Issue #113: PayPal Is Getting Into The Ad Sales Business, Visa Preps Pay-by-Bank In The US, And Nubank Launches An eSIM Offering
👋 Hi all, I hope you’ve had a great week.
A big shout-out to our loyal subscribers and a hearty welcome to the new faces — we're ecstatic to have you here!
If you’re new to Fintech Radar, this is what you can expect from each issue:
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 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.
As always, it’s been a busy week for fintech, so without further ado, let's delve into the major happenings from last week. But before we do…
🆕 Advertise In Fintech Radar!
After 113 issues, I’m excited to announce that Fintech Radar is now opening up for advertising! That’s right, you now have the opportunity to put your brand in front of the Fintech Radar community.
The aim of launching advertising is to connect the most relevant financial services brands with our readers, offering a platform to highlight your unique offerings.
To make this accessible to startups, a feature ad placement costs only $USD400 per issue (and cheaper if you advertise for a month!).
If this sounds like a good fit for your brand, head to our sponsorship page for more details and to secure your advertising slot.
If you have any questions, just reply to this email and ask away!
⤷ Visa preps for US pay-by-bank services
🏃♂️ The Rundown: Visa is gearing up to introduce pay-by-bank services in the U.S. after extending the service in Europe through its acquisition of Tink in 2022.
Visa's Chief Product and Strategy Officer, Jack Forestell, announced the U.S. launch with pilot customers and highlighted Visa's focus on enhancing security and user experience, especially for large payments like loans and healthcare with their pay-by-bank offering.
🥡 Takeaway: This is shaping up as the year of A2A payments, and the card schemes are not looking to be left behind. You might recall that only a few weeks back, Visa announced a swath of new products (well, a “swath” for them) at their Visa Payment Forum. Sandwiched between flexible credentials and Payment Passkey, they announced that they’d be bringing A2A payments to the US—so this isn’t anything new.
As I’ve discussed in previous issues of FR, A2A is one of the truly existential threats to the card schemes, and they’re clearly taking it seriously.
Historically, the schemes have been at the absolute bleeding edge when it comes to payment trends. As an example, back in 2011, Visa launched its foray into the digital wallet space in an attempt to stave off upstarts like Venmo, and they were confident it would be widely adopted (cf. read this article about the announcement). The fact that it’s now a relic of history and no one has a V.me wallet (which is what it was called at launch) on their phone points to the fact that it didn’t play out how they expected it to.
The point is schemes have no problem identifying trends and even building products (one of my more controversial views is that the card schemes are some of the best product shippers in fintech); it’s the distribution that they struggle with.
On the face of it, the idea that the schemes struggle with distribution sounds absurd — after all, they have their hooks in every financial institution in the world. However, there is a reason their P&Ls are still dominated by their core offering and not the tens of other services they offer — FIs don’t go to a card scheme for innovative products.
My guess is that both Mastercard and Visa will fight valiantly to be relevant in the A2A space. Still, it will ultimately not be the schemes most FIs naturally turn to when considering implementing A2A payments, and most will turn the upstarts for infrastructure to power their faster payment and A2A offerings.
⤷ PayPal is launching an ad sales business based on user behavior data
🏃♂️ The Rundown: PayPal has unveiled plans to launch a new advertising platform that will leverage its extensive user behaviour data. This initiative comes amid significant leadership changes. Mark Grether, formerly of Uber, was appointed SVP and General Manager for PayPal Ads and John Anderson as SVP and General Manager for Consumer Group.
The platform promises personalised ads driven by insights from PayPal’s network of 400 million customers and 25 billion annual transactions.
🥡 Takeaway: Running ads in a fintech product is probably the surest sign you’ve hit the end of your innovative years.
Every consumer fintech startup talks about running ads (or maybe more euphemistically referred to internally as product/brand partnerships), but few pull the trigger.
The most obvious reason is that our social contract with our core financial services providers is that they won’t use our information for anything other than providing us with financial products (not to mention the regulatory challenges you could face in some markets). But I get it: The temptation is always there. After all, the product is “free”, and when a product is free… well, you know the saying.
