Fintech Update, 2/13 - 2/19

Feb 21, 2023

Hi! It’s Tuesday, February 21, 2023. We hope you had a nice long President’s Day weekend!

Global financial technology provider FIS will spin off its “Merchant Solutions” business unit, a part of the business primarily composed of WorldPay, the global payments business that FIS acquired for $43 billion in 2019. The decision is a surprising one, given the size of the deal in 2019 and the relatively short amount of time that the companies were together. It speaks to the complexity of merging two firms, and especially to FIS’s failure to successfully integrate the WorldPay business into its own existing product set. FIS shares have lost half their value since completing the WorldPay acquisition and the company stated that the spinoff “offers the best path to enhance shareholder value.” FIS is facing pressure from activist shareholders and recently laid off roughly 2,600 employees.

The Securities and Exchange Commission (SEC) finalized its new rules to “shorten the standard settlement cycle for most broker-dealer transactions in securities from two business days after the trade date (T+2) to one (T+1).” The move had been approved one year ago, and the SEC will now move forward with adopting and enforcing them. SEC Chair Gary Gensler lauded the new rules, saying they will “reduce latency, lower risk, and promote efficiency as well as greater liquidity in the markets.”

Goldman Sachs reportedly has halted internal plans to create a Goldman-branded consumer credit card, the latest sign that the international bank is taking significant steps back from its retail ambitions. The bank had planned to develop the consumer card as part of CEO David Solomon’s goal to expand outside of the bank’s traditional investment- and private bank-focused business lines, but the company is reconsidering the strategy after shutting down its Marcus brand and “shelving plans to widely offer a checking account” last year.

Apple reportedly plans to assess customers’ past spending behavior on Apple products as part of determining eligibility for its upcoming Apple Pay Later service: According to Bloomberg, eligibility criteria (such as total spending, past use of Apple Pay, and which Apple devices the user owns) were revealed during employee tests of Apple’s forthcoming BNPL offering.

Alibaba sold the last of its shares in Indian mobile payments fintech Paytm for about $167 million, marking the end of an investment it held for eight years. The Chinese tech giant is gradually withdrawing from its Indian investments amid tensions between the two countries, and a regulatory crackdown at home complicates its international ambitions.

African cross-border payments platform Chipper Cash laid off about 100 employees, roughly 33% of the company, only 10 weeks after a previous round of cuts that affected approximately 12.5% of its workforce at the time.

Plaid launched its identity verification and KYC solutions into Canada, enabling Canadian companies to “verify the identities of users from more than 200 countries” through a single integration.

After announcing $93 million in new funding earlier this month, UK neobank Zopa acquired BNPL provider DivideBuy. Terms of the transaction were not disclosed. As we wrote in January, we expect M&A in fintech to continue and think it is a great market for larger, acquisitive companies to pick up great tech and talent.

Jarring headline of the month: Crypto Has an Incest Problem, courtesy of CoinDesk.
As explored in the Financial Times, Stripe’s employee stock expiration dilemma is emblematic of a broader issue faced by startups that delay IPOs: employees at these companies grow increasingly anxious as their Restricted Stock Units (RSUs, a common way to grant stock to employees in tech companies) approach expiration, often after seven years. Stripe reportedly is raising billions in new funding partly to help employees manage their tax bills as RSUs begin to expire in 2024, but Stripe is not alone: grocery delivery app InstaCart and autonomous ride sharing company Cruise face similar issues.

After announcing a few weeks ago that it raised $350 million (at a $12 billion + valuation) in a new funding round led by General Atlantic, Indian mobile payments app PhonePe raised another $100 million as part of this "ongoing round" from Ribbit, Tiger, & TVS Capital.
Aspire, the Singapore-based company offering a finance operating system for growing businesses in SouthEast Asia, raised $100 million in Series C funding.
Nigerian-based ID and KYC solutions provider Smile Identity raised $20 million in Series B funding.
Puzzle, the “first smart accounting software” company, raised $15 million in Series A funding.
ModernFi, the interbank solution that allows banks to exchange deposits on demand via a tech-enabled marketplace, raised $4.5M in a seed funding round led by a16z.
Ledge, the Israeli company building an automated, no-code payments command center for CFOs and their organization, raised $8 million in a seed funding round led by NEA.
Mexican neobank Vexi raised $8 million in Series A funding.