Fintech Update, 8/17 - 8/23
Hi! It's Monday, August 24, 2020.
Leading Off
Robinhood raised a fresh $200M in Series G funding, its third round of 2020, bringing its valuation to $11.2B. // American Express confirmed that it is purchasing small business lender Kabbage for an expected $850 million. // Meanwhile, Wirecard began selling off entities in the UK and Brazil; Samsung Pay launched a Curve-backed card product in the UK; JPMorgan is expected to launch a Chase-branded UK challenger bank in 2021; and China’s Ant Group launched a consumer finance business. // This + more below!
Heavy Hitters
Robinhood raises more money again. . . The fee-free stock trading and money management app raised $200 million in Series G funding, only one month after raising $320 million in July. In fact, Robinhood’s Series G is its third fundraising of 2020, which, including the $280 million it raised in May, now stands at $800 million for the year. Importantly, each round has also come with an increased valuation – Robinhood’s valuation was $8.3B in May, $8.6B in July, and now is $11.2B – suggesting that investors believe Robinhood’s significant growth in users and trading volume amid Covid will not be a flash in the pan-demic. (Sorry.) While rumors fly that Robinhood is considering an IPO, the company stated that the new funding will be used to improve its products and customer experience. One thing is for certain: despite some recent growing pains, including trading outages and negative press around a user’s unfortunate suicide earlier in the year, Robinhood is still growing – and growing fast.
. . . While questions persist about its game-like approach to investing. Coinciding with the firm’s Series G announcement, the Wall Street Journal considered the potentially problematic nature of Robinhood’s product and interface: The article cites a number of behavioral scientists concerned by Robinhood’s gamification of trading, including things like spraying digital confetti after a trade is completed, offering users Netflix-like ‘buy’ recommendations, and making ‘confirm trade’ buttons brighter and larger than ‘cancel’ buttons, which they believe may nudge inexperienced investors into taking bigger risks – a problem we highlighted in our most recent Big Idea on financial literacy in the age of fintech. Robinhood argues that simple interfaces support its goal of democratizing investing and maintains that “most customers use a buy-and-hold strategy.”
AmEx confirms Kabbage acquisition. After rumors swirled in recent weeks that the Atlanta-based small business lender Kabbage was seeking a buyer, the global payments company confirmed that it plans to acquire the firm for an estimated $850 million. AmEx reportedly will acquire Kabbage’s team, data platform, intellectual property, and products (e.g., online bill payment, cash flow visualization tools, flexible lines of credit, etc.), but its existing loan portfolio was omitted from the deal. As we wrote in last week’s update, Kabbage’s acquisition both increases AmEx’s exposure to small business services and further highlights the recent challenges and declining valuations experienced by many fintech lenders.
Quick Takes
The Wirecard selloff begins. The disgraced German payments provider announced the first sales of its international operations this week: A subsidiary of e-commerce service PagSeguro Digital acquired Wirecard’s Brazil operations, while its UK business will be bought by competitor Railsbank.
Samsung Pay Card launches in the UK. The global tech giant’s Mastercard-issued debit card launched for customers in the UK, powered by London-based digital banking platform Curve. The card will allow users to consolidate their various bank cards into a single Samsung Pay card and digital wallet.
FRB Boston partners with MIT on CBDC testing. The Federal Reserve Bank (FRB) of Boston will work with researchers at the Massachusetts Institute of Technology (MIT) on a "multiyear effort to build and test a hypothetical [central bank] digital currency” (CBDC) platform and related potential FRB use-cases.
More firms join the Betterment-led Fintech Equality Coalition. Several more fintech firms, including Credit Karma, Monzo, and Varo, have joined the organization, spearheaded by Betterment, with the goal of fighting racial inequality in the fintech industry and society in general.
JPMC set to launch UK challenger bank in 2021. JPMorgan Chase plans to open a Chase-branded digital bank in the UK in Q1 2021. The move would echo that of competitor Goldman Sachs, which launched its Marcus retail banking app in the UK in 2018 and now boasts over 500,000 customers.
NYT looks at PayPal Credit’s allegedly “predatory” student loans.The New York Times outlines recent claims by U.S. student lending advocacy groups that PayPal and Synchrony Bank are offering student loans with deferred interest rates that could be considered predatory.
Huawei launches digital payments cloud. The Chinese tech giant entered the cloud computing space with a “payment platform and super app that helps mobile payment operators build an ecosystem quickly and efficiently.”
Ant Group to launch consumer finance arm. The recently rebranded Chinese fintech giant plans to set up and invest $1.2 billion in a new consumer finance arm, which will offer consumer loans to Chinese customers.
Duck Creek Technologies IPO closes up 48%. The provider of software for the property and casualty insurance industry closed at $40 on its first day of trading, up nearly 48% after debuting at $27.
Pop Flies
Open-source banking platform Moov raised $5.5 million in seed funding led by Bain Capital Ventures.
Bitcoin lender BlockFi raised $50 million in a Series C funding round.
SoFi launched a program to offer $200 to SoFi Money Account users for emergency savings.
Cloud-payments technology firm Form3 raised £33 million in its latest funding round.
EU regulators approved the purchase of Dutch payments technology firm Nets by Mastercard.