Fintech Update, 10/12 - 10/18
Hi! It’s Monday October 19, 2020.
Leading Off
Stripe announced that it will acquire Nigerian payment processing firm Paystack for $200 million. // The Chinese government accelerated the pace of its launch of the world’s first central bank-backed digital currency. // In other news, Revolut is close to applying for a bank charter in California; PayPal launched a “buy now, pay later” service in the U.K.; Tech-enabled wealth managers Wealthsimple and M1 Finance raised new rounds of funding; and Rapper-activist Killer Mike launched a digital-first challenger bank that is both majority Black- and Latinx-owned and aimed at supporting minority “entrepreneurs.” // All this + more below!
Heavy Hitters
Stripe to acquire Paystack. Stripe announced that it will acquire Paystack, a Nigerian payment processing startup, for $200 million. The two payment firms are no strangers, as they have been working together closely since Stripe led an $8 million funding round for Paystack in 2018. The acquisition displays Stripe’s commitment to geographical expansion - the firm has added 17 countries to its platform in the last 18 months and is now clearly betting on African emerging markets as an area of high potential growth. The African internet economy is expanding quickly, with online commerce in the region “growing 21% year-over-year, 75% faster than the global average.” Paystack will continue to operate independently, but over time, Paystack’s capabilities will be embedded in Stripe’s Global Payments and Treasury Network, a programmable platform for global money movement that currently spans 42 countries.
The digital yuan rollout is happening, setting the pace for the rest of the world. The Chinese government has increased the pace of its launch of the “digital yuan,” the world’s first central bank-backed digital currency (CBDC), distributing it to citizens in several cities and “urging even faster rollout of the token nationwide.” The Chinese government has stated that its ultimate goal is to “replace cash [and] maintain government control over the currency,” both for the purpose of control itself and to ward off potential incursions from non-governmental tokens like bitcoin or the proposed Libra coin. “We must build an independent and high-quality financial infrastructure,” noted Chen Yulu, deputy governor of the People’s Bank of China, “[that] is controllable and safeguards the security of payments." Meanwhile, as China marches forward with its plans for a mass rollout of its sovereign digital currency, the rest of the world remains firmly in the research stage: The Bank for International Settlements (BIS) recently published a report outlining the “key requirements” for CBDC projects, while the Financial Stability Board (FSB) published “high-level recommendations” concerning the “regulation, supervision and oversight” of future sovereign stablecoins. While the central banks of several countries, including the U.S. and U.K., are researching CBDCs, no country other than China has committed to producing one.
Quick Takes
Revolut expected to apply for CA bank charter. According to CNBC, the London-based challenger bank, Europe’s largest, is close to applying for a state bank charter in California. If successful, the charter would make Revolut one of the few fintech firms with a license to operate as a depository in the U.S. and the first European fintech with such powers.
PayPal launches Klarna competitor in U.K. The global payments firm is rolling out a “buy now, pay later” service in the U.K. that will compete with European giant Klarna and other point-of-sale installment lenders. PayPal’s “Pay in 3” product allows shoppers to “finance their purchases over three interest-free monthly instalments,” similar to the “Pay in 4” product it launched last month in the U.S. market.
FSB publishes a roadmap to improve cross-border payments. The Financial Stability Board (FSB) issued the new paper as part of a broader push to improve the cross-border payments space, which has been “a priority of [Saudi Arabia’s] G20 presidency.” The FSB’s report notes “several challenges, including high costs, low speed, limited access and insufficient transparency.”
Visa accelerates blockchain integration with Ternio partnership. The global cards giant opened its Fast Track program – which “provides turnkey access to Visa’s ecosystem” – to the blockchain firm, whose BlockCard allows users to access the value of their cryptocurrency wallets in real time. The partnership aims to “improve interoperability between Visa’s legacy finance products and blockchain.”
Mastercard partners with Stride. The global payments giant is partnering with the portable healthcare benefits provider to provide insurance to gig economy entrepreneurs that use services relying on the Mastercard network. Mastercard also announced that fintech firms Mobility Capital Finance and Jobble will be the first to offer Stride’s insurance-recommendation platform to its customers.
Wealth managers raise new funding. Two major digital wealth management firms raised new rounds of funding: Wealthsimple raised $114 million in Series E funding, granting it unicorn status with a $1.4 billion valuation; and, only months after raising $33 million, M1 Finance raised a fresh $45 million in Series C funding as its assets under management grew to over $2 billion from $1 billion in February.
Rapper-activist “Killer Mike” launches digital bank. Michael “Killer Mike” Render and his business partners announced the new “Greenwood Bank,” a digital-first challenger bank that is both majority Black- and Latinx-owned and aimed at supporting minority “entrepreneurs who typically have a harder time securing loans from mainstream commercial banks.”
Chase and Greenlight launch checking account for kids. Chase launched Chase First Banking, powered by Greenlight, a new checking account with no monthly fees to help parents teach kids the importance of money management and develop healthy saving and spending habits.
Fintech partnerships help TD in the pandemic. Pre-existing partnerships with fintechs has positioned the bank well to take advantage of shifting consumer preferences in the pandemic. TD has seen a 20% increase in digital engagement this year and added over a million digital banking users in the past few months.
Pop Flies
Move over metal, TreeCard will be offering wooden debit cards, 80% of whose profits will be used to plant trees.
But also, move over cards! Designer Phillipe Starck introduced a ring that stores card information in one wearable device.
German challenger bank N26 is reported to be considering a fresh fundraising round next year at a valuation of over $3.5 billion.
More Fundings!
FCA-regulated digital exchange Archax raised $8 million in seed funding.
Argyle raised $20 million in Series A funding to provide an API driven gateway to access employment records.
Sydney-based insurtech Cover Genius raised $15 million in fresh funding.
Extend raised $40 million in Series B funding to help companies build and handle extended warranties on their products.
Indian payment processor Razorpay raised $100 million in Series D funding.