Fintech Update, 6/22 - 6/28
Hi! It's Monday, June 29, 2020.
Did you know that on this day 13 years ago, the Apple iPhone (1st generation) was released??
Leading Off
Mastercard acquired open banking API platform Finicity for up to $1 billion. // The Brazilian central bank suspended WhatsApp’s mobile payments service only a week after it launched in the country. // Wirecard’s CEO was arrested as the saga continues to unravel. // Thousands of small enterprises that use Square have complained that the company recently began holding back 20 to 30 percent of the money they collected from customers. // Meanwhile, the NYDFS proposed easing regulations around crypto trading; PayPal and Venmo announced that they will add crypto buying and selling to their platforms; Zopa secured a UK banking license; and nCino filed for an IPO.
Heavy Hitters
Mastercard acquires Finicity for $825M. The global payments processor acquired Finicity, a fintech that helps banks share customer data with other financial firms, in a deal valued at $825M. The acquisition will help Mastercard expand its open banking services, and mirrors its rival Visa’s acquisition of Plaid in June, albeit on a smaller scale. Finicity CEO Sachin Mehra noted that the deal allows Mastercard, who already has established involvement in open banking in Europe, “to make good headway in the U.S.” in that area.
Brazil says ‘thanks but não obrigado’ to WhatsApp payments. The Brazilian central bank suspended WhatsApp’s mobile payments operations in the country, less than a week after the Facebook-owned messaging service rolled out the new functionality to its 120 million Brazilian users. Banco Central do Brasil’s official statement on the decision noted that it was made to “preserve an adequate competitive environment” in the mobile payments space and to ensure “functioning of a payment system that’s interchangeable, fast, secure, transparent, open and cheap.” Brazil is WhatsApp’s second-largest market.
Wirecard completes terrible, horrible, no good, very bad week. The Financial Times chronicles the past week for the German payments firm, long hailed as one of Europe’s best payments startups, which disclosed a massive accounting discrepancy only days before filing for insolvency. Along the way, the firm acknowledged that the scale of accounting misconduct was likely years-long, admitted that the missing €1.9 billion “probably does not exist,” and watched as CEO Markus Braun resigned and was subsequently indicted on fraud charges. Commentators are calling it fintech’s “Enron” moment.
Square accused of withholding cash owed to small businesses. Thousands of Square’s small businesses customers have complained that the firm is holding back 20-30% of the money collected from them, a vision of the firm at odds with the praise it has won for its corporate activism during the coronavirus crisis. Upon investigating the claims, the New York Times found that some businesses indeed had funds withheld, apparently despite not having any returns or transactions flagged for risk. Square’s customers say the withholdings have thrown their businesses into further financial difficulties at a particularly precarious time.
Quick Takes
NYDFS announced new crypto initiatives and regulatory changes. The New York State Department of Financial Services (NYDFS) launched a series of initiatives related to cryptocurrency in the state, including a partnership with the State University of New York called “SUNY BLOCK,” guidance for cryptocurrency “licensees’ ability to self-certify the use of new coins,” and new guidance for crypto license-seekers.
PayPal and Venmo to roll out direct sales of crypto. The online payments giant and its Venmo subsidiary announced that users soon will be able to buy and sell cryptocurrency on their platforms. The move may be an effort by PayPal to capture new revenue and compete with competitors like Square’s Cash App, which launched support for bitcoin transactions in mid-2018.
Verizon launches credit card. The U.S.’s largest wireless provider partnered with retail card provider Synchrony Financial to launch the Verizon Visa Card. The fee-free card offers Verizon Wireless customers the ability to collect rewards and redeem them against monthly bills or smartphone purchases.
Uber scraps financial services plans. The ridesharing giant said it will “‘deprioritize’ several of its finance-related projects, which included credit cards, a digital wallet and instant payments” in an effort to focus on ride-sharing and food delivery. Uber’s head of financial services is also leaving the company.
Checkout.com raises $150M, triples valuation. The UK-based payments startup raised $150 million in Series B funding, giving it a $5.5 billion valuation that almost tripled its $2 billion 2019 valuation.
Zopa secures full UK banking license. The online lender received approval from the UK’s Financial Conduct Authority to launch Zopa Bank, a “new challenger bank [that] will sit alongside its existing peer-to-peer lending business.” The firm plans to launch a fixed-term savings account later in the year.
nCino files for IPO. The financial services cloud software provider filed paperwork with the Securities and Exchange Commission for an initial public offering, indicating that it plans to raise $100 million.
Google to offer loans to Indian merchants. The global tech giant announced plans to help small businesses in India fight through the pandemic by offering small business loans via the Google Pay app.
Pop Flies
Robinhood committed to improving its options offering, following a user’s tragic suicide.
Visa launched AI-based digital identity scoring to help banks handle fraudulent accounts.
Ant Financial reportedly will drop “financial” from its name and rebrand as Ant Technology Group.
Brex and Apple partnered on a new deal to give Brex customers 3x rewards on eligible Apple products.
Banking startup Karat launched a new credit card for “creators who make a living on social media.”
SoFi CEO Anthony Noto said the firm may take steps to warn users about the risks of day trading.
Lemonade is aiming to sell 11 million shares in its IPO, at a price of $23-$26 per share.