Issue #116: Apple Pay Later Gets Canned, Plaid Introduces A New Product, And Deel Drops An AI Bot
👋 Welcome to another edition of Fintech Radar, your weekly go-to source for deep insights into what’s happening in fintech.
If you’re new, here is a breakdown of what you can expect from each issue.
This weekly missive is written for founders, operators, and investors in fintech. I prioritise quality, depth, and provocation each week over just rehashing press releases and partnership announcements. Rather than simply covering news, I dig in and explore the implications of what’s happening in the industry — without all the fluff.
My goal is to spark discussion, highlight emerging trends in fintech that could become central themes in the coming years, and help you connect the dots.
If you missed our recent editions, you can catch up here. Some previous issues you might want to check out if you’re new include “A Deep Dive Into The Cash App's Growth Machine”, “The Future Of Payment Initiation”, and “Current: Doing It Differently”.
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⤷ Apple discontinuing Apple Pay Later, ahead of new features launching this fall
🏃♂️ The Rundown: Apple has announced the discontinuation of its BNPL service, Apple Pay Later, effective immediately in the United States.
Instead, the company is focusing on new global features for Apple Pay, including instalment loan offerings from credit/debit cards and lenders. Previously available only in the U.S., Apple Pay Later allowed users to split purchases into four payments over six weeks with no fees. Notable partners for the upcoming features include Affirm, with a rollout starting in Australia, Spain, the U.K., and the U.S.
🥡 Takeaway: It’s fairly clear Apple has realised that BNPL isn’t something they can do themselves. Yes, BNPL isn’t easy — if you’ve worked on lending products you know how damn hard it is to make them work. But then again, we’re talking about Apple, not some two-bit startup with no distribution.
After waving the white flag on underwriting the product themselves, I think we might see Apple look to open up the ecosystem and go beyond Affirm to provide customers with further choices around BNPL. Much like they allowed OpenAI into their Apple Intelligence walled garden the same might be true for BNPL.
⤷ Plaid’s new tech makes it easier to sign up for financial accounts
🏃♂️ The Rundown: Last week, Plaid introduced Plaid Layer, a new offering to streamline the account setup process for financial services. Users can link their bank accounts with compatible services in a few clicks. Plaid claims the product reduces signup time by 87-90%. Early data also shows a 10-25% increase in conversion rates for companies using Layer.
🥡 Takeaway: A lesson most players in open banking have learnt is that just being a data provider isn’t sufficient to build a venture-scale business. Yes, there have been some sizable exits for companies in the space that were essentially dumb pipes in what we might consider as open banking 1.5 (open banking 1.0 would likely include the likes of Yoodle and all the other OG screen scrapers). Suffice it to say, in the current stage of open banking everyone has figured out you need to go beyond just raw data as the product.
It’s been interesting to observe the different directions those left-standing in the segment have gone in. While other open banking players have gone hard at payments as the world of A2A payments heats up (notably, Tink and TrueLayer), Plaid is looking to leverage the “ten of millions” of customers who have opted in to be remembered by Plaid to enhance customer onboarding. In substance leveraging their network of customers to build a better onboarding flow.
Yes, uplifting onboarding is a huge area of opportunity for every single fintech and for that matter ALL financial services business. Yet, at the same time, I just wonder where this all leads. There’s no doubt Plaid is great at product — everything they release is incredibly thoughtful and well crafted. Yet the question of how this all ladders up into a $13b business is still an open question.
The idea that they’re building a “data network” I think is overblown. If one looks across the pond to the home open banking, nearly all the OGs have moved on from trying to build a network (and most tried!) and are either sticking to their knitting — i.e. playing the dumb pipes game (and have probably been written down to zero by their investors) — or have realised everything in consumer financial services ladder up into payments and thus have moved on to become PIS providers.
Having said all this, given how smart the Plaid team is it’s just a matter of time before they pivot hard into being an A2A payments powerhouse. Put another way; Plaid is a payments company, they just don’t know it yet.
⤷ Wells Fargo and Rent-Rewards Card Bilt Deny Troubles Despite Reported $10M in Monthly Losses
🏃♂️ The Rundown: Wells Fargo and Bilt are refuting claims of trouble in their co-branded credit card partnership, despite The Wall Street Journal reported that Wells Fargo is incurring monthly losses of up to $10m.
The WSJ suggests inaccurate revenue projections led to financial losses, causing Wells Fargo to halt new co-branded card ventures and reconsider renewing its Bilt contract ending in 2029. Both companies deny any intent to end the partnership.
🥡 Takeaway: This is every founder’s dream. Getting the commercials just right, such that the lumbering incumbent bends over backwards to lock up a partnership with you. In this case, it sounds like Bilt really did get an amazing deal. As the original WSJ article notes, the deal could be costing Wells Fargo $10m a month and it runs till 2029! Wild.
Getting day 1 commercials right is sooooo hard. This is precisely why many have protective clauses to ensure there is an eject button in the event things go commercially haywire. Clearly, that wasn’t the case here.
Regardless, it seems like Wells Fargo is left holding the bag and Bilt gets some free publicity that I’m sure drove a ton of new sign-ups. Well played.
