Issue #120: Deel Is Acquiring Hofy, Cash App Exits The UK, And For Some Reason NatWest Launches Its Banking App On The Apple Vision Pro
đ Welcome to another edition of Fintech Radar, your weekly go-to source for deep insights into whatâs happening in fintech.
If youâre new to FR, 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 whatâs happening in the industry â without all the fluff.
My goal is to spark discussion, highlight emerging trends in fintech, 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 youâre new include âA Deep Dive Into The Cash App's Growth Machineâ, âThe Future Of Payment Initiationâ, and âCurrent: Doing It Differentlyâ.
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đââď¸ The Rundown: Deel announced itâs acquiring Hofy to enhance its global HR and payroll platform by integrating IT services and device lifecycle management.
The acquisition will allow Deel to offer a comprehensive solution, including software provisioning and app access management, through the upcoming Deel IT platform.
𼥠Takeaway: Itâs been a busy 2024 for Deelâs corp dev team with this being the third announced acquisition â having gobbled up people enablement platform Zavvy and African payroll provider Payspace earlier in the year. In an increasingly crowded space, Deel seems to be looking for ways to further expand its offering to cover the full gamut of needs for globally minded SMEs and further differentiate itself from other EORs.
Building a one-stop shop for all things hiring and managing employees is ambitious and when youâre riding a $12b+ valuation and have ingested $600m+ in capital thatâs what investors expect. No doubt there are a bunch of synergies between Deelâs product offerings. It makes a ton of sense to bundle operations in the same workflow. For example, EOR services with payroll and payouts.
What will be more interesting to see is whether less complementary offeringsâlike an employee engagement platform (which Deel offers via Deel Engage)âachieve the same attachment rates. My guess is that these products drive incremental revenue, but horizontal bundling is notoriously challenging, especially in HR tech, where point solutions are the norm.
Itâll be fascinating to see how this segment shakes out with the likes of Deel, Rippling, Gusto, Remote and a cadre of others fighting it out to be the HR platform of choice for SMEs. Iâm personally interested to see if this âall-in-one approachâ actually works or whether more target offerings end up putting a spanner in the works for the likes of Deel, Rippling et al.
⤡ Cash App to exit UK as Block scales back international expansion plans
đââď¸ The Rundown: Cash App has announced its decision to exit the UK market, with operations set to close on 15th September 2024.
According to the article, this move aligns with Block's shift in strategy to focus on growth within the US and reduced global expansion efforts which they announced in a shareholder letter back in January.
𼥠Takeaway: Itâs telling that in a market where challenger banks like Monzo and Revolut have been able to thrive, Cash App struggled to gain traction in the six years it was on offer in the UK. RIP Cash App.
Donât get me wrong, I know first-hand how hard global expansion for consumer fintech startups can be. Trying to recreate the magic that an offering conjured up in its first market is a challenge. In many instances, itâs lighting in a bottle. The combination of timing and execution that worked the first time around is hard to replicate.
In the case of Cash App, its initial offering of P2P payments just didnât land in a market where RTP is the norm. This combined with never getting to feature parity with the US offering likely contributed to it being nothing more than a well-branded P2P app in the UK.
At a time when UK consumer fintech startups like Monzo and Revolut are trying for a second time to gain market share in the US, this is a reminder of how important it is to land a localised value proposition. Letâs hope the British neo-bank brigade has more luck in the US than Cash App had in the UK.
⤡ Lemonade expands UK offerings with buildings and contents insurance
đââď¸ The Rundown: Lemonade has launched Buildings and Contents insurance in the UK, expanding its home insurance offerings since its UK entry in October 2022, in partnership with Aviva.
This new product, designed for UK homeowners, starts from ÂŁ14 a month and includes comprehensive coverage with a Defaqto 5-star rating, offering features like rebuild costs and flexible content coverage. Lemonade's CEO highlighted the UK market's digital-savvy population as driving their rapid regional growth.
𼥠Takeaway: Unlike its listed fintech brethren mentioned above, Lemonade looks to be growing its footprint in the UK. The press release noting the product expansion in the UK mentioned that the ââŚUK has quickly become one of Lemonadeâs fastest-growing marketsâ. Beyond this Lemonade has previously noted that the UK is its largest customer base in Europe.
Insurance is a notoriously challenging segment in financial services when it comes to global expansion, mainly due to market idiosyncrasies related to underwriting risk. The jury is still out on how this will work in the long run, but early signs indicate that theyâre gaining traction and building a strong portfolio of products that resonate with UK customers.
⤡ Monzo to launch bank account for children
đââď¸ The Rundown: UK digital bank Monzo has introduced a new account for children aged six to 15, allowing them to set savings goals, manage money with savings Pots, and access educational resources through the app. Parents can link their accounts, monitor spending, set limits, and control cash withdrawals and online payments.
𼥠Takeaway: The teen/kidâs banking segment is one crowded space with no lack of players trying to capture the market. In the UK, youâve got GoHenry and RosterMoney (Acquired by NatWest in 2021), HyperJar, and nimbl. Also, Letâs not forget about the challenger banks like Revolut, and Starling, who all have teen versions of their products.
