#PayTech / After breakup with Visa, Plaid could be eyeing public markets

After Visa’s attempt to acquire Plaid for $5.3 billion fell apart nearly one year after the deal was first announced, industry observers are betting that the startup will nix getting acquired by another company. Instead, Plaid is more likely to go public via a traditional initial public offering, a special purpose acquisition vehicle (SPAC), or a direct listing…

Pinar Ozcan, a Professor of Entrepreneurship and Innovation at Oxford Said Business School, agrees that the logical next step for Plaid could very well be a move toward the public markets. She also believes that the events of the past year have had a major influence on Plaid’s value in the fintech world… “The fact that Plaid attracted the interest of an industry giant, Visa, is in itself an indicator of the competitive and innovative potential such fintechs create via solutions benefiting the society,” she told FinLedger. “Furthermore, the reactions from regulators to the acquisition news show that how they, as key decision-makers in the market, perceive fintechs as strategic actors ensuring innovation and competition in a traditional, stagnant market. It also hints that open banking will likely be the future of the industry.”

It’s now clear that Visa wanted to buy Plaid because it was an emerging competitor and threat to Visa’s business with its debit card plans…


#DigitalBanking / Goldman Sachs is mulling acquisitions to bulk up its UK-based digital savings and lending service Marcus

… the bank believes online activity will be central to future growth. This is why its executives are ruling out any deals that involve acquiring branches… the bank has set an “extremely high” bar for deals. They need to be both large and transformational.

Marcus as a key for Goldman… The CEO wants to move the bank away from a sole reliance on unpredictable investment banking, to more predictable revenues from retail banking products.

Future of PFM… [Adam Dell, head of product for Marcus says] Personal finance management (PFM) tools have shown consumers that “they’re not getting a fair deal”… “Through the use of these new tools people are seeing where their money actually goes”… a combination of a PFM and a banking service is a powerful thing: “It creates synergy between a financial situation a consumer is in and the products and services they can utilise.”


#BankTech / The 5 Hottest Technologies In Banking For 2021

… The truly “hot” technologies in banking are the ones that financial institutions invest in—not necessarily the ones the pundits talk about… In Cornerstone’s What’s Going On in Banking 2021 study, the top five technologies for 2021 are: 1) Digital account opening; 2) Application programming interfaces (APIs); 3) Video collaboration; 4) P2P payments; and 5) Cloud computing.

1) Digital Account Opening

Consumer digital accounting opening is the most popular technology for the fourth year in a row—with banks (finally) leading the way here… Nearly half—44%—of banks and a quarter of credit unions expect to add a new or replacement consumer digital account opening system in 2021.

2) Application Programming Interfaces (APIs)

APIs jumps from the #5 spot last year to #2 on the list for 2021, with roughly one in four institutions planning new investments… Going into 2021, only 30% of banks had deployed APIs, but that’s up from the 21% that had done so going into 2020.

… The growth in API deployment among banks and credit unions is more focused on efficiency (i.e., cost and speed). That’s OK, but it still leaves the threats of fintech competitors and the opportunities from fintech partnerships unaddressed.

3) Video Collaboration

One in four financial institutions are planning to invest for the first time in this technology in 2021. Going into 2020, only 20% of banks and credit unions had already deployed these tools—heading into 2021, that percentage is roughly 30%.

… Consumers’ continued use of branches has little to do with their desire to go to a physical location, and a lot to do with their desire to interact with a person.

The problem to solve: Without good video collaboration tools, it’s been hard for consumers to find the right person to talk to, and then actually interact (if and) when they do find the right person.

4) Person-to-Person (P2P) Payments

For 2021, about a quarter of banks and a fifth of credit unions expect to select a new or replacement P2P tool. That’s down from the roughly 30% who expected to deploy one in 2020, which, in turn, was down from the 35% who planned to do so in 2019.

