PayPal Wants to Catch Klarna - Launches Pay in 4; Chime Adds $485M at a $14.5B Valuation; Amazon Debuts Hand-Scan Payments

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September was crazy hot and really intense month in the world of FinTech. PayPal has launched Pay in 4, a short-term interest-free BNPL instalment offering for merchants in the US; stock trading app Robinhood is being investigated by the Securities and Exchange Commission for failing to disclose that it sold clients' orders to high speed trading firms; US neobank Chime closed a funding round that brought its valuation to $14.5 billion. This is nearly double its valuation in December 2019 and almost 900% higher than just 18 months ago, when it was valued at $1.5 billion, and more developments and insights!

Without further ado, let us dive into what has happened in the new age of finance last month. Let’s connect the dots.

PayPal Introduced Interest-Free Buy-Now-Pay-Later Product

PayPal has launched Pay in 4, a short-term interest-free BNPL instalment offering for merchants in the US.

On the first week of September, one of the hottest news came from the digital payments titan PayPal that has unveiled an instalment payment that will allow approved US customers to pay for purchases from $30 to $600 in four payments made over a six-week period, with no interest or origination fees. The product will be included in existing PayPal pricing for merchants, allowing them to enable it at no additional cost, and it will be housed in PayPal's wallet to make it easily accessible for consumers.

THE TAKEAWAY

Launching Pay in 4 could increase PayPal's dominance in the surging buy now, pay later (BNPL) market. BNPL was already growing quickly, but the pandemic accelerated adoption as customers are searching for flexible payment options and avoiding credit card interest. And with both digital upstarts and legacy players launching new products and forging new partnerships, competition is only set to continue to intensify, especially as the holiday season approaches, when customers shop more and look more for savings. With over 26 million merchant partners worldwide, PayPal has a big advantage and a big audience with which it can scale the product.

Robinhood Faces Hefty SEC Fine for High-Speed Trade Deals

Stock trading app Robinhood is being investigated by the Securities and Exchange Commission for failing to disclose that it sold clients' orders to high speed trading firms, according to the Wall Street Journal.

Another cherry during the same week came from FinTech giant Robinhood that did not disclose, until 2018, that it received payments from high-speed trading firms for sending them client orders to buy or sell stocks and options, says the WSJ.

The FinTech giant could face a fine of more than $10 million if it agrees to settle the investigation, which is at an advanced stage, says the Journal, citing sources. However, a fine has not yet been negotiated.

THE TAKEAWAY

While payment for order flow is common for retail brokerages, it might be argued that it creates a conflict of interest. Robinhood only began disclosing the practice on its site in 2018. This is yet another illustration that if something is free of charge (in this case - trading), you are probably the product ???♂?

Chime Adds $485M at a $14.5B Valuation, Claims EBITDA Profitability

Chime has raised $485 million in a Series F funding round that values the American digital banking outfit at $14.5 billion

The 4th week of September, the US neobank Chime closed a funding round that brought its valuation to $14.5 billion. This is nearly double its valuation in December 2019 and almost 900% higher than just 18 months ago, when it was valued at $1.5 billion. Chime's successful raise comes in contrast to UK neobank Monzo, which accepted a down round in June that it attributed to the uncertain economic environment.

With this funding round, Chime surpassed stock trading FinTech Robinhood as the most valuable US consumer FinTech. Chime has more than tripled its transaction volume and revenues this year, it's adding hundreds of accounts per month, and should be "IPO-ready" within the next 12 months, according to the CEO.

THE TAKEAWAY (LONG ONE)

Chime has strong customer acquisition rates and ability to build relevant offerings that cater to customers' needs. Some of the examples:

• Chime made a concerted effort to ease consumers' financial burden caused by COVID-19. The neobank piloted early access to pandemic stimulus checks—$1,200 check advances for 1,000 customers—in early April. A week later, it extended the pilot to enable 100,000 customers to take out $200 beyond their account balances through its SpotMe feature, which typically acts as an overdraft protection feature, allowing customers to overdraft their accounts without having to pay a fee.
• Chime successfully distributed stimulus checks before most of the major US banks: it disbursed over $1 billion in stimulus payments to over 600,000 customers.
• It recently launched a credit-building credit card, which is poised to be another powerful driver of customer acquisition and loyalty among key untapped audiences. The card is designed to help customers build a credit history. It can be especially useful in enhancing Chime's value proposition among younger consumers, those with lower credit scores, and the underbanked population.

Amazon Debuted Hand-Scan Payments to Expand its Retail Push

Amazon launched Amazon One, a biometric technology that'll allow customers to make contactless payments using hand-scanning technology.

Lastly, the month was closed by Amazon - Amazon One will allow customers, upon sign-up, to enter two Seattle Amazon Go stores using hand-scanning technology. Amazon is planning a wider rollout to its other retail locations.

Further, Amazon says One technology could allow users to enter offices and stadiums, or authenticate loyalty cards at checkout. Although other firms like Fujitsu have launched similar biometrics products in the past, Amazon is the first major retailer to create and implement the technology in stores. 

Amazon plans to leverage the biometric technology to expand its payments, retail, and data collection capabilities. A Mastercard study found that more than half of US adults have turned to contactless payments since the onset of the coronavirus pandemic. Amazon can leverage that trend to appeal to customers wanting to use contactless payments in-store.

THE TAKEAWAY

With the launch of Amazon One, e-commerce giant is yet again moving further into Finance. Removing friction during the shopping and checkout experience (since customers won't have to pull out their cards or mobile devices for payment) could be a strong move in a markets like US. Also, coupled with Amazon Pay, One technology could also improve Amazon's data collection capabilities since it could gain more insight into customer purchases and use that information to market products to consumers, which could help boost Amazon's sales volume. 

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September in Brief

PayPal has launched Pay in 4, a short-term interest-free BNPL instalment offering for merchants in the US.

Stock trading app Robinhood is being investigated by the Securities and Exchange Commission for failing to disclose that it sold clients' orders to high speed trading firms, according to the Wall Street Journal.

Chime has raised $485 million in a Series F funding round that values the American digital banking outfit at $14.5 billion

Amazon launched Amazon One, a biometric technology that'll allow customers to make contactless payments using hand-scanning technology.

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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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