👋Hi, FR fam. I hope iso is treating you well and you’re living it up Drake style.
🛍️ Sofi goes shopping
It’s been a massive week in fintech with another $1bn+ acquisition announced. This time it was SoFi pulling the trigger and purchasing Galileo for $1.2bn. The deal left the fintech industry dumbfounded with many trying to work out why a B2C lending and wealth platform would spend $1.2bn on a payment processor.
If you’d like to read my analysis of the deal, you can find it HERE.
In all noise surrounding the Galileo acquisition, one of the more under-discussed pieces of information is the quick ~4x’er that Accel pulled from the deal.
For some background, Accel led Galiloe’s series A back in October last year. The valuation was undisclosed, but an intelligent guess would be that it was around ~$400m. As Techcrunch note in their piece on the deal:
Accel’s valuation of the deal was not publicly disclosed in November, but a source with knowledge of the acquisition today characterizes the firm’s return as more than 4x. Given that Accel held the equity for roughly half a year, that’s quite the IRR multiple in an otherwise challenging global macro context.
Not a fund returner, but still an excellent outcome that will juice the fund’s IRR. Well played Accel 👏👏
Having said this, maybe the person most jazzed about the result is Qualtrics Founder & CEO, Ryan Smith. According to the original blog post by Accel on the deal, the round was co-led by Smith. Sometimes the rich just get richer.
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86400 announced this week that they raised a fresh round of financing. Morgan Stanely led the $34m round, and it brings the total they've raised to $90m.
In the press release announcing the deal, 86400 note that they now have more than 170,000 accounts on their platform (which is impressive) and that they’re seeing more than 350,000 transactions and balance updates per day. They also mention that they currently have an NPS score of 46, which they compare to the big four Aussie bank average of 2.1. By way of comparison, UK challenger bank, Monzo reported an NPS of 80 for 2019.
In a letter to applicants for new banking, insurance and superannuation licences, APRA (Australia’s prudential regulator) announced that they’d be temporarily suspending the issuance of new licences for at least the next six months due to the economic uncertainty caused by COVID-19.
It’ll be interesting to see how this impacts challengers banks that are mid-stream with their licenses. For those who have already been able to secure an ADI license, this could be the small break they need to help accelerate their growth ahead of what looked to be a competitive market in 2020.
As part of a $2 trillion COVID-19 stimulus package, the US government has announced around $350m in small business loans. For an eligible business to access these loans, they will need to, amongst other things, provide payroll data to their bank who will then need to verify the information provided.
To help with the verification process, Plaid is releasing a new product for FSIs that will allow for more straightforward verification of this payroll data through direct connections to sources.
This is an excellent example of how open data can be used to help speed up a process that would have traditionally been completed manually and would’ve taken hours or even days. Further, this highlights how fintech startups are solving simple yet critical infrastructure issues to help get funds out to businesses quicker in these uncertain times.
To many outside the US, this doesn’t sound like a groundbreaking feature. However, according to FDIC data, around 25% of US households are either unbanked or underbanked. That’s a staggering number of people who will struggle to get their $1,200 stimulus cheque banked.
To help with this, Square’s Cash App has introduced routing and account numbers to allow for depositing of stimulus payments into the app.
It’s been fascinating to see how fintechs have been able to move nimbly to add new features to products in just days, while FSI incumbents have been caught flat-footed trying to figure out whether they should use Zoom or Webex.
Singapore is well known for its support of the fintech sector. Each year they lavish money on the sector, aggressive modify fintech-related legislation and innovate in the way startups interact with incumbents (see, for example, APIX) - all in an attempt to make Singapore the default home for fintech startups.
This week the Singaporean Monetary Authority announced a massive injection of money into the local fintech ecosystem as they continue to signal their intent to be the go-to jurisdiction for fintechs.
It’ll be worth watching how other governments support their local ecosystems and whether, for example, they’ll lean in and partner with startups to help more effectively deliver stimulus dollars to those who need it most.
This week Railsbanks announced a new tranche of funding led by Visa. This comes hot on the heels of Visa’s recent acquisition of Plaid for $5.3bn in January this year.
Along with the cash injection, Railbank announced that they’d signed a 5-year partnership with Visa to “…deliver Banking as a Service (BaaS) innovation in Southeast Asia…”.
It’s interesting to see how active Visa has been in open banking and BaaS space. I’d be guessing this won’t be the last infrastructure investment they make this year.
I use Finix as an example of the shift we see in the ‘roll your own infrastructure’ space. If you’re keen to hear what they do and who they’ve been working with, this is well worth a watch.
🥶 From Cold Storage
This week I’ve pulled out of cold storage a long read and one that is definitely for the fintech nerds. It’s a deep dive into the world of fintech infrastructure that covers off on how the modern developer-driven banking stack looks and who the players are at each level.
I highly recommend this piece for those who want to quickly get up to speed with how fintech infrastructure looks in 2020.
📈Fintech in numbers
This week I thought I’d share some interesting graph, stats and general data related to fintech.
SensorTower is one of many app download trackers out there. They publish a monthly fintech download chart that is well worth checking out. It’s also well worth subscribing to their newsletter to get updates of what’s popping off in the AppStore.
This article is an oldie, but a goodie and you’ve likely seen the data before.
The piece picks up a bunch of data from a famous economics paper on the impact of the introduction of the CARD Act in 2019. The paper, ‘Regulating consumer financial products: evidence from credit cards’, showed that the introduction of Act (which was designed to curtail deceptive and abusive practices by credit card issuers) resulted in $12 billion less in fees every year to consumers.
One of the most striking graphs in the post is one that illustrates the profit distribution of credit card companies based on credit scores. It speaks for itself.
One of the big questions in fintech at the moment is around the impact COVID-19 will have on fundraising for 2020. According to CBInsight, it looks like for Q1 about $6bn in funding will be completed - which bring the market back to about 2017 levels.