Issue #25: MSCHF In Fintech, CSX From Credit Suisse And Aussie Banks Launch Some Strange New Credit Cards
👋 Hi, FR fam. I hope you’re all doing well this week.
Let’s kick this issue off with MSCHF’s latest drop - CardvCard. It’s a “competitive multiplayer bank account. All players’ cards connect to the same account. Money is deposited at random: race to spend it before the others!” The experience is powered by Privacy.com’s issuing API (which is some great marketing for them!) Watch out for the copy cats, as I can see this technique being used by neobanks as a growth strategy.
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Chef Nomi gives back $14m after he does a runner from Sushiswap (all via an Academy Award style apology tweet). Here come the Silicon Valley debt collectors, and they want their $200 back. Starling launches a debit card for kids, and Revolut launches in Japan. Change Financial is looking to scoop up Wirecard Australian and New Zealand. Save money, and you could win $10m using this app. Oh no, transaction banking volume continues to slump. In surprising news, another bank blockchain project gets delayed (/sarcasm). Find out why Tardigrade sellers are getting blocked by Paypal (and a great related tread on OFAC). Stash hits $1.8bn in AUM (apparently “…an 85% increase since pre-pandemic”).
Last week 25 deals raised a total of $645m. Not a bad week for fintech financing.
🦄 Mollie Becomes a Unicron
Last week European Payment Service Provider (PSP), Mollie, announced a €90m series B round of financing. The round was led by TCV and brings Mollie's valuation to $1bn.
🤓 My Take
Many (even in payments) will likely have never heard of Mollie. Yet, this PSP is one of the largest in Europe and did €10bn in transaction volume this year across 10,000 merchants (and is doubling YoY).
For context, a PSP is an aggregator of payment methods. So, for example, it allows an online merchant to accept payments via debit cards, BNPL (and other financing schemes), e-wallets, etc. An advantage of using a PSP is that on the backend, you can connect multiple merchant acquirers - which offers redundancy and the ability to operate internationally without having to modify anything on the front end.
Most of you are probably scrolling on to the next section now that you’ve added a new acronym to your arsenal, but the reason I wanted to highlight this deal is that a common comment I get about the acquiring side of the payments ecosystem is something to effect of “you can’t compete with Stripe.” However, the reality is that the diversity of players offering solutions (and doing well!) on the merchant side of payments is enormous. This is driven by the number of elements in a business that interface with the way payments are accepted and the multitude of payment methods that you need to solve for in each country you sell into - globally, there are hundreds of different payment methods an international merchant has to solve for. For example, in Austria, the most common online payment method is EPS (a joint initiative by Austrian banks and government). It is table stakes when selling online in that market (80% of merchants in Austria accept this method).
What all this ends up meaning is that there is still white space in payments - it’s just very narrow and more about taking an ‘unbundling’ mindset when thinking about the opportunities. Mollie is an excellent reminder that even in the crowded payments market, you can build a billion-dollar fintech company.
🤑 Groww Bags $30m In Funding
Last week India investment app, Groww, announced that they’d raised $30m. The round was led by YC Continuity and included participation from existing investors; Sequoia India, Ribbit Capital, and Propel Ventures. To date, Groww has raised $59m.
🤓 My Take
India is a fascinating market for fintech.
As I noted last week, Amazon is doubling down on its aspirations in the market. At the same time, every major Silicon Valley tech company has poured money into Reliance Jio (which obviously has a fintech play). To avoid turning this section into a giant piece of why I’m bullish on Indian fintech, I’m just going to link you to a great article on the state of challenger banking in India - to give you a sense of the market dynamic at play in the country.
Now back to Groww. The startup allows users to invest in mutual funds, including systematic investment planning (SIPs are a tool to help you regularly invest in mutual fund schemes) and equity-linked savings. Recently, Groww has also expanding to include US stocks and gold.
The company is on a tear, with “…8 million registered users for their mutual fund offering, and over 200,000 users have bought stocks from the platform…” according to one of their co-founders, Lalit Keshre. More interestingly, they note in their press release that 60% of their users are from tier 2 and 3 cities, and 60% are first-time investors.
The opportunity for the likes of Groww is still huge, as many retail investors in India are just entering the equities market - as Ashish Agarwal of Sequoia Capital India notes in their announcement of the investment:
Indians save about 30% of their disposable income, with annual savings totalling to >$450B. However, much of this has traditionally been invested in physical assets like real estate or gold, in low yielding bank FDs or, even worse, sits as cash, where savings are eaten away by deflation. Financial markets globally have offered the most efficient way for middle class investors to compound their savings over the decades, but in India, retail investors shied away in the past. Retail investor participation in Indian equities is <3% today. This is significantly lower than US (at ~55%) and even China (at ~7%).
