Fintech Update, 3/4 - 3/17
Hi! It’s Monday, March 18th, 2024
Apologies for missing your inboxes last week, but we are back with a bang!
The Rundown
Are we witnessing The Great Consolidation in fintech? Jake Gibson, GP at Better Tomorrow Ventures and Co-Founder of NerdWallet, seems to think so (and should probably ™ the term, you’re welcome, Jake). Last January, we wrote about how we expected to see a lot more M&A activity, as it seemed like a great market for larger, acquisitive companies to pick up great tech and talent. The market has certainly heated up since then, and the last two weeks were potentially the most active (yet)! In the last two weeks alone:
Deel, the all-in-one HR solution for international teams, acquired African-based payroll and HR company PaySpace. While financial terms of the acquisition were not disclosed, it is rumored that the deal was ~$100 million. The week before, Deel acquired German people development platform Zavvy. Deel continues to be a very acquisitive company over the last 1-2 years - in November 2022, the HR startup also acquired APAC-based payroll company PayGroup, and in January, 2023, it acquired equity management software provider Capbase. Given how much payroll varies across countries and regions, especially from a regulatory perspective, the strategy of BUY > BUILD, makes a ton of sense to us. Outside of the acquisition of PayGroup, Deel announced it “crossed $500 million in ARR…and claims that it has been EBITDA positive since September 2022 and still has $600 million left in the bank.”
British mutual financial institution Nationwide agreed to acquire Virgin Money, England’s sixth largest retail bank in terms of assets, for $3.7 billion in an all-cash deal. Notably, the proposed deal would “form [the] UK's 2nd-largest savings and mortgage company.”
Intuit acquired Proper Finance, which offered automated revenue reconciliation and a financial operations platform, for an undisclosed price. Well, actually, to be very clear, they ONLY acquired the IP and talent. In their blog post announcing the acquisition, Intuit wrote that it “had acquired intellectual property and hired the team.” Our guess is that there will be many of these types of acquisitions to come, as there will be lots of companies that raised funding in the last few years who never found product market fit and will be considering strategic alternatives.
Mexican revenue-based financing provider Ziff acquired Arrenda, which provided a revenue-based financing offering for Mexican landlords. Terms of the deal were undisclosed.
French business banking startup Qonto acquired accounting and financial automation platform Regate, for an undisclosed sum.
PayPal announced the launch of its tap-to-pay feature for US-based businesses on iPhone, enabling merchants using either Venmo or Zettle to accept contactless payments via phone without additional hardware. In addition to simplifying operational overhead for merchants, the feature will allow Venmo for Business to reach consumers outside of the Venmo ecosystem. The announcement comes nine months after the payments giant announced a similar feature for Android. The move enables PayPal to compete with Stripe, which already rolled out a similar feature for iPhone.
Speaking of Apple – the tech-giant-turned-fintech rolled out FinanceKit, an API that enables developers to pull transaction and balance information from users’ Apple Card, Apple Cash and Savings accounts. Initial integration partners include budgeting apps YNAB, Monarch and Copilot.
Payments giant Stripe processed over $1 trillion in total payment volume in 2023 (+25% from 2022), hitting the milestone only 15 years after the company’s creation (for comparison, PayPal took 23 years to hit the $1 trillion mark). Stripe attributed the growth to three factors: “enterprise business, fast-growing startups adopting its products, and billing and tax services.”
Federal Reserve chairman Jerome Powell said the Fed is “nowhere near” launching a central bank digital currency, and if such a currency ever came to pass, the government would play a limited role. Further, he stated that the Fed has no interest in establishing accounts for individuals that would compete with the banking system, nor any interest in monitoring personal financial transactions.
Critics questioned the CFPB’s proposed regulation of large digital payments firms in a House hearing on Wednesday. Committee chair French Hill called the rulemaking “egregiously short” and “deeply flawed,” and said that many companies are “confused about how the rule will be implemented or if they are even covered by it.”
Digital banking service Oxygen announced it will shutter its consumer banking offering and pivot to health insurance.
The Reading Nook
The Wall Street Journal took a look at JPM’s old-fashioned, branch-based growth model as a counterpoint to the increasing trend towards digital banking.
Selected fundings
UK-based challenger bank Monzo raised $430 million in growth funding led by CapitalG, as it reportedly prepares to reenter the US market. The round values the London-based fintech at $5 billion, which currently has over nine million retail UK customers.
Income and employment verification platform Argyle raised $30 million in new funding.
British BaaS platform Griffin raised $24 million in new funding to “meet regulatory capital requirements . . . as a fully-licenced bank.”
BaaS provider Synctera announced a $18.6 million Series A extension funding round co-led by Lightspeed and Fin Capital.
Riyadh-based construction platform BRKZ emerged from stealth and announced it raised $8 million in Series A funding, following a $5.5 million seed funding round led by Better Tomorrow Ventures.