I wonder if this is the moment we look back at as the end of PayPal’s innovative streak. Specifically, the moment they started serving up Ozempic ads to people ordering too much Ubereats. Hello, “late-stage fintech”.
⤷ More neobanks are becoming mobile networks — and Nubank wants a piece of the action
🏃♂️ The Rundown: Nubank is entering the mobile network space by launching an eSIM service offering 10GB of free-roaming internet across 40+ countries.
The eSIM service targets Nubank Ultravioleta subscribers and leverages Gigs' platform for infrastructure. This trend mirrors similar initiatives by neobanks like Revolut, highlighting the growing synergy between financial services and mobile communications.
🥡 Takeaway: The eSIM seems to be the new “it” addition to the challenger bank/super app product range. In the last year, Revolut, Tinkoff, Zolve and Kookmin added eSIM offerings to their product.
It’s a fascinating trend and, as I’ve previously noted, one that is a bit of a throwback to the days when telcos had ambitions to play in the world of financial services.
The Mint-mobile play is one that I’m sure many are looking at as an example of where a relatively new mobile virtual network operator (MVNO) came in and captured some serious attention and eventually exited for $1.35b to T-Mobile as a model for how much value can be generated — now layer in ready-made distribution and it could be a compelling growth story for consumer fintech brand. In other words, expect more to follow suit this year.
⤷ Swift to pilot AI in fight against fraud
🏃♂️ The Rundown: Swift is collaborating with global banks to pilot AI solutions that combat cross-border payments fraud. The first pilot enhances the Payment Controls service with an AI model to detect fraud by analysing historical activity patterns on the network. The tests utilise live traffic data from member banks.
Additionally, in a separate experiment involving ten financial institutions, including BNY Mellon, Deutsche Bank, and HSBC, they are testing AI to analyse shared data for fraud detection. In the article, Tom Zschach, Swift's chief innovation officer, highlights AI's potential to reduce finance fraud through collaborative efforts.
🥡 Takeaway: Swift is another interesting bellwether for innovation in financial services. Like the card schemes, they see a lot of trends through their interactions with the vast majority of banks globally and, as a result, are constantly tinkering with the latest hotness in financial services. If you’ve ever been to SIBOS, you’ll know exactly what I mean.
You might recall Swift was early to the party regarding DLT and crypto. So, when it comes to AI, it’s a good proxy for where incumbents are looking when it comes to use cases, and unsurprisingly, it’s in the compliance space where there seems to be interest.
As I’ve noted in previous issues, this is where we’re likely to see traditional financial institutions play — to begin with, at least. The opportunity to “augment” their staff with AI for compliance is a no-brainer. However, what’s more interesting is if this augmentation turns into “replacement” as banks look for ways to dive deep into AI and really start to generate some serious ROI.
⤷ Western Union collaborates with Plaid for faster, more secure payments in Europe
🏃♂️ The Rundown: Western Union has partnered with Plaid to enhance its payment processes. This collaboration simplifies account verification and increases transaction thresholds, allowing larger money transfers with enhanced security.
In the press release, Bart Stencel, VP of Omnichannel Marketing Europe at Western Union, highlighted the innovation's impact on customer trust and flexibility. Brian Dammeir, Head of Europe at Plaid, emphasised the demand for more accessible and secure cross-border payments.
🥡 Takeaway: One of the challenges that organisations face when it comes to faster payments (and especially in an A2A environment) is the risk associated with the initial settlement and non-reversability.
While being able to do some sanity checks and even go a little deeper using open banking data is nothing new, it is a use case that is getting more airtime as payment players look to improve their compliance and fraud capabilities. I anticipate this will be a popular use case in numerous markets for open banking players like Plaid.
⤷ We’ve raised $11M to change where businesses buy insurance
🏃♂️ The Rundown: Authentic Insurance last week announced they’d secured $11M in a Series A funding round led by FirstMark Capital, with contributions from Slow Ventures, Altai Ventures, MGV, Upper90, and Commerce Ventures.
Authentic enables franchisors, software companies, and associations to offer their own insurance solutions through a captive model. This model allows for customised coverage and potential cost savings, benefiting both small businesses and their service providers. Their clients include Mindbody, Restaurant365, theCut, and PushPress.
