Fintech Update, 7/26 - 8/1
Hi! It’s Monday, August 2, 2021.
Leading Off
Square acquired Afterpay in a monster $29B deal; the Department of Justice is looking into whether Tether executives committed bank fraud with its early partners; and PayPal’s “super app”is close to launch. // In other news, Monzo’s annual report revealed a possible money laundering probe by the Financial Conduct Authority and continued losses, Marqueta and Google are partnering on virtual Google Pay card, and Klarna continued its acquisition spree by purchasing influencer marketing software firm APPRL. // All this + more below!
Heavy Hitters
Square announces now, will acquire Afterpay later. The payments firm and Australian ‘buy now pay later’ (BNPL) company kicked off August with a bang by announcing that Square will acquire the latter for $29 billion in stock, valuing Afterpay at a 30% premium over its recent average trading price. The massive deal is only the latest big move for Square, which also added a Bitcoin business unit and purchased a stake in the Tidal music streaming service earlier this year, and is another, many-zeroed data point supporting the significant growth and high potential of BNPL businesses. According to Square’s press release announcing the acquisition, the firm intends to use Afterpay to “enhance both the Seller and Cash App ecosystems” as it addresses “shifting consumer preferences away from traditional credit, especially among younger consumers.” In other words, Afterpay gives the payments giant a (giant-sized) foothold into BNPL, the fastest-growing form of payment around the world, helping it stay current with customer and merchant demand and on the same playing field with competitors like Klarna, Affirm, and Apple (Apple Pay Later coming soon!). Moreover, combined with its other products, Square appears to be building a robust multi-channel payments platform, capable of serving any type of merchant and offering multiple types of purchasing options to customers – from standard swipes to Bitcoin to installments. The payments landscape is getting crowded with winners and this may be the first big sign of consolidation on the way.
Quick Takes
The DOJ is looking into whether Tether executives committed bank fraud. The U.S. Department of Justice (DOJ) is investigating whether the executives behind the stablecoin concealed crypto-linked transactions from their early banking partners, which could result in criminal charges. Tether is the largest stablecoin by market cap (~$63B) and underpins more than half of all Bitcoin trades, and any legal action – particularly on such a large stage – would likely send shockwaves through the industry.
Robinhood had a tough week. Things got off on a sour note for the popular, fee-free digital brokerage when, on the eve of its hotly anticipated IPO, the firm disclosed that regulators are investigating CEO Vlad Tenev for not being licensed by the Financial Industry Regulatory Authority (FINRA). Then, after months of hype and a revolutionary approach that allowed Robinhood customers to invest “on equal terms with institutional investors,” the firm debuted on the Nasdaq stock exchange at under its $38 target price, missing expectations and disappointing investors.
PayPal readies the launch of its “super app.” The payment giant said it’s ready to launch its super app, which includes features like “enhanced direct deposit, check cashing, budgeting tools, bill pay, crypto support, subscription management, and buy now, pay later functionality.” The enhanced PayPal will look much more like its famous do-everything Asian competitors WeChat and Grab, which have bundled features like chat and ride-share and delivery services alongside financial services.
… and releases quarterly results. PayPal also released its second quarter 2021 results, showing yet another strong quarter: the fintech gained 11.4 million net new active accounts and handled $311 billion in total payment volume.
Monzo’s in hot water. The British neobank’s annual report revealed that it is facing a possible civil and criminal money laundering investigation by the Financial Conduct Authority. For the second year running, the report warned that continued losses threaten its ability to continue as a going concern (its annual losses totaled £130 million, up from £111 million last year).
Marqeta and Google Pay partner. Google Pay is partnering with card issuing platform Marqeta to offer a virtual Google Pay balance card, which allows users to “spend their Google Pay balance through a virtual card tokenized into a mobile wallet and used at accepting merchants.”
Klarna acquires APPRL. The Swedish BNPL giant completed its third acquisition of the month, announcing its acquisition of influencer marketing software firm APPRL. Klarna’s CEO said that adding APPRL to Klarna’s retailer support, provides an opportunity to “create an enriching and informative shopping experience for consumers everywhere while accelerating retailer growth.”
Starling Bank acquires Fleet Mortgages. The surging digital bank made its first acquisition, purchasing specialist buy-to-let mortgage lender Fleet for £50 million. Starling will become the sole funder of Fleet’s ~£1.75 billion book of mortgages under management. Starling plans to expand its lending offerings this year through strategic arrangements and M&A.
Visa is getting into the BNPL game. The payments network is now offering APIs that allow its clients to offer installment payments products, becoming the recent major financial company to enter the space. Visa is partnering with Commerce Bank to offer these products in the US.
Pop Flies
Ramp is reportedly raising its fourth round of venture funding in the last eight months at a valuation of $3.8 billion, more than double its valuation in March.
Wealthfront is adding two cryptocurrency trusts to its menu of investments: Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust (ETHE).
Investor Third Point reportedly pulled its funding offer from BlockFi’s most recent round of funding amidst regulatory challenges.
More Fundings!
Wealth management
Alternative investing platform iCapital Network raised $440 million in a funding round that values the firm at $4 billion. 🦄🦄🦄🦄
Banking
LatAm SME financial services platform Xepelin raised $30 million in equity and $200 million in credit facilities.
Payments
B2B payments platform Nium raised $200 million in Series D funding at a valuation north of $1 billion. 🦄
Lithic (formerly Privacy.com), the virtual card platform that provides secure payments, raised $60 million in Series C funding at a valuation of $800 million.
South African point-of-sale payments provider for small businesses Yoco raised $83 million in Series C funding.
Crypto & Blockchain
Digital asset platform Fireblocks raised $310 million in Series D funding at a valuation of $2.2 billion, tripling its valuation from the last time it raised 5 months ago. 🦄🦄
Blockchain infrastructure and stablecoin firm Paxos announced that four high-profile investors, including Bank of America and Coinbase, joined its recent $300 million Series D round.
Crypto-wallet company Eco raised $60 million in seed funding only five months after raising $26 million in pre-seed funding.
Crypto platform Vauld raised $25 million in Series A funding.
Infrastructure
Banking and payment infrastructure-as-a-service provider Sila raised $13 million in Series A funding.
Berlin-based banking platform Solaris raised €190 million in Series D funding, valuing the company at €1.4 billion; and the firm acquired one of its competitors, Contis. 🦄