⤷ Remote Working Fintech Deel Launches AI Tool for Streamlining Operations
🏃♂️ The Rundown: Deel last week launched an AI tool on their platform to streamline operations by enhancing compliance and global workforce management.
Deel AI, powered by OpenAI's ChatGPT, provides instant answers, reports, and insights from the company's knowledge base. Clients can access workforce data, generate reports, and make informed decisions using the feature. According to Deel, Deel AI is secured within a Virtual Private Cloud environment, limiting data access to authorised users.
🥡 Takeaway: Another example of how fintech startups are using AI and again we have more customer service agents. Don’t get me wrong this is cool — I bet there are a bunch of compliance, HR and even founders who’ll find this little bot super useful.
As I’ve said before the most likely outcome of this first(ish) wave of AI in fintech is cost reduction — which is great in this post-ZIRP era — but don’t expect much by way of new services to emerge.
⤷ Commerzbank taps Pliant to launch digital card for SMEs
🏃♂️ The Rundown: Commerzbank has partnered with Berlin-based corporate card platform Pliant to introduce a fully digital credit card for SMEs, available from the third quarter of 2024.
This collaboration, facilitated by Commerzbank's investor neosfer, aims to enhance efficiency in billing processes for business customers. Tobias Knoll from Commerzbank highlights the focus on customer convenience and cost savings. As a side note, PayPal Ventures recently led an €18+m investment in Pliant for its expansion into the UK market.
🥡 Takeaway: It’s always fascinating to see banks partner with start-ups for BaaS middleware services. In many ways, it makes a lot more sense in Europe where building card-based products in the context of SME banking is much more complex with vastly more functionality needed due to the inherent cross-border nature of doing business in the EU.
The EU BaaS market has gone through its shakeout (that arguably the US is going through at the moment) and there are few promising players left standing. It’s a market well worth keeping an eye on if you’re a BaaS nerd.
⤷ PayPal Ventures leads $20M round into Gynger, which offers companies ‘buy now, pay later’ for technology purchases
🏃♂️ The Rundown: PayPal Ventures last week led a $20m Series A round into Gynger, a platform offering "buy now, pay later" for technology purchases.
Founded in June 2021, Gynger has raised a total of $31.7m and secured a $100m debt facility from CIM. The company notes that they use AI to approve credit, with a fast application process and quick credit decisions.
Gynger's revenue has surged 700% YoY, with a 5x increase in customers. It competes with companies like Pipe and Capchase. Gynger plans to expand beyond tech into sectors like real estate and healthcare.
🥡 Takeaway: We all know BNPL is booming, not just for consumers but also in the business world. Gynger’s impressive growth and expansion plans highlight just how much demand there is for flexible payment options across different industries. As more companies look for clever ways to manage cash flow, companies that provide the picks and shovels (like BNPL infrastructure) are well-positioned to take advantage.
⤷ Cadana, an emerging markets payroll services provider for global hiring platforms, banks $7.1M seed
🏃♂️ The Rundown: Cadana, a payroll services provider targeting emerging markets, last week announced they’d secured $7.1m in seed funding. Founded in January 2021, the company addresses challenges faced by global hiring platforms by streamlining payroll in 32 emerging markets. Led by Costanoa Ventures, the recent funding round brings Cadana's total funding to $7.4m.
Cadana offers real-time payments, investment options, and expertise in local labour laws for their customers. The company, processing over $150m in transactions, aims to expand its team, enhance products, and enter new markets with the latest funding.
🥡 Takeaway: The global payroll and EOR (Employer of Record) services segment in emerging markets is taking off with several players looking hard at how they build a presence there. While payments and expertise in local labour laws are becoming the norm, the real challenge is building a robust network across these diverse markets.
As more companies look to take advantage of the fact that top decile talent can live anywhere (and the salary arbitrage that exists in many emerging markets), having a payroll service that can handle the complexities of multiple emerging markets is crucial. It’s not just about covering the basics anymore; it’s about being everywhere companies need you.
Much like remittance companies learned long ago, having the largest network is the key to success when managing payouts globally. Building a strong, widespread presence is essential for this contingent of EOR startups.
⤷ 20Growth: How Revolut Acquired Their First 10M Users: Tips, Tactics and Strategies From the Revolut Product & Growth Playbook with Val Scholz, Former Head of Growth @ Revolut
On this episode of 20VC, Val Scholz, former Head of Growth at Revolut, shares a number of the growth strategies that helped Revolut get its first 10 million users. In this wide-ranging conversation, he talks about the importance of understanding customer needs, effective referral strategies, and the benefits of diversifying growth channels. It’s a deep and ranging conversation that is well worth adding to your podcast rotations this week.
⤷ IN THE VAULT: In the Vault: New Applications in Fintech with Plaid’s Zach Perret and Marqeta’s Simon Khalaf
At a16z’s Connect Fintech event, Angela Strange sat down with Plaid’s Zach Perret and Marqeta’s Simon Khalaf for a facinating discussion. They explored how AI is shaking up banking, the changes happening in U.S. payment systems, and how credit cards are becoming digital products. It’s a fascinating conversation that you definitely want to add your playlist.
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