The ultimate goal for kid/teen-focused neo-banks is to capture customers in their formative years. The hope is that these young customers turn to the same neo-bank for car loans, tuition loans, mortgages, and more. Itâs all about the long game.
Itâs for this reason weâre yet to see the strategy fully play out for the current wave of kid/teen-focused challenger banks. It may still be too early but given the number that has planted their flag the next generation of financial services customers might have already decided who their bank of choice will be when theyâre all grown up.
⤡ NatWest launches banking app on Apple Vision Pro
đââď¸ The Rundown: NatWest has launched its banking app on the Apple Vision Pro, becoming one of the first banks globally to utilise the VisionOS, which offers a three-dimensional interface controlled by eye, hand, and voice gestures.
The app is optimised for eye tracking and includes features for viewing balances, making transfers, and accessing the AI-driven digital assistant Cora+. Chief Digital Information Officer Wendy Redshaw highlighted the opportunity to learn from customer interactions with the app to enhance future banking services.
𼥠Takeaway: It was only a matter of time before the innovation team at a bank tried this. Unfortunately for NatWest outside of being a more complex way to track customer interactions on devices, this might amount to nothing given, according to reports, the Apple Vision Pro isnât selling all that well.
More broadly, it is interesting to think about how the next wave of computingâperhaps AI-drivenâmight look and what it could mean for fintech. Fortunately, (or maybe unfortunately for Apple) it doesnât look like weâll be doing our banking in the metaverse anytime soon.
⤡ Adaptive builds automation tools to speed up construction payments
đââď¸ The Rundown: Adaptive, co-founded in 2021 by Matthew Calvano, Henry Bradlow, and Francisco Enriquez, uses workflow automation and generative AI to simplify financial management and accelerate payments in the construction industry, addressing back-office inefficiencies and slow payments.
The startup recently raised a $19m Series A round led by Emergence Capital, with plans to expand its customer base and workforce while exploring monetising integrated payments and financial services. Adaptive currently serves over 280 construction companies and aims to focus on underserved SMBs.
𼥠Takeaway: Vertical payments continue to present massive opportunities, and Adaptive is a prime example of how much low-hanging fruit remains for startups.
Itâs easy to think payments is a solved problem with giants like Stripe, Adyen, PayPal, and near-ubiquitous RTP all offering ways for SMEs to make payments. However, many industries still face significant challenges when it comes to paying and receiving money.
As the article notes, âThe construction payment chain involves multiple layers, including banks, developers, general contractors, and subcontractors,â Calvano told TechCrunch. âWe believe that this complex web, combined with the fact that most construction companies are small- and medium-sized businesses (SMBs) lacking financial expertise, are the primary drivers of the industryâs slow payments.â
Vertical opportunities in fintech generally thrive at the intersection of âworkflows and walletsâ. Just as vertical SaaS solutions have become mega businesses by solving specific workflow challenges, the same potential continues to exist for vertical payments.
⤡ Sam Altman backs Slopeâs $30M round to digitize, scale B2B payments
đââď¸ The Rundown: Slope, a B2B payments platform, secured $30M in funding, led by Union Square Ventures and supported by Sam Altman, to enhance its AI-driven technology for automating order-to-cash workflows. Since its 2021 launch, Slope has significantly grown, with a 17x increase in revenue and a focus on enterprise clients like Fiserv.
The new funds will be used for product development, including their latest innovation, SlopeGPT, a payments risk model powered by GPT.
𼥠Takeaway: Youâve got to love that when a startup lands a $30m round and the first name mentioned in the headline is that of an investor. Lol.
Iâve covered Slope in previous issues of FR, and as I noted back then, the opportunity to improve business payments is still huge, even outside of the verticalised opportunities. Bridging the gap between B2B and B2C payment experiencesâby making services more akin to what consumers encounter dailyâcontinues to offer significant potential for B2B fintech startups.
Their move upmarket also highlights a persistent problem for many legacy infrastructure providersâit seems itâs hard to break away from those grey payment pages.
⤡ 20VC: Brex CEO Pedro Franceschi
This is a great interview with Brex CEO Pedro Franceschi. He discusses his journey from being a 12-year-old in Brazil making $200K online to founding Brex. For those interested in the Brex vs. Ramp battle, youâre in for a treat as he shares his perspective on how he sees it playing out.
⤡ Crossing The Chasm With Jeremy Allaire
Arguably, the killer use case for crypto to date has been stablecoins, and in this interview, Jeremy Allaire discusses all things USDC. Itâs a great conversation. For those who havenât been following the space closely, itâs a must-listen to get up to speed.
⤡ GenAi: Too much spend, too little benefit?
This isnât fintech-specific, but itâs a great 360-degree view of AI and its long-term commercial implications. Itâs a research report from Goldman Sachs on the state of AI that provides a counterpoint to the breathless enthusiasm for the technology you read on Twitter. Beyond offering tempered expectations for how (and by how much) AI could impact business, it also covers topics like energy production and how itâll impact the sector. Well worth checking out.
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