Issue #119: Bain Capital to Buy Envestnet, Apple Settles with EU on Contactless Payments, and Target Stops Taking Personal Checks (Seriously)
👋 Welcome to another edition of Fintech Radar, your weekly go-to source for deep insights into 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, 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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⤷ Bain Capital to buy financial software vendor Envestnet in $4.5 bln deal
🏃♂️ The Rundown: Bain Capital will acquire financial software vendor Envestnet in a $4.5b transaction. Envestnet, based in Berwyn, Pennsylvania, serves 16 of the 20 largest U.S. banks and 48 of the 50 top wealth management firms. Key investors backing the deal include Reverence Capital, BlackRock, Fidelity Investments, Franklin Templeton, and State Street Global Advisors. Bain Capital's offer is $63.15 per share. Envestnet's stock has risen 24.6% this year amid takeover speculation.
🥡 Takeaway: 2024 has been a hot year for enterprise fintech M&A. Everyone from PE firms to large startups and incumbent FIs are hunting for undervalued assets. Middle-market PE funds have particularly targeted payment companies, leading to increased deal count but generally smaller acquisition sizes.
Bain's acquisition of Envestnet, while larger in scale, is intriguing on several fronts.
Fintech old heads will recall Envestnet's $590m acquisition of open banking OG Yodlee in 2015. Since then, Yodlee has somewhat languished within Envestnet's data and analytics business, likely due to that part of the business only accounting for ~12% of the company's total revenue.
Bloomberg reported last December that Envestnet was attempting to sell Yodlee. Bain might follow suit, but with a twist - instead of selling, they could spin off Yodlee as a separate entity. This move could breathe new life into the company.
While Yodlee might not have attracted much buyer interest under Envestnet (or it would have sold already), a Bain-backed spinoff could give it a fresh start. Even though regaining market share in 2024 would be challenging, this strategy could give Bain Capital its own stake in the competitive open banking segment.
⤷ Apple reaches deal with EU regulators to open up mobile payments system to rivals
🏃♂️ The Rundown: Apple has reached a deal with EU regulators to grant rivals access to its tap-and-go payments system, ending a four-year investigation. The European Commission began formally investigating Apple Pay in 2020, citing concerns about competition restrictions.
Apple has committed to providing third-party developers access to NFC technology without fees, allowing competing payment wallets access to key iPhone features, and enabling users to set any wallet as the default option. These commitments, now legally binding, aim to enhance competition and innovation in the market. Apple must implement the changes by July 25, with the commitments lasting for 10 years.
🥡 Takeaway: I discussed this ongoing investigation a few issues ago and it looks like the final shape of the settlement is similar to what was proposed initially — third parties will get access to the NFC system via APIs without fees. This means features like Field Detect (which opens the default payment app near an NFC reader), double-clicking the side button to launch a payment app and authentication tools like Face ID and Touch ID will be accessible to third parties.
Whilst the settlement is finalised, implementation is another matter. It’ll be interesting to see how Apple grants access to these features, which I’m sure will be a rich and full-featured set of APIs (sarcasm intended).
Realistically, it's hard to imagine many users switching from the default Apple Wallet to another provider. Consider the likely maze of menu click-throughs and pop-ups required to make such a change your average customer will need to navigate.
Defaults hold significant power, and Apple still maintains control over these in their operating system. This settlement may open doors, but Apple's home-field advantage remains substantial.
⤷ Dosh Applies To Become New Zealand’s First Locally-Owned, Digital-Only Bank
🏃♂️ The Rundown: Dosh, a New Zealand fintech startup, has applied to become the country's first locally-owned digital-only bank. Operating since late 2021, the startup aims to compete with major banks through a branchless model. Notably, New Zealand banks rank as the world's second most profitable.
Co-founders Shane Marsh and James McEniery have initiated the registration process with the Reserve Bank of New Zealand, marking a significant milestone for Dosh.
🥡 Takeaway: Whilst small, New Zealand's fintech market is undergoing interesting changes. For context, NZ's banking sector is highly concentrated and profitable (it’s second most profitable in the world on an ROE basis). This stems partly from the fact that back in the 1980s and 1990s Australian banks took advantage of regulatory changes to snap up market share and today the top four banks are all Aussie-owned.
Recently, NZ's competition regulator launched an inquiry into banking competition, amid growing sentiment that big banks are earning "excess profits". The regulatory implications remain uncertain, but this presents an opportunity for challengers like Dosh, if only from a marketing perspective.
Additionally, the approaching deadline for account information implementation in NZ's open banking regime could be another catalyst for change in the market. New Zealand is certainly a market worth watching, with potentially significant developments on the horizon for this small island nation.
⤷ Commbank adds car buying and travel bookings to mobile app
🏃♂️ The Rundown: Commonwealth Bank of Australia has expanded its mobile app to include travel bookings and car buying services. With over 8.5 million active users, the app allows customers to search, book, and pay for flights and hotels, thanks to a partnership with travel agency Hopper. Additionally, car buying and selling options are available through collaborations with Carsales and Vyro. This update follows the integration of More Telecom in November 2023.
🥡 Takeaway: Not sure I get this. I’m bullish on the idea of embedded SaaS in fintech — I’m actually writing a piece on the topic — but this doesn’t strike me as the way to implement it.
