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Issue #117: Klarna Sells Its Checkout Offering, Coinbase and Stripe Team Up On Crypto Payments And Both Chime And Nubank Make Acquisitions
👋 Welcome to another edition of Fintech Radar, your weekly go-to source for 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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⤷ New owners to take Klarna Checkout to the next level
🏃♂️ The Rundown: Klarna announced the divestment of Klarna Checkout (KCO) to a consortium led by Kamjar Hajabdolahi of BLQ Invest.
KCO, launched in 2012, holds over 40% market share in Sweden and 20% across the Nordics. The buyers plan to enhance KCO's offerings for e-commerce. The transition will occur on October 1.
🥡 Takeaway: Exiting the checkout space on the face of it seems like a strategic move designed to pull Klarna away from competing with payment providers. Why compete when you can partner and focus on your core business of BNPL?
It’s worth noting that Klarna and the other BNPL players that have dabbled in the owing the checkout have done so that they own the full user journey — ensuring they are the preferred BNPL option rather than just another interchangeable provider.
There is a fine line between owning the checkout and simply being a button within it. The idea here seems to be that this move opens Klarna up to partnerships with the likes of Stripe and Adyen, who won’t be concerned about Klarna encroaching on their territory. The sale of the KCO business is a very clear signal they’re done with trying to take on the PSP players directly.
Listening to the podcast linked below of Klarna’s CEO Sebastian Siemiatkowski speaking about how in the early days of the company they went after payments and his “attempt” to acquire Adyen before they were the payments behemoth they are today speaks to just how long they’ve been at the trying to own the checkout. To be fair in certain markets they’ve been highly successful (e.g., Sweden where they have a 40% market share of online shopping transactions) So it is interesting to see that they’ve very clearly ended their aspirations of being the soup-to-nuts payments provider to e-commerce players. Well, at least for now…
⤷ Coinbase + Stripe team up to expand global adoption of crypto
🏃♂️ The Rundown: Coinbase and Stripe have partnered to enhance global crypto adoption, aiming to provide faster and cheaper financial services.
Stripe will incorporate support for Base across its crypto products, enabling quicker and more affordable money transfers to over 150 countries.
While Coinbase will integrate Stripe's onramp into Coinbase Wallet, allowing instant crypto purchases via credit cards and Apple Pay.
🥡 Takeaway: Stablecoins continue their gradual march into the mainstream. While it’s still early days for Base (Coinbase’s L2 solution), the Stripe partnership highlights its potential to delve deeper into the payments stack, beyond pure-play crypto.
On the other hand, it’s intriguing to see Coinbase collaborate with Stripe, utilising them as an on-ramp into the Coinbase Wallet. Given that Coinbase has made significant efforts to build its connectivity to local payment rails in various markets, it will be fascinating to see if this partnership goes the distance.
⤷ US judge rejects Visa, Mastercard $30 billion swipe fee settlement
🏃♂️ The Rundown: A U.S. judge rejected Visa and Mastercard's $30b antitrust settlement to limit merchant fees, citing concerns over high fees and control.
Many merchants and trade groups, including the National Retail Federation, opposed the deal, arguing the fees would remain excessive. The decision could lead to further negotiations or a trial. The case is part of ongoing litigation from 2005, separate from a $5.6b settlement upheld in March 2023.
🥡 Takeaway: Ruh Roh, it looks like the schemes might be sent back to the drawing board on their swipe fee settlement. As the article notes, it’s unsurprising given the backlash from some vocal industry groups.
Let’s see where this goes and whether there will be any significant changes to the overall settlement. My guess is that Visa and Mastercard might offer a bit more, but it’s unlikely to result in a material change in the outcome.
⤷ Chime buys enterprise employee rewards platform Salt Labs
🏃♂️ The Rundown: Digital banking leader Chime has acquired employee rewards startup Salt Labs, founded in 2022 by the creators of DailyPay.
Salt Labs will now be central to the new 'Chime Enterprise' unit, aiming to collaborate with employers across various sectors. Jason Lee, CEO of Salt Labs, will head the new unit, marking Chime's strategic entry into the employer channel. Chime's COO, Mark Troughton, highlighted the acquisition as a unique opportunity to engage millions of consumers via employer partnerships and integrate them into the Chime platform. The financial details remain undisclosed.
🥡 Takeaway: Reports of Chime’s plans to go public have been circulating for some time. If true, acquisitions that diversify their revenue streams and expand into other verticals will certainly bolster their IPO prospects
What’s interesting here is that way back in 2022, Chime attempted to acquire DailyPay, Jason Lee’s former company, not once but twice for what a reported $2b. Unfortunately, it never came to fruition. This deal secures them Jason Lee (who will head up Chime’s Enterprise unit) and a promising product that complements their recently released EWA offering.
It will be fascinating to see how the market reacts to Chime when it decides to go public and how it values these small but highly complementary additions to its core consumer banking business.
⤷ Nubank acquires AI-for-banks startup Hyperplane
🏃♂️ The Rundown: Nubank has acquired San Francisco-based AI startup Hyperplane just seven months after its $6m seed funding round.
