Issue #100 🎉 🥳 : Revolut Expands Into Offering eSIMs, FIS Partners To Offer A2A Payments, And Temenos Gets Hindenburged
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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 week — so don’t expect a weekly smorgasbord of press releases and partnership announcements. The aim here 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, it’s been a busy week for fintech, so without further ado, let's delve into the major happenings from last week.
📣 The News Grab Bag
⤷ Revolut ventures into telecom: introduces phone plans in the UK
Revolut has entered the telecom sector by introducing phone plans in the UK. The company's phone plans involve eSIMs, virtual SIM cards that can be managed through the Revolut app.
According to the article, the plans offer affordable and transparent international connectivity options, addressing rising roaming charges. Revolut's expansion into phone plans aligns with its vision of becoming an all-encompassing super app, offering a comprehensive range of services to attract and retain customers.
🥡 Takeaway: This is an interesting inversion of what you usually see when we combine telco and financial services. What you more commonly see is the telco reaching out into financial services. Whether that be the OG, NTT-Docomo offering an Osaifu-Keitai (mobile wallet) back in 2004 or Safaricom, Orange, and Airtel all offering mobile money solutions across the continent, there is a long history of telcos trying to expand their footprint into financial services.
It made sense that if you had an extensive network of customers. I mean, why not offer them other services on your platform? The more extensive the network, the better, as people joined for the mobile phone plan, and then you could entice them to stay for the financial services that are exclusively available on that telco’s network (e.g. mobile money). Nigeria, Kenya, Cote d'Ivoire and the list goes on are all examples today of this strategy working across Africa.
This is obviously nowhere near as ambitious. It’s not like Revolut is trying to build a telco on the back of their customer base — which would actually be a ballsy play. It could be a Mint Mobile-esque type of play. Instead, this product seems to be a small step in the direction of offering more than just financial services, and eSIMs for international roaming might end up being a neat place to start.
Having said this, offering FS adjacent products is where the ‘super-app’ model is challenged. When you’re a reseller, you face the low margin and high CAC problem, which just means non-core offerings end up being relegated to the back of the line when it comes to the market dollar, product updates, etc.
It’s easy to believe that offering everything in one app solves this, but from experience, the complementarity is overstated. In most instances, it just becomes another button for customers to navigate around or push notifications for them to ignore.
⤷ FIS and banked team to widen pay-by-bank usage
FIS last week announced it has partnered with banking provider Banked to drive new pay-by-bank offerings for consumers and businesses.
Pay-by-bank solutions combine real-time payment rails with the flexibility and efficiency of open banking, allowing third-party financial service providers to complete digital payments without requiring card details, account numbers, or sort codes.
In the article, Banked and FIS note that businesses can enjoy reduced fraud, faster settlement, and lower processing fees. At the same time, consumers get a smoother payment experience, easier verification, and quicker access to funds. While pay-by-bank payments have been gaining traction, they also mention a significant knowledge gap among consumers, underlining the need for comprehensive awareness campaigns.
🥡 Takeaway: Even if this is FIS just dipping their toes in the water to see the reaction, it’s a clever move. As I’ve noted in previous issues of FR, A2A payments are the biggest threat to the card schemes’ respective franchises. In many ways, FIS is the perfect player to offer A2A payments to its broad roster of clients who might be keen on building a new payments business.
There’s no doubt, some of its customers on the acquiring side will stick their heads in the sand and ignore an A2A offering as they look to protect their current revenue streams. However, those who understand where the puck is headed will see this as an opportunity to experiment with A2A experiences.
In a world where compressed margins are the norm, astute operators will see this as an opportunity to win back some of the dollars that Visa and Mastercard have traditionally absorbed. I believe it’s only a matter of time before A2A becomes more common as a payment method.
Although I’m bullish on A2A, the user experience still has a long way to go. Linking accounts and overcoming the trepidation most consumers have entering their bank or digital wallet details into a third-party interface are all still unsolved problems. In this regard, FIS partnering with a startup is a clever move. Fingers crossed, this partnership hits.
⤷ Visa integrates virtual corporate cards with digital wallets
Visa has integrated virtual corporate cards with digital wallets, allowing financial institutions to add these cards to the digital wallets of their client’s employees. This new capability provides convenience, security, and flexibility for corporate users.
The virtual corporate cards can be added to third-party wallets like Apple Pay and Google Pay. This integration gives a chief financial officer control over corporate spending and allows for contactless digital payments. Regions Bank is the first Visa collaborator to offer this capability to its treasury management customers. Visa also announced plans to expand its commercial solutions to the Latin America and Caribbean region.
🥡 Takeaway: When we think of the card schemes, it’s easy to associate them with a consumer offering. Having said this, as Visa and Mastercard eye new opportunities for growth, one that has become an obvious target is B2B transactions.
The likes of Brex, Ramp and Mercury in the US have shown there’s a massive opportunity for innovation in the B2B banking space. Notably, card and spend management is an integral part of their value proposition.
In this regard, offering more accessible ways for every issuing organisation to create virtual corporate cards for the digital wallets of their clients’ employees makes a ton of sense — why not productise a validated value proposition?
As Visa’s CFO noted in 2022, the “cardable B2B” segment is a $20t opportunity (of which they already control ~$1t) that is almost as large as the company’s consumer payments business but growing faster. Watch this space; I think in 2024, we’ll continue to see both Visa and Mastercard come after this segment in an even more meaningful way.
⤷ Temenos fights back against Hindenburg report allegations
Temenos, a Swiss core banking vendor, has responded to allegations made by Hindenburg Research, calling the report inaccurate and filled with misleading claims. After the report was released, Temenos' shares dropped significantly.
While Temenos refutes the Hindenburg report, it has not provided specific details regarding the alleged errors. The company plans to release its audited results soon and, according to the article, remains confident in its business, financial performance, and cash position despite the accusations.