I don’t know about you, but when planning a holiday I don’t think to go to my banking app to do so. I haven’t seen the implementation but it also feels like it’d be an awkward experience. My guess is the experience is one where the CBA banking app simply kicks you out to a partner website, at which point seems rather pointless.
On paper, the strategy might appear sound: "We have millions of customers who trust us with their finances. Providing them with flight booking and car buying services within our app makes us an indispensable hub for their lives - a 'super-app', if you will." Cue slide on super apps.
However, there's a vast difference between having distribution and effectively activating it. Large FIs often conflate these concepts. Simply cramming every tangential offering under the sun into a banking app rarely works, especially when you just add random things because you found a partner to work with on it.
My prediction? This will likely go the way of CBA's crypto offering... announced today, gone tomorrow.
⤷ Target to stop accepting personal checks
🏃♂️ The Rundown: Target will stop accepting personal checks for in-store payments on July 15, citing low usage volumes. The decision impacts approximately 1,950 existing stores and nearly 40 upcoming locations. However, Target will still accept checks by mail for credit card balances. The change aims to streamline checkout processes and enhance customer convenience.
Target emphasises alternative payment methods like Target Circle Cards, cash, digital wallets, SNAP/EBT, buy now pay later services and cards. Walmart, a competitor, continues to accept personal checks.
🥡 Takeaway: This has strong "New York discovering the wheelie bin" energy. While most might chuckle at Target finally pulling the plug on cheques in 2024(!), it's a good reminder that payments aren't all BNPL and tap to pay. In some places, even in the US, paper cheques are still a reality.
⤷ Nala raises USD 40 million in Series A funding
🏃♂️ The Rundown: Nala has secured $40m in Series A funding, led by Acrew Capital and joined by DST Global, Norrsken22, HOF Capital, and Amplo. Angel investors including fintech founders of Chime and Robinhood also participated.
The funding will aid Nala's global expansion, focusing on Asia and Latin America. The company's consumer app currently facilitates transfers to 249 banks and 26 mobile money services across 11 African nations. Nala aims to enhance payment capabilities and strengthen its B2B payments platform, Rafiki, to support global business transactions in and out of Africa.
🥡 Takeaway: At a time when funding for fintech startups targeting the massive opportunity on the continent is drying up, Nala seems to have bucked the trend, securing a substantial sum from some impressive investors.
Despite these funding and macroeconomic headwinds, Africa's FinTech ecosystem has demonstrated remarkable resilience and continues to grow. The smart money realises that the core factors that have made the market such a huge opportunity remain unchanged. Africa's unique combination of a large unbanked population, high cash usage (still ~90% across the continent), continued increases in mobile penetration, and supportive regulatory environments in many key countries still make it a market too big to ignore.
Hopefully, in the second half of the year we see more investors regain their appetite for African fintech and start backing promising startups again. The opportunities are still massive - it'd be a shame to let them slip by just because of a temporary loss in confidence from investors.
⤷ lemon.markets secures €12M for Brokerage-as-a-Service platform expansion
🏃♂️ The Rundown: Berlin-based fintech lemon.markets has secured €12m in funding to expand its Brokerage-as-a-Service platform, with plans to open 100 million brokerage accounts. The round was led by CommerzVentures, with participation from Heliad, Creandum, Lakestar, Lightspeed, and System.one.
Lemon.markets provides brokerage and custody infrastructure for various investment products. The company obtained the necessary licenses in January 2024 to operate as an investment firm, allowing services like contract broking and investment advice.
🥡 Takeaway: The plot thickens as more cash flows into an already crowded market. With heavyweights like Drivewealth, Alpaca, Upvest, WealthKernel, and Atomic (just to name a few) all vying for the same slice of the European pie, the brokerage-as-a-service segment is shaping up to be a fierce battleground.
To be fair, each country's regulatory landscape is its own beast, demanding unique licensing hoops to jump through. But beyond these bureaucratic hurdles, it's hard to imagine all these players staying in the game long-term. Something's got to give.
If history's any indicator, this market might just follow in the footsteps of the BaaS world, where only a select few have emerged. The million-dollar question is: who'll weather the storm when the inevitable market shakeup hits?
⤷ How Eric Glyman (CEO, Ramp) Runs One of The Fastest Growing Startups
In this episode of the Logan Bartlett Show, Eric Glyman, CEO of Ramp, shares his approach to leading the company. The discussion also delves into current hot topics in fintech, such as AI, and the once-popular concept of "self-driving money". Be sure to add it to your playlist this week.
⤷ Building product at Stripe: craft, metrics, and customer obsession | Jeff Weinstein (Product lead)
I love interviews that offer a glimpse into how a company operates, and this episode of Lenny's Podcast is just that. In it, Lenny chats with Stripe's Product Lead, Jeff Weinstein, for over two hours on everything from the importance of customer obsession and effective metrics to rapid execution in product development. It's a great listen that provides an insightful look into how Stripe runs its product organisation.
⤷ The world’s top 250 fintech companies: 2024
Everyone loves a listicle, and here’s one from CNBC. There aren’t many surprises in any of the eight categories covered by the list. In some ways, this list probably reflects the stagnant nature of the fintech startups that remain in the zeitgeist — which is a little disappointing given the numerous up-and-coming fintech startups out there. But then again, it is a CNBC list of fintech startups.
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