Issue #106: Jamie Dimon Is (Still) Bullish On AI, Revolut Continues Its Global Expansion, And Experian Acquires Illion
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A curated round-up of the most interesting and relevant news from the world of fintech. In each issue, I focus on what caught my eye from the previous weekâso donât expect a weekly smorgasbord of press releases and partnership announcements. The aim is to serve the meaty bits in a neat, nibble-worthy package. It's all about spotlighting the head-turners and giving you the nitty-gritty without the fluff.
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As always, itâs been a busy week for fintech, so without further ado, let's delve into the major happenings from last week.
đŁ The News Grab Bag
⤡ Jamie Dimon says AI may be as impactful on humanity as the printing press, electricity and computers
đââď¸ The Rundown: Jamie Dimon, CEO of JPMorgan Chase, highlighted the transformative impact of AI in his recent shareholder letter.
According to Dimon, JPMorgan is heavily investing in AI, with over 2,000 AI and machine learning employees working on various applications. The bank aims to use AI in fraud detection, marketing, and employee productivity enhancement.
Dimon foresees AI augmenting most jobs within the bank while necessitating workforce retraining. The hefty letter also addresses concerns about inflation, economic softlanding, interest rates, geopolitical risks, and the recent First Republic acquisition.
𼥠Takeaway: We all know AI is the hottest thing since⌠well, blockchain in financial services. The big banks have all gone all out and hired a chief AI/data officer, or some flashy titled executive, to signal theyâre serious about implementing an âAI strategyâ.
In this yearâs shareholder letter, Jamie Dimon jumped straight into discussing AI to let everyone know that JPMorgan was taking AI seriously as a threat to their business. He didnât hold back on the hyperbole, comparing AI to the â⌠printing press, the steam engine, electricity, computing and the InternetâŚâ
Iâm not the first person to note this, but I canât think of a time weâve seen a tech wave conjure up so much activity from incumbents in financial services â all sectors, for that matter â and in the case of JPMorgan, they really are going all out.
As Dimon noted in the letter, they ââŚnow have over 400 use cases in production in areas such as marketing, fraud and riskâŚâ Itâs hard to parse what this actually means, as itâs not uncommon for banks to run a plethora of ML models across their compliance functions. So, I'm unsure if that 400 is all that meaningful at a mega bank like JPMorgan. However, it does signal something significant. The consulting firms are going to be making bank this year.
In all seriousness, I imagine weâll continue to see these types of headlines for a while as the incumbents try to figure out what they will invest in (not be confused with trialling). One thing is certain: while startups continue looking for opportunities to create net-new products using AI, the incumbents will take the usual approach and look for cost savings.
⤡ Fintech Revolut receives Mexican banking authorisation, eyes expansion
đââď¸ The Rundown: Revolut has secured a banking license in Mexico, signalling its expansion into Latin America's second-largest market. The license enables Revolut to offer a broad range of financial services in Mexico and paves the way for the company to offer cross-border, inbound and outbound remittances.
𼥠Takeaway: Iâve said it in previous issues of FR, and Iâll say it again â Revolut has really picked up its product cadence recently. In fact, it feels like thereâs a bit of a resurgence at the UK neobank.
It wasnât long ago that most articles regarding the company implied it was overvalued and a ZIRP-era startup (hereâs an example). That still may well be true, but boy, are they hustling to build a global fintech super app.
Launching with remittance in Mexico is clever. Start with a high-margin business with massive appeal across the whole market. Moreover, it allows them to leverage customers in another market to help grow the user base in Mexico. For example, you can imagine them running a âgive-getâ campaign for those looking to send money to their family in Mexico. Strategically, it might also play well for their ambitions in the US, with Mexico being a $63.3b inbound remittance market, with the bulk of that coming from the US.
Oh, by the way, Revolut also announced last week that they landed a PPI license in India. Let the hustle continue!