🥡 Takeaway: When the first wave of neo-insurers hit the market, incumbents scrambled to sure up their direct sales channels, worried about the impending disruption coming to the sector. As we all know, the market turned, and we saw some notable failures in the space and growth slow for others. The pressure being felt by incumbents subsided, and they turned their attention back to dealing with core business issues like claims inflation.
In many ways, the current wave of embedded insurance offerings is a replay of what happened when the neo-insurers entered the market over a decade ago. Much like the neo-insurers were able to dominate online channels and capture specific markets through targeted offerings (Lemonade’s renter insurance offering in NYC is a classic example), the embedded players are taking the same playbook but going even lighter.
Unlike what we generally see in financial services, insurance is a low-affinity product with few customer touchpoints (outside of renewal and claims, no one interacts with their insurer). This is why embedded insurance poses a real threat to incumbents across many lines of insurance — it provides a way to buy insurance when people actually need it. Beyond this, the embedded players are taking a model that works (i.e. affinity sales) and adding a layer of technology and data insights to supercharge it.
Much like just standing up a well-designed website and becoming an MGA wasn’t enough to disrupt the incumbent, the same may be true for embedded insurance. Having said this, expect more vertically focused players to enter and chip away at specific segments — where they’ll likely be able to gain some surprisingly large market share.
⤷ Fintech startup Forward grabs $16M to take on Stripe, lead future of integrated payments
🏃♂️ The Rundown: Forward announced last week that it’d secured $16m in seed financing led by Commerce Ventures, Elefund, and Fiserv. Co-founded by industry veterans, Forward aims to boost SaaS companies' revenue by embedding payments. The funding will support meeting growing software partner demand and enhancing payment risk functions with AI.
🥡 Takeaway: It wasn’t that long ago that becoming a PAYFAC sounded sort of crazy. Even if your company was processing billions of dollars in transactions, bringing the whole payments kit and caboodle in-house sounded wild. I mean, imagine running the payment gateway, merchant account, underwriting, staffing a compliance team, running risk management and doing reporting.
However, at a certain size of business, the “let’s become a PAYFAC” discussion becomes more serious; thus, we’ve seen the rise of the PAYFAC-as-a-service startups.
Don’t get me wrong, it’s still a ton of work to become a PAYFAC, and just because you have the tooling doesn’t mean you can do it well. That’s why I think what Forward calls a “PAYFAC-lite” model sounds super interesting — in substance, outsourcing part of the process to them.
Obviously, even just “renting” out part of the stack is a big undertaking, but it does feel more approachable for the average marketplace business.
⤷ Inside Cash App’s approach to banking its base: A conversation with Ryan Budd
I really enjoyed this conversation Zack Miller had with Ryan Budd, Head of Financial Products at Cash App. During the 40-minute episode, they discuss the Cash App's transformation from a simple money transfer service to a comprehensive financial platform that now includes full-service banking, investing, crypto trading, and tax services. Add this one to your weekly fintech playlist.
⤷ Earned Wage Access and Fintech Policy Primer with Ben LaRocco of EarnIn
I feel like every other week I’m recommending an episode of Fintech Layer Cake and here’s another one to add to list.
If you’ve been paying attention to the EWA space you’ll know it’s heat up not only from an adoption perspective but also a regulatory one.
In this episode of Fintech Layer Cake, Reggie Young discusses EWA with Ben LaRocco from EarnIn. More broadly they chat about what the policy function at a company does and what value it can bring to a fintech startup. As always a great listen and worth tuning in for.
❤️ Show Some Love For FR
📧 Feel free to reach out if you want to connect. I'm @alantsen on Twitter, or you can DM me directly by clicking the button below ↴
Ps. If you like what I'm doing with FR, please share it on your social disinformation network of choice. I'd also appreciate it if you forwarded this newsletter to a friend who might enjoy it.
🙏 What did you think of this week's issue of FR?
I love it! ◌ I Like It ◌ Not Bad ◌ I Don’t Like It ◌ It’s Awful