It builds on the company's previous use of AI for a discovery shopping feed in the Klarna app which recommends products based on personal interest. ICYMI: Klarna's strategy that nobody’s talking about ?? [closer look + more about Klarna + AI]
• Apple’s OB Play in the USA ???? Apple Wallet’s new integration has enabled it to show the card’s details and transaction history for Discover US credit card customers. With the new functionality, tapping on a transaction will deep-link into the Discover app or website, so users can act accordingly. This integration is rolling out as part of the just-released iOS 17.1 developer beta 3. In the UK, the Wallet app supports the Connected Cards feature with many different banks. This is enabled through a UK-standardised Open Banking API. No such API exists in the US, so Apple has partnered specifically with Discover to enable this feature for Discover US credit cards. The company did not comment on whether other US banks will add support in the future. If a customer is running the iOS 17.1 beta and has a Discover credit card in the Wallet app, taping on it and pressing the button to opt-in and begin the connect card flow will enable the new functionality. This will involve securely authenticating with Discover. Once set up, one can see his card’s balance in the Wallet app. Following Apple’s usual privacy standards, any data fetched through the Connected Cards feature remains on the device and is not shared with Apple. When other cards? ICYMI: Apple Makes a BIG Play into Finance with Open Banking integration ?????? [+ more reads]

Money Moves ??

• Germany-based startup Kodex AI has announced it raised EUR 1.6M in a funding round led by Signals VC to empower financial professionals with its AI solution.
• Barclays among potential Metro Bank mortgage book buyers. The bank secured a ￡925M rescue deal and is looking to sell up to ￡3B of residential mortgages.
• Upvest, a Berlin-based startup offering a plug-and-play API for FinTechs entering the investment market, has raised €30M and secured a deal with BlackRock to make investing more accessible for millions of people across Europe.

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 10 FinTech predictions for 2023 ??

?? Top banking trends to watch in 2023 ??

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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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