Zelle has become the 800-pound gorilla in the space, with roughly 500 institutions currently offering its P2P tool—including nearly all of the 25 largest banks… The PayPal app is installed on nearly two-thirds of smartphone owners’ devices, and 40% of them say they make P2P payments through the app every week… Apple Pay, Google Pay, and Venmo are found on fewer smartphones, but among consumers that do have these apps on their phone, about a third say they use them every week to make P2P payments.

Bottom line: P2P payments isn’t a winner-take-all game. Consumers use different apps depending on who they’re paying or getting paid by…

5) Cloud Computing

The percentage of banks that have deployed cloud computing increased significantly in 2020, going from 32% at the end of 2019 to 40% at the end of 2020. Half of credit unions are already there.

While there are still holdouts to cloud computing, the general sentiment in the industry has shifted over the past few years to the point where many (if not most) banks and credit unions believe they are on an inevitable journey to the cloud.

What About Artificial Intelligence (AI)?

For all the hype surrounding AI-based technologies like chatbots, machine learning, and robotic process automation, few financial institutions beyond the 25 largest are doing much with these tools… most mid-size banks and credit unions don’t have the internal resources to experiment with and develop AI-based solutions.

Over time, this will become less of an issue as AI becomes assimilated into—or indistinguishable components of—banking applications.

Will Banks Jump On The Crypto Bus?

Cornerstone’s consumer research has found that roughly 15% of Americans hold some form of cryptocurrency like Bitcoin. But that was three months ago… Cornerstone estimates that consumers made more than $30 billion in retail purchases using cryptocurrencies in 2020.

… If banks are sincere about being “customer-centric” and listening to the “voice of the customer,” they’ll start becoming more interested. A consumer survey from NYDIG found that 80% of Bitcoin holders would move their Bitcoin to their bank if it provided secure Bitcoin storage.

Prediction for 2021: The combination of the recent regulatory guidelines concerned the provision of cryptocurrency services by banks and the run-up in the price of Bitcoin will finally lead to some forward-thinking banks and credit unions to start offering crypto investing services to their customers and members.


#LendTech / LendingPoint closes on $125 million investment from Warburg Pincus

The company has developed a financial technology platform that provides financing origination solutions for our e-commerce and point of sale partners, lending institutions, and consumers.

CEO Tom Burnside co-founded LendingPoint in 2014 alongside Franck Fatras, Victor Pacheco, and Juan Tavares. They launched the company based on the premise “that the U.S. credit scoring system is imperfect and leaves many individuals underserved and overlooked, forcing people to rely on payday lending”… “We wanted to make a difference in the marketplace, so LendingPoint used data and technology to tell a more accurate credit story about customers to help them get a fair and equitable financing solution.”

Today, the company’s fraud prevention, risk, and asset management algorithms are used to create financing opportunities across the full credit spectrum. For example, its LendingPoint Merchant Solutions platform provides e-commerce platforms, merchants, and other service providers what the company describes as “fully integrated, one-stop buy now, pay later financing solutions” to convert more customers for products like Invisalign, for example.


#BNPL / Max Levchin’s Affirm pops nearly 100% in market debut

Shares of payments company Affirm soared 98% in its initial public offering on the Nasdaq, kicking off what’s likely to be a busy season for market debuts.

Founded in 2013 by PayPal co-founder Max Levchin, Affirm has become prominent in the “buy now pay later” space that offers point-of-sale loans. The company allows customers to finance online purchases that can be paid back in monthly installments without accruing compounding interest.

Affirm makes money when it helps a merchant make a sale. It also earns interest income on loans it buys from bank partners and some consumer loans. The rate it charges varies by consumers’ creditworthiness, but often starts at 0%.

“Our goal is to be a viable alternative to credit cards,” Levchin told CNBC ahead of the company’s first trade.

Morgan Stanley, Goldman Sachs and Allen & Co were the lead underwriters for the offering. Major investors include Peter Thiel’s Founders Fund, Khosla Ventures and Lightspeed Venture Funds.