Founded in 2022, Hyperplane specialises in building data intelligence models for banks, aiding in personalisation and risk assessment. Hyperplane’s expertise will bolster Nubank’s AI capabilities, aiding its mission to simplify banking and enhance personalised financial services. CEO David Velez emphasised this acquisition will bolster Nubank's commitment to AI and customer-centric innovation. Financial details of the deal remain undisclosed.
🥡 Takeaway: Hyperplane was building something nearly all banks are either building or trying to find a partner to work with on. As one of the co-founders notes in the article:
“The goal for Hyperplane is, if banks across the world have a lot of first-party data, what does it take to build a data intelligence layer so that banks can plug in their first-party data?”
It’s easy to see why big-name investors like Lachy Groom and SV Angel, jumped into their seed round. And yet, just seven months after announcing their round (and to be fair they’ve been building since 2022) they decided to call it a day and get acquired by Nubank. It’s hard to imagine that their investors are thrilled with this outcome — especially in the currently hot AI funding environment.
What’s even stranger is that, from the presser, it sounds like this is getting wrapped into the Nubank’s stack. So basically, an acquihire with some tech (whatever, they’ve been able to pull together in a years of being alive).
I could squint and imagine combining forces with a larger player could make sense this early in the journey if the acquirer brought, say, distribution to the table, but to call it quits after just a few years just to be wrapped into Nubank’s tech stack seems strange.
Regardless, it’s a neat play from Nubnak who probably just accelerated their AI program by a few years with the acquisition.
⤷ Climate X completes $18m Series A led by Google Ventures
🏃♂️ The Rundown: Climate X, a UK-based risk intelligence start-up founded in 2020, secured $18m in a Series A round led by Google Ventures. Existing investor Pale Blue Dot also participated, along with CommerzVentures, Blue Wire Capital, PT1, Unconventional Ventures, Western Technology Investment, and Noa VC.
The company offers a data analytics platform using physics, digital twins, and AI to assess climate risks on asset valuations. Climate X plans to use the funds to grow its commercial team in New York and expand operations across North America, Europe, and the Asia-Pacific.
🥡 Takeaway: You need only look at the long list of insurers that have exited the California home insurance market to get a sense of how big of an issue climate risk has become — and it’s only getting more serious.
The whole fintech climate segment is growing with insurers, and other large asset portfolio owners (e.g. data centre owners and property developers to name a few) all looking at ways to better quantify climate hazards. Much of this has become more sophisticated as players look to better prepare or mitigate risk by building their projects in less climate-impacted areas. In other words, companies like Climate X are seeing a ton of demand for their services.
Despite the segment getting increasingly crowded the need for highly market-specific, increasingly more precise and actionable insights means there’s likely a lot more room to run for players in this segment.
⤷ Feather raises €6M to go Pan-European with its insurance platform for expats
🏃♂️ The Rundown: German startup Feather has secured €6m to expand its insurance platform for expats across Europe, aiming to simplify the fragmented insurance landscape for the 40-plus million expats in the region.
With a focus on personalised coverage recommendations and a quick assessment tool, Feather has attracted investments from industry players like Wise co-founder Taavet Hinrikus and VC fund Plural. Feather plans to expand to three more countries by the end of 2024, leveraging its funding for internal growth and a digital-first approach tailored to the expat niche.
🥡 Takeaway: Consumer-facing insurtech seems to be regaining momentum as investors slowly rebuild confidence in the segment. Much like what we’ve seen in the neobank space, investors seem to be regaining confidence and pushing money back into the segment with around 50% of deals done in Q1 in the P&C space being “distribution” focused deals (i.e. insurer/Broker/MGA).
So what’s changing? Much like what we’ve seen in the world of neobanks, the opportunity to disrupt incumbents remains and the market is as big as ever (and only increasing as other segments continue their growth — e.g. cyber insurance)
This time around, investors are more cautious and focusing on verticalised opportunities — think cyber insurance for SMEs (e.g., Coalition), insurance for expats (e.g., Feather), and insurance for freelancers (e.g., Alicia). Outside of those who have weathered the storm in the broader P&C space, expect fewer horizontal offerings like Lemonade to secure the bag this year.
This more verticalised approach is driven by a trend toward embedded insurance, aiming to connect more closely with customers at the point of need. It’s a strategy likely to continue playing out, offering a more targeted and timely insurance purchasing experience and, importantly for startups, funding.
⤷ Building a Disruptive Payments Company (with Klarna CEO Sebastian Siemiatkowski)
This week’s first recommendation is a pod with Klarna’s CEO Sebastian Siemiatkowski which discusses the rise of Klarna with the Acquired Podcast guys.
If you’ve heard the Klarna founding story before skip the first half of the episode. Beyond the history lesson, Siemiatkowski discusses everything from AI to where he sees Klarna headed in the coming year. Well worth a listen.
⤷ Prudence, Profits, and Growth: Fintech Report co-authored by BCG and QED
This is the second edition of the Global Fintech report from BCG and QED and it’s another ripper. The title of report — Prudence, Profits, and Growth — says a lot about the themes covered in the report. The main messages from the report: revenue is growing across the fintech sector, the era of “growth at all costs” is over, and it’s time to get serious about compliance.
As with anything from BCG and QED, it’s well worth checking out
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