Fintech Update, 8/3 - 8/9
Hi! It's Monday, August 10, 2020.
Leading Off
Earlier this year, we wrote about the inevitable expansion of Big Tech into financial services, a development we believe will re-shape both industries in the next decade. That’s why we weren’t surprised by the big announcements this week, including: Google announced that six more banks will serve as partners for its digital checking and account services; Amazon Web Services announced a partnership with Global Payments to create a cloud-based processing platform for card issuers; and Grab launched a slew of new financial consumer products, including micro-investments and a consumer loan platform. Big Tech is on the move.
Meanwhile: Square crushed Q2 earnings and reported particularly strong traction in the Cash App ecosystem; the People’s Bank of China reportedly plans to use its digital currency to target technology giants Alibaba and Tencent in the digital payments sector; Uber abandoned its fintech ambitions, but it might only be a speed bump on the road to embedded finance; Kabbage may be seeking a sale of up to $1B; and Current launched a rewards program for its debit card users. All this + more below!
Heavy Hitters
Google continues its push into financial services. The global tech giant announced that it is partnering with six more U.S. banks to offer digital checking and savings accounts to American Google Pay users, starting some time next year. The new partners, which include Bank Mobile, BBVA USA, BMO Harris, Coastal Community Bank, First Independence Bank and SEFCU, join existing partners Citi and the Stanford Federal Credit Union, giving Google eight partner banks in total. Similar to many Big Tech and FS partnerships, Google will provide the consumer-facing front-end to the digital banking services it makes available, while the deposit accounts will be held by the FDIC-backed partner institutions. By embedding itself into customers’ checking accounts, Google stands to gain a trove of valuable information about their payment and purchasing behavior.
AWS partners with Global Payments. Amazon Web Services (AWS) announced a new, multi-year agreement with the payments firm to provide a cloud-based issuer processing platform aimed at global financial institutions. Per the agreement, Global Payments will engage AWS as its preferred cloud provider for issuer processing and will make use of a variety of AWS services, ranging from storage to analytics and machine learning, to allow “financial institutions of all sizes to more seamlessly operate the entire lifecycle of card issuance and management.” The Global Payments platform currently handles approximately 27 billion transactions annually, giving Amazon a new avenue to drive innovative payments solutions, at scale, worldwide.
Grab launches new consumer financial services…and raises $200M. The Singaporean ride-hailing and delivery company announced that its financial unit is launching several new services, including a lending, health insurance, a pay-later program, and micro-investments. Grab is no stranger to the world of consumer finance, previously forming a joint venture with ZhongAn Insurance to build a digital insurance marketplace and dipping into investment and wealth management through its acquisition of Bento. Although Grab is not at the same scale as the FAANGs, the tech firm’s growing diversification and expansion into financial services suggests a similar intention to become a player in that market, bringing to Southeast Asia what has already happened in China and is currently happening in the U.S. Oh, and it also grabbed (😏) a cool $200 million in private equity funding.
China’s central bank takes aim at tech giants with its new digital currency. According to a report from the Financial Times, the People’s Bank of China (PBoC) hopes its new digital currency will reduce Alibaba and Tencent’s dominance in domestic payments. Having initially fostered the tech giants, the PBoC is now looking to create a “more level playing field” in response to complaints from China’s banking sector, per a senior executive at the Hong Kong Monetary Authority. With Alipay alone controlling 55% of China’s mobile payments market, the PBoC may seek to promote the use of its “digital yuan” as a new payment mechanism with the same convenience of Alipay but greater connectivity and acceptability among the traditional banks. The Economist also explored this evolving dynamic in its own report.
Quick Takes
Square *smashes* its quarterly earnings record (thanks, Bitcoin!). The payment’s firm’s most recent earnings report showed that its 2020 Q2 was significantly better than any previous quarter, including revenues up 70% YOY and a gross payments volume of $22.8 billion (up 50% YOY). The firm touted the 167% YOY growth of its Cash App, which was largely driven by $875 million in Bitcoin revenue, a 75% increase over Q1.
What are the implications of Uber’s exit from fintech? Forbes’s Ron Shelvin looks at the potential effects of the ridesharing firm’s retreat from fintech, concluding that it will ultimately be little more than a speed bump in the march toward “embedded fintech.” The article references recent moves into embedded fintech by Shopify and Quickbooks, as well as Uber’s ability to reverse course in the future.
Kabbage looks for buyers. As the pandemic drags on and continues wreaking havoc on lending businesses, the online small business lender reportedly may be seeking to sell itself for up to $1 billion. After having to furlough workers earlier in the year, Kabbage has been on more stable footing thanks to the government’s approval to disburse PPP loans, though non-PPP lending has not resumed.
Current launches debit card rewards program. The U.S. digital banking service launched a new program that will allow its members to earn up to 15x points on everyday debit card purchases at over U.S. 14,000 merchants. Fintech flame-war sold separately...
OCC fines Capital One $80M for data breach. The Office of the Comptroller of the Currency (OCC) penalized the bank $80 million for the 2019 data breach that exposed personal information on over 100 million customers. The agency said Capital One did not "establish effective risk assessment processes" and did not "correct the deficiencies in a timely manner."
Rocket’s IPO closes up 20%. The parent company of mortgage lender Quicken Loans debuted on the New York Stock Exchange at $18 before climbing 20% to close its first day of trading at $21, continuing a recent trend of successful (albeit less successful) debuts for fintech companies on public markets (see also nCino and Lemonade, ever heard of ‘em?).
Pop Flies
Curve announced it is seeking £100M in a Series C funding to build the “Amazon of banking.”
Mozper launched a new digital banking service for Latin American families.
Volante Technologies raised $35M to fund global expansion of its cloud payments and messaging tool.
Splitit raised $71.5M in a private placement and share purchase plan.
Money-moving platform Orum Banks came out of stealth, announcing $5.2M in seed funding.
Cash App’s marketing team continues recent dominance, releasing a *glow in the dark* Cash Card.