🥡 Takeaway: Unexpectedly, Temenos finds itself in the spotlight — and not in a good way. The company is set to deliver audited results to counter claims of financial impropriety — fingers crossed for them that they refute those claims.
While allegations of botched implementations might sound surprising to the uninitiated, they are par for the course when we’re talking about large corporate tech transformation projects. After all, there’s a reason why most core banking-related ‘digital transformations’ take a decade and billions of dollars. Regardless, let’s hope Temenos is able to refute all of Hindenburg’s claims.
⤷ HR unicorn HiBob acquiring British payroll platform Pento for $40 million
HR unicorn HiBob, known for its HR management platform, is acquiring British payroll company Pento, which specialises in cloud-based payroll systems, for an estimated $40m in shares and cash.
HiBob's CEO, Ronni Zehavi, highlighted the synergistic benefits of combining payroll and human capital management systems to enhance user experience and boost employee productivity. With a recent funding round of $150m, HiBob aims to offer an all-inclusive solution for people management, focusing on modernising HR and payroll processes to provide flexibility and ease for customers worldwide
🥡 Takeaway: HR platforms going downstream to company payroll doesn’t seem that interesting, but it does speak to how many of the startups servicing companies in the SME space are on a collision course.
Whether it’s Revolut launching an HR platform or Ramp eyeing the procurement segment, it’s clear many of the players in this space are playing for the whole SME relationship.
My guess is that we’ll continue to see players try (whether through acquisition or building product) and build up all-in-one solutions, but they’ll eventually realise just how hard it is to offer a world-class product across all these disparate areas of the SME segment. Then let the unbundling begin/restart.
💸 Notable Funding Announcements
Last week was yet another slow one for fintech financing, with 45 funding rounds completed and companies collectively securing $327m in investment.
⤷ Bold raises USD 50 million in Series C funding
Colombian fintech company Bold has raised $50m in a Series C funding round led by General Atlantic, bringing the company's total raised to $130m. Bold specialises in offering cost-effective payment terminals that enable small and medium-sized enterprises to accept link payments and other local payment methods.
Bold officials noted that the company has seen a surge in demand for electronic payments, particularly accelerated by the COVID-19 pandemic. With the latest funding, Bold intends to enhance its product offerings and expand its business operations, transitioning from a payment link provider to a comprehensive solution provider for merchants.
🥡 Takeaway: It’s easy to forget just how much opportunity still exists in growing regions transitioning from cash to digital payment methods. Moreover, as Bold shows, there is still space for companies to build analogues of fintech businesses that have been proven out in other markets. Yes, the “Square for Country X” is still a model that works — especially for markets crossing the digital payment chasm.
Think about what Paytm did in India or what Tencent (WeChat Pay) and Alibaba (Alipay) did in China to power the transition to digital payments. The same remains a live opportunity across Latam and Africa, and I’m sure we’ll continue to see VC dollars pour in, even in a challenging capital-raising environment.
⤷ Finom raises $54 million to expand digital business banking solution
Last week, Finom announced it had secured €50m in Series B financing to expand its digital business banking solution in the EU. The company plans to enhance its web and mobile experiences, aiming to empower millions of European SMEs and become a leading business banking provider in the EU.
Since its launch in 2020, Finom has assisted over 85,000 European businesses with their banking needs, facilitating the transfer of more than €14b. They are focused on providing cost-effective and user-friendly digital banking solutions to help entrepreneurs grow their businesses across Europe.
🥡 Takeaway: In the last few issues of FR, I’ve highlighted cap raises of SME challenger banks, and interestingly, these have been in a variety of markets.
There’s no doubt that there are few markets where SMEs are well-catered to by incumbent banks. Notably, the reasons tend to be the same across countries — SMEs are complex customers to serve with a variety of different needs, they offer little upside from a lending perspective, and compliance risk is non-trivial (and can be exceedingly complex).
Moreover, it’s fascinating to see how each is trying to find a strategy that works. Whether it’s Ramp’s focus on spend management, Revolut’s plethora of product offerings, or Judo Bank’s focus on lending here in Australia.
It’ll be interesting to see how each of the players continues to expand their offerings and which approach ends up being the one that works — a vertical (i.e. more financial offerings) or horizontal approach (i.e. providing products outside of financial services, like, say, an HR platform).
🎧 Resources & Recommendations
Last week, Forbes unveiled its Fintech 50 list. The list had a pronounced emphasis on B2B sectors, notably in payments, capital markets, and B2B banking — which probably highlights where most of the activity is in 2024.
It’s a fun little list and well worth checking out — even if there were a few startups I’d never heard of who made the cut.
⤷ Nik Milanovic & Rex Salisbury - From Fintech Builder to Solo GP
In this episode of the Wharton FinTech podcast, Zoey Tang and Rocky Gowni interview Nik Milanovic, founder of This Week in Fintech, and Rex Salisbury, founder of Cambrian VC.
The discussion covers updates from This Week in Fintech and Cambrian, as well as Nik and Rex's experiences as solo GPs. The conversation also touches on the latest fintech ecosystem and what to expect in 2024. As always, Nik and Rex provide some great insights. Well worth a listen!
⤷ Chris Dixon on the Future of the Internet, Crypto, and Web3
On this episode of Moment of Zen, Chris Dixon, a16z General Partner and author of Read Write Own, talks about the impact of blockchain on industries, the evolution of crypto, re-centralization, AI's implications on the internet economy, and media in a discussion with Erik Torenberg, Dan Romero, and Antonio Garcia Martinez.
I’ve been really enjoying Dixon’s book and this is a great summary of some of the more contentious topics he covers in it. Well worth a listen if you’re after a quick primer before delving into the book.
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