Affirm’s market debut could mark another successful venture for Levchin, who owns 27.5 million shares in the online lender. Following PayPal’s sale to eBay in 2002, Levchin started the social application company Slide. That sold to Google in 2010 for a reported $182 million.

Affirm… has made CNBC’s Disruptor 50 list twice.


#LendTech / X1 Card raises $12 million for its credit card with limits based on your income

X1 Card is raising a $12 million funding round. The company is building a credit card that sets limits based on your current and future income, not your credit score.

Spark Capital is leading the round with Jared Leto, Aaron Levie, Jeremy Stoppelman, Max Levchin and Ali Rowghani also participating. American Express veteran Ash Gupta is also joining the company as an advisor…

The startup believes the credit score system is outdated and doesn’t reflect your creditworthiness. That’s why it doesn’t use it to calculate limits. Your credit score still affects your variable APR (from 12.9% to 19.9%), but that’s it.

There are also a lot of software features that work with the credit card. For instance, you can track your subscriptions from the X1 app, you can also generate an auto-expiring virtual card for free trials that require a credit card. You also get notifications for refunds… you get 2X points on all purchases. If you’re a heavy user and you spend more than $15,000 on your card per year, you’re upgraded to a new tier and earn 3X points. There’s also a viral element as you get a boosted reward level when you refer a friend — you get 4X points for a month. You can then spend your points with retail partners.


#LendTech / Starling renews search for non-bank European lender

In an interview with Sifted this week, Boden said the UK challenger was actively searching “for lending businesses to buy”. This includes peer-to-peer (P2P) lenders, as well as small business lenders.

Starling’s deposit base passed £3 billion back in July 2020, up from £600 million in July 2019…

Last year, Starling deployed millions into consumer loans via alternative lender Zopa, and similarly millions into small business loans via Funding Circle.

“Because we have a European strategy, we’re also keen on looking for lending businesses to buy” … Boden highlights the state of P2P lending in Europe, which she believes is traditionally funded by retail investors. But the current trend shows that P2P lenders’ reserves have largely been replaced by institutional backing, which is far more expensive.


#CryptoCurrency / CoinSwitch Kuber’s $15m Series A marks Ribbit Capital’s first Indian crypto deal

Ribbit Capital, the Palo Alto-based backer of Revolut, Robinhood and Affirm, has led its first Indian cryptocurrency deal.

The start-up began as CoinSwitch in 2017, a global aggregator of crypto exchanges. It removed the need for businesses to create an account on an exchange… The Kuber platform launch was designed to simplify crypto investments for Indian retail investors.

Within six months of launch, the fintech claimed this platform had attracted more than one million users. It had also reaped the rewards of some $270 million in investments.


#PFM / Dubai-based Bankiom promises “new way” to manage money

Bankiom offers a card “accepted worldwide”, the ability to send and receive money through chat apps like WhatsApp, and instant payments.

According to the firm, customer accounts can activate in under three minutes, and loan applications approved in 60 seconds.

The fintech says it is a “new way to manage your money” from a firm that “cares and believes in your future”… Bankiom joins a list of challengers in the UAE, including Clearly, CBD Now, E20, and Mashreq Neo.


#BankTech / Irish banks plan payments rival to take on fintech entrants

A group of major Irish banks are banding together to create a payments app rivalling fintechs like Revolut.

According to The Irish Times, the system allows bank customers to transfer their funds quickly and easily between accounts.

The group of banks are open to others in the industry joining them in the new joint venture. The project is coordinated by the Banking and Payments Federation Ireland (BPFI).

The scheme could launch as early as summer 2021, with an initial focus on consumer payments.

Revolut has made waves in the Republic of Ireland. The fintech claims more than one million customers in Ireland, meaning one in four Irish adults have a card.

Revolut offers its main payments and wallet services in the country, on top of its Revolut Junior product for those aged seven-to-17.