Issue #128: Klarna Drops Major SaaS Players, TrueLayer Boosts Pay-by-Bank With Stripe And Amazon Expands Its Just Walk Out Tech
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đââď¸ The Rundown: Klarna's CEO Sebastian Siemiatkowski says the company has decided to discontinue its use of Salesforce and Workday as part of its AI-focused strategy to consolidate SaaS providers.Â
According to the article, Salesforce CEO Marc Benioff expressed confusion over this decision, questioning how Klarna manages data compliance and governance without these platforms, suggesting a misunderstanding of AI's role in data management.
đĽĄÂ Takeaway: Sebastian Siemiatkowski caused a minor stir on Twitter last week when he revealed Klarna was shutting down its Salesforce instance and would soon remove Workday from its internal software stack. Unsurprisingly, Marc Benioff quickly commented, asking, âHow will they manage?â The answer is theyâll be fine, and for their efforts will further compress Klarnaâs operational costs â a win-win.
I know I sound like a broken record, but AI is relentlessly advancing into every corner of a company. While not every fintech is slashing expenses like Klarna, itâs becoming clear that many B2B SaaS products are at risk. Even systems of record, once thought safe from the GenAI revolution, are now in the crosshairs.
Sure, the âbuild vs. buyâ debate isnât new, but something feels different this time. Companies, emboldened by the promise of what GenAI can do/might do, are taking a more critical view of their software stacks and are increasingly willing to wield the axe. What started with customer support bots is now extending to systems of record â AI continues its march across the opex of companies.
đ¸ TrueLayer: Expanding Open Banking in the UK, Fintech Magazine
đââď¸ The Rundown: TrueLayer has expanded its partnership with Stripe to enhance Pay-by-Bank services in the UK, aiming to reduce transaction fees and improve user experience for businesses.
𼥠Takeaway: First slowly, then all at once. While A2A/Pay-by-Bank hasnât yet hit the exponential part of its growth curve, signals like this make me increasingly bullish.
On the one hand, itâs just another payment method (and yes, Stripe has offered similar options in other markets), but seeing Stripe further invest in its rollout in a tier 1 market suggests itâs nearing prime time.
đ Amazon provides checkout tech at universities, stadiums, Payments Dive
đââď¸ The Rundown: Amazon is expanding its Just Walk Out automated checkout technology to 10 more university campus convenience stores, bringing the global total to over 30. This technology allows customers to enter, select items, and leave while their accounts are automatically charged.
𼥠Takeaway: I rarely discuss in-store payments, partly because theyâve become fairly generic, with most startups just iterating on the PoS machineâs shade of cream and following Squareâs PLG playbook.
Amazon is an oddity in this sense. Theyâre not just upgrading hardwareâtheyâre reinventing the entire customer experience. While the industry is rife with Square copycats, few are fundamentally rethinking how retail payments should work. Having experienced Amazonâs Just Walk Out product and similar systems, I can say firsthand that they really are a great customer experience and a glimpse into the future of retail payments.
That said, it still feels like a product stuck perpetually in the R&D phase, with most examples limited to pop-up experiences and small-scale rollouts. And yes, there are rumors about the technology that Amazon has denied, which may be holding it back â but I hope we see this technology expand into more retail locations and across different verticals.
đŠâđź UK introduces Bill to clarify crypto's legal status, Coindesk
đââď¸ The Rundown: The UK government has introduced a bill to clarify the legal status of digital assets, including cryptocurrencies and NFTs, by categorising them as personal property under British law.
đĽĄÂ Takeaway: In the world of crypto, the common refrain has been, âWe just want clarity.â So, itâs reassuring to see more jurisdictions addressing even the edge cases, providing much-needed legal certainty to a sector that has long been calling for it.
That said, this isnât exactly the area I expected the UK to prioritise for legislation. Still, some clarity is better than none, I suppose.
đł Ansa debuts in-store digital wallet capabilities, Payments Dive
đââď¸ The Rundown: Ansa has launched Ansa Anywhere, allowing brands to offer seamless in-store tap-to-pay capabilities via Apple Pay and Google Pay from customers' digital wallet balances without needing extra hardware or complex integrations
𼥠Takeaway: The stats around Starbucksâ app and gift card ecosystem are staggering. For the uninitiated, here are a few headline numbers: The app currently boasts 34m active users. In 2023, its âfloatâ â unused balances held in the app â has ballooned to a staggering $1.6b, with a CAGR of 16.5% over the past two decades. In fact, just in unused credits, Starbucks reportedly claimed $181m in revenue in 2021. So itâs no surprise that companies like Ansa are offering Starbucks-style wallets as a service to others in the market.