💳 Credit Suisse To Launch Revolut And N26 Digital Banking Rival
This seems to be a bit of a theme recently. As you may recall, a few weeks back, I noted that JPMorgan was looking at reviving their challenger bank aspirations with a Finn 2.0 in the UK (which you’ll no doubt remember they scuttled after just 12 months in the US).
Clearly, 24 months ago, innovation teams at banks were able to convince some executives that this was the best way to reinvest themselves/compete against the challengers and thus the recent announcements.
To be fair, I do think this strategy can work. For example, GS’ Marcus has shown when it works, it can really work. In another example, a little closer to home, Aussie challenger bank UP is a collaboration between Ferocia and Bendigo and Adelaide Bank (here’s a little video that tells their story in typical Up style) that has yielded benefit back to the mothership despite them operating fairly autonomously. As Bendigo and Adelaide Bank’s chief transformation officer, Ryan Brosnahan, noted in a recent article:
The same team that builds Up is the same team that also builds our digital channels so we're getting that real benefit of having the same team learning from things they're doing at Up, learning in terms of what customers actually like and what's working and what's not working, [and] that gives us the ability to rapidly deploy that into our … digital channels as well.
It’ll be interesting to see how Credit Suisse’s experiment goes, but I have to say I have my doubts when part of the strategy is to turn branches into “digital bars.” Also, what’s with the name? CSX probably isn’t the best name, especially when you try to say it out loud - or maybe that’s part of the marketing.
🏦 NAB and CommBank Race To Launch No-Interest Credit Cards
So this one left me scratching my head a bit. This week two of the four major Aussie banks, NAB and CBA, announced an interest-free credit card. According to most reports (see HERE and HERE), these cards are aimed at battling the popularity of BNPL in Australia.
To help contextualise why this is a strange move, let’s turn to some data about payments in Australia. Debit card usage in Australia is the dominant card payment method accounting for ~70% of all card transactions. At the same time, credit card usage has consistently been between 2-3% of all card transactions for the last five years (see HERE for the data). At the same time, credit ownership amongst millennials has been diving for a very long time (it has fallen from 58% in 2002 to 41% in 2016). While over the last few years, we’ve seen BNPL usage surge in this important demographic (e.g. it’s already the most popular payment method in the online fashion category - accounting for 48.3% of all online transactions).
It’s fairly clear the demgraphic this is aimed has no interest in a credit offering. I totally understand that they are concenred about preserving the $1.7bn in credit card revenue they derive yearly, but this feels like Blockbuster trying to get people back into their stores by offering a 2-for-1 offer on DVD rentals when everyone has moved on to Netflix. Having said this, they seem to be on trend with the vertical cards.
👀 Santander spins out its $400M fintech venture capital arm, now called Mouro Capital
This week Santander announced that they’d be spinning out their VC arm, InnoVentures, and renaming it Mouro Capital. The new standalone entity will continue to invest solely for Santander, as they continue to be the fund’s only LP.
It’s always interesting to see how FSIs attempt to structure their CVC arms. As the article notes, the change is in part aimed at helping them:
…to invest more nimbly, including placing bets adjacent to pure fintech or financial services and in startups that could more directly compete with Santander’s own product lines. It should also help remove any market perception that portfolio companies aren’t independent of the incumbent bank, in terms of future investment or partnerships with Santander competitors.
InnoVentures was already a top tier fintech fund - having invested in the likes of Tradeshift, Upgrade, iZettle (sold to Paypal), and Kabbage (sold to AMEX), to name a few - so I’ll be keen to see if this move changes anything for them.
Here are some podcasts you should add to your listening rotation this week.
The $3.6 Trillion Embedded Finance Opportunity with Mike Massaro and Matt Harris → Listen to this twice. It’s a banger of a podcast and it’ll get you up to speed with what’s happening in embedded finance in the time it takes to walk your dog.
BankMobile: From Fintech Bank to TechFin Platform → To be honest, I’d never heard of BankMobile before this podcast, so this was a great primer on a challenger bank that seems to have successfully leveraged a B2B2C customer acquisition strategy. Well worth a listen to hear about their distribution strategy.
Inside Shopify’s financial services strategy → Ok, so this is another embedded fintech themed 'pod for you to listen to. Having said this, who isn’t interested in hearing what Shopify is plotting to do in the fintech space and you get to hear it directly from their head of financial solution, Kaz Nejatian.
📈 You can check out Radar, an open database of Australia's fintech ecosystem. You can find it here → 📡 SideFund Radar
📧 Feel free to flick me an email if you have any exciting news you'd like me to share with the FR community. I'm me@alantsen.com and @alantsen on the Twitters.
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