⤡ Nubank Ultravioleta launches global account with Wise
đââď¸ The Rundown: Nubank Ultravioleta introduced a Global Account in collaboration with Wise, targeting high-income clients interested in a more globally focused offering.
The product offers instant currency conversions at a rate of 0.9%, a fee-free debit card valid in 200+ countries, as well as perks like two free monthly foreign currency withdrawals and complimentary international internet access. The service is set to launch in the coming weeks, marking a significant expansion of Nubank's product offerings and Wise's global reach.
𼥠Takeaway: This piece caught my eye less because Nubank is offering a global account for its HNW customers and more because of the quiet success story that Wiseâs Platform product has become.
Itâs super rare for a consumer fintech startup to be able to thread the needle on offering both a B2C product AND a pure play infrastructure offering, in several cases, that they sell to their competition.
For context, Wise Platform powers the FX offering for fintech startups like Monzo, N26, Up and now Nubank. At first blush, it feels odd that many of these startups would turn to Wise to power their cross-border product, especially when remittance offerings are some of the highest-margin financial services products out there. This is especially the case when, from a product perspective, it generally only requires a payout partner in the receiving market.
If youâve ever had to work on a remittance offering, you know practically there is a lot more to it than â treasury management, heightened KYC/AML/CTF and the actual technical work of having an FX engine and thatâs generally the easy stuff. To Wiseâs credit, theyâve made that a clean API product that takes a fair bit of the complexity away and leverages their network of payout partners and licences to handle the tricky money movement piece.
In many ways, itâs an under-discussed success story in the world of financial infrastructure, and as much as fintech pundits love talking about BaaS, this is what the future of âBaaSâ actually is â multimarket and multicurrency
⤡ Experian to acquire Illion
đââď¸ The Rundown: Experian has announced the acquisition of Illion for approximately $542.10m to expand its presence in Australia and New Zealand.
This move aligns with Experian's strategy to tap into Australia's growing demand for analytical tools and data-driven services amidst regulatory reforms. It aims to enhance Experian's offerings by improving its consumer and commercial credit bureaus and identity management capabilities. Pending regulatory approval, the acquisition is expected to be finalised in the second half of 2024.
𼥠Takeaway: The Australian Competition Law watchdog, the ACCC, has already signalled it will investigate this and has called for comment from the market.
As with most countries, the consumer and commercial credit bureau market in Australia is relatively tightly held by Equifax (which has ~85% of the market), Experian and Illion.
Itâll be interesting to see how the ACCC views, in substance, the second and third-largest providers coming together. Itâs one worth keeping an eye on, as it could signal how the ACCC plans to deal with fintech M&A going forward.
⤡ Empower Finance strikes deal to buy Petal with Cashalo acquisition completed
đââď¸ The Rundown: Empower Finance, a US credit underwriter, has finalised the acquisition of Cashalo, a consumer credit firm in the Philippines, and is set to acquire Petal, a US fintech company later this quarter.
Petal offers credit cards without requiring a credit score, utilising open banking data for credit assessment. Empower, known for its machine learning underwriting process, aims to integrate both acquisitions to strengthen its presence in the US credit card market and Southeast Asia.
𼥠Takeaway: As Iâve noted in a few recent issues of FR, the M&A market is heating up as savvy acquirers look for targets that have run out of gas and are looking for a soft landing.
Empower seems to have reached deep into its pockets to purchase two consumer propositions to bolster its product further. In all likelihood, these acquisitions probably didnât cost all that much as both Petal and Cashalo looked to land their employees into roles somewhere.
I imagine part of the thinking here by Empower was to leverage what both had been doing on the customer assessment side to advance Empowerâs models further while also picking up a few customers (according to reports, Petal had ~400,000 customers).
More generally, I think weâll look back at this funding downturn as one of the best opportunities the sector has seen to pick up not only some bargains on the M&A front but also talent that will be a real asset in the next market run-up when cash is a little easier to come by â and wages balloon again.