Traditionally, retailer apps were all about engagement â points redeemable for future purchases. But retailers like Starbucks and Target have shown that these apps, and their integrated payment systems, can do far more. Target, for example, has evolved its app into a nearly closed-loop payment system, cutting down on interchange fees while boosting customer loyalty through its RedCard debit card discounts. Iâm curious to see which other brands go big with this approach and whether an embedded offering like Ansaâs will entice smaller retailers to adopt similar strategies.
𧞠Form3 snares another $60 million for A2A payment vision, Finextra
đââď¸ The Rundown: UK A2A payments platform Form3 announced last week that itâd secured an additional $60m in Series C extension funding, bringing the total raised in the round to $220m. British Patient Capital led the new investment.
𼥠Takeaway:  Iâve long believed that the leading edge of fintech development is happening in markets outside the US. When it comes to A2A/Pay-by-Bank and open banking, the UK has consistently led the way.
This leadership has influenced how non-US investors, particularly those in Europe, the UK, and Southeast Asia, view the A2A/Pay-by-Bank opportunity. Many see it as an essential new payment method that could rival other non-credit payments (a massive market), and if a company can execute well, it could pose a real threat to the card schemes (and thus why theyâre being active in the segment!). For those unfamiliar with its success in more emergent payments markets, the full potential may be hard to grasp.
One thing is certain: expect more capital to flow into this space as investors continue to back emerging A2A leaders, especially in markets outside the US.
𼡠Novatus nabs $40M to help financial institutions quell their regtech nightmares, Techcrunch
đââď¸ The Rundown: Novatus, a startup founded by Andrew Hedley and Matthew Ranson, last week announced theyâd raised $40m in their latest round of funding. Novatus helps financial institutions manage complex data for risk and compliance through its SaaS platform, En:ACT.
đĽĄÂ Takeaway: One trend to watch in fintech funding for the rest of 2024 (and likely into next year) is the renewed interest in regtech. In the wake of partner bank issues in the US and the fallout from perceived inadequacies in controls â or at least, thatâs the current narrativeâ expect more dollars to flow into this segment as companies and investors focus on strengthening processes and compliance controls. And letâs not forget AI, which is undoubtedly playing a significant role in driving sales pitches in regtech right now.
Mike Hudack: How Facebook, Monzo and Deliveroo build great products, 20VC
On this episode of 20VC, Mike Hudack, Co-Founder and CEO of Sling, shares insights from his time at Facebook, Monzo, and Deliveroo. He dives deep into the balance between art and science in product design, emphasising that simplicity stands the test of time. This is a masterclass for anyone laser-focused on building something customers love.
Navigating Net Interest Margins and Fintech Partnerships with Saira Rahman, Fintech Layer Cake
On this episode of Fintech Layer Cake, Saira Rahman, VP of New Investor Initiatives at Fundrise, joins Reggie Young to explore the dark arts of net interest margins and fintech partnerships. Itâs a deep dive into a topic rarely discussed in the context of banking partnerships. Definitely one for fintech nerds, but well worth a listen.
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đ What did you think of this week's issue of FR?
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Another great issue as always:
On RegTech: renewed interest because there are HUGE exits. Would love your take on the $2.6bln acquisition MC made last week of Recorded Future... "will add to Mastercardâs identity, fraud prevention, real-time decisioning and cybersecurity services, bringing expanded threat intelligence capabilities to its network of merchants and financial institutions".
Sedric raises $18.5M Series A for AI-based fintech compliance platform is also notable.
On Ansa: pro-tip to them is to really-really understand what is the pain-point they are solving for their Customer's customer which is often missed in B2B sales (I am often guilty of this). Case in point, I use to have 2 starbucks accounts. One for work and one for personal. For work, I used to schedule at least 2 meetings a week at a Starbucks not because I loved the coffee. Branches are ubiquitous in Singapore and the Starbucks experience is predicable. Best part, at the end of the month I downloaded all the receipts from the app and loaded them into Expensify. It appealed to my loss-aversion bias because I know I didn't miss out on an expense item.