đ¸ Notable Funding Announcements
Last week was a busy one for fintech financing, with 57 funding rounds announced and companies collectively securing $1.4b in investment.
⤡ Bunq Raises $31 Million After Quadrupling User Deposits in 2023
đââď¸ The Rundown: European neobank Bunq secured $31m in funding after a significant increase in user deposits, reaching 11m users and $7.3b in deposits in 2023. According to the article, the company's growth was fueled by its strategy of offering competitive interest rates on savings accounts.
Bunq also recently re-applied for an EMI license in the UK to expand its services post-Brexit and plans to do the same for a US banking license.
𼥠Takeaway: When it comes to fundraising, consumer fintech startups are currently in feast or famine mode. While some consumer propositions get swallowed up in acqui-hires, others are securing the bag as they continue to grow.
Whatâs been interesting to observe is how many of the UKâs OG neobanks have battled through the challenging funding climate and emerged as high-growth and, in some instances, profitable companies.
As much as fintech Twitter like to focus on the US scene, the UKâs neobanks are proving to be the harbinger of what the modern consumer fintech startup will look like going forward. Growing and profitable!
⤡ Guesty snaps up $130M at $900M valuation to help property managers list on Airbnb and beyond
đââď¸ The Rundown: Guesty, a platform aiding property managers in listing on platforms like Airbnb and VRBO, has secured $130m in a Series F round, valuing the company at $900m. KKR led the funding, with other participants including Apax Funds, Inovia, BDT & MSD Partners, and Sixth Street.
Amid a post-COVID travel rebound, Guesty anticipates profitability in 2022, with a revenue surge of 5x over three years. Guesty plans to enhance its platform for existing customers, expand into medium-term rentals, and explore acquisitions with the funds.
𼥠Takeaway: Vertical fintech is hot. More specifically, the formula of providing a SaaS offering in a marketplace and layering on a financial services product continues to bring all the VCs to the yard in 2024.
In the case of Guestly, theyâve gone from offering a booking aggregation platform to being a one-stop platform for short-stay rental owners by layering on the classic three financial services products â payments, lending, and insurance.
Itâs a model that investors understand. Build a vertical offering that appeals to a segment (e.g., plumbers, hairdressers, beauticians, or personal trainers) and then up ACV by offering a financial services product.
As a second-order outcome, this has been a significant (narrative?) driver for BaaS as many players continue to point to this as the future of how consumers and businesses interact with financial services.
But weâre still so incredibly early when it comes to embedded finance. Yes, there are some standout examples, like Shopify (which is already generating more revenue from its embedded finance offering than its software subscriptions â actually 3x more). However, for the most part, financial services and SaaS offerings are still fairly bifurcated.
As Iâve discussed in previous issues, I think the more interesting battleground is between vertical SaaS players and the neo-banks/modern PSPs (especially in the SME segment) cross into each otherâs lanes â whether thatâs Stripe or Square offering loans or the likes of Ramp going deeper into procurement. This is where the battle for embedded fintech will be fought. Watch this space.
đ§ Resources & Recommendations
⤡ The Fintech OG Series: Jake Gibson and Nik MilanoviÄ
Another great episode from the âThe Week in Fintechâ team. On this one, Julie VerHage-Greenberg chats with Jake Gibson of NerdWallet and BTV and Nik MilinoviÄ of TWIF. They dive deep into their experiences in the world of fintech. More specifically, they discuss the evolution of the sector during their time in it, its impact on traditional banking, and the ongoing challenges shaping the industry.
⤡ 20Sales: Sam Blond, Former CRO at Brex
In this episode of 20Sales, Sam Blond, former CRO at Brex, shares insights on scaling sales for B2B startups. He shares his hiring strategies and what early stage sales team performance metrics actually matter, as well as the importance of demand generation and outbound strategies in todayâs AI-saturated landscape. Well worth a listnen.
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