Issue #48: Freetrade Secures The Bag, Airwallex Tops Up Their Series D (Again) And What's The State Of BaaS In Europe?
đ Hi, FR fam. I hope youâve all had a great week.
Letâs kick this weekâs issue of FR off with simultaneously the worst and best piece of fintech content youâll find on Youtube. Trust me youâll want to watch it.
đŁ The News Grab Bag
How Beeple crashed the art world â Earnd sold to Wagestream as part of the Greensill fallout â Oaknorth records a ÂŁ77.6m pre-tax profit â Zip goes into contactless payments â Plaid announces its first accelerator cohort â Interchange fees are on the rise in the UK â HSBC gets Kinetic â Are we entering a new era for peer-to-peer payments? â Musings on Plaidâs roadmap â All good under the hood with Apple Card â Revolut applies for a US banking charter.
đ Notable Funding Announcements
It was another big week for financings in the world of fintech. In total, 72 funding rounds were announced, totalling $3.8b.
đŻ Freetrade Raises A ÂŁ50m Series B For European Expansion
UK stock trading platform, Freetrade last week announced a ÂŁ50m Series B round of funding. The round was led by New York-based growth equity firm Left Lane Capital.
đ¤ My Take: Although most of the news in fintech relating to stock trading platforms tends to centre around the US goliath, Robinhood, trading in US shares has become a global phenomenon. In fact, the ability to buy fractional stakes in Amazon, Tesla and Apple, to name a few, has become far more accessible over the last 2 years in several countries. In part, this has been driven by the payment for order flow (PFOF) model which has provided a way for fintech startups wanting to play in the brokerage space to monetise their offering. Along with this, several brokerage-as-a-service infrastructure providers have popped up, allowing any consumer fintech app to roll out US fractional share trading â these include companies like DriveWealth and Alpaca.
Itâs worth noting that before the likes of Revolut, Stake and Freetrade offered access to the US market, it was generally restrictive and expensive to purchase US stocks. Yes, the PFOF model has been called into question, and an argument can be definitely be made that âwhen youâre not paying for a product, you are the product.â Having said all this, access has opened up, and the ability to buy into the US stock market is now a global opportunity. Freetrade is a great example of this playing out in the UK. According to the press release announcing the funding round, theyâve passed 600,000 users, and Q1 2021 trade volumes exceeded ÂŁ1bn. Which is really impressive.
It already feels like in the world of consumer fintech that offering access to the US stock market (specifically to listed tech companies) is becoming table stakes. Itâll be interesting to see whether this continues, especially if we see a serious correction in prices.
đ¸ Airwallex Raises Valuation To $2.6n On $100m Series D Extension â
Aussie fintech unicorn, Airwallex last week announced a further extension to their Series D funding round. The $100m in additional funding was led by Greenoaks, with participation from Grok Ventures and returning investors Skip Capital and ANZi Ventures. This brings the companyâs valuation to $2.6b.
đ¤ My Take: Firstly, congrats to the team over at Airwallex! Itâs always great to see an Aussie fintech startup secure the bag.
I wrote a fairly extensive piece back in issue #28 about cross border B2B payments and why itâs such a massive opportunity. As a quick reminder, the market for remittances is usually thought of as being mainly made up of C2C payments. However, the vast majority of the value that moves between countries is, in fact, B2B. Beyond this, the growth in C2C has remained relatively flat. In contrast, international commerce continues to expand at an impressive clip1, meaning access to business payments and accounts is becoming a global issue vs a localised one.
As we see e-commerce infrastructure companies like Shopify and BigCommerce rapidly expand the size of the addressable market for the average SME, this also creates a need for banking that matches the boardless market many are now selling into. This is where companies like Airwallex and Wise are focused.
An interesting trend weâre starting to see is that multicurrency accounts are becoming table stakes in the challenger SME banking segment â as companies not only receive payments from other markets but also make payments for SaaS services in a variety of currencies. In many ways, this could be a somewhat orthogonal way to enter the crowded SME banking space. Itâll be interesting to see what other services companies like Airwallex roll out to their growing customer base.
âď¸ Things You Should Know About
đ¤ˇââď¸ How Well Are Fintech Startups Being Banked? â
The growth of BaaS has allowed fintech startups to get to market quicker and in a more cost-effective way than was previously possible. However, itâs not until youâre in the middle of integration hell that you realise that itâs not always rainbows and skittles when working with a BaaS provider.
This survey conducted by BaaS startup Clear.Bank highlights the double-edged sword that is working with a banking partner.
The survey of 100 fintech startups across the Netherlands, Lithuania, Sweden, Switzerland, and the UK is an interesting insight into the state of BaaS in Europe â and well worth a read.
One of the more striking findings was that nearly half of respondents (49%) didnât believe their agency bank had helped their business, with 12% believing that theyâd inhabited them. Ouch.
đˇââď¸ The Distinct Flavors of API-Enabled Employment Data Access â
The âPlaid for payroll dataâ was a hot meme in fintech last year. The PPP rollout in the US highlighted the increased interest in this niche segment of data. As part of that process, those seeking loans were required to provide payroll data and what became obvious was that there wasnât an easy way in most instances to access it.
However, this is just one manifestation of the challenge that many companies face in getting accurate payroll data. A great example of this is in the loans space â getting accurate salary data, information on when a person was hired, their job title, the number of hours they worked last week/year/month is an incredibly manual and time-consuming process. In fact, in many instances, it requires a bank to call an employer to verify data.
This is a great read on what Argyle and Finch are doing in the payroll data space, and it also highlights the vast amount of opportunities accurate real-time payroll data could unlock.
đ¤ˇââď¸ Tide Proposes Open Banking Data Fees To Incentivise Banks â
This article highlights a genuine issue that every regulation mandated open banking regime faces. Specifically, how do you ensure that the incumbent banks actually provide a service that is fit for purpose?
Itâs easy to think that once that regime is enshrined into law and a framework has been developed for an open banking regime that itâs âjob done.â Au contraire mon ami, this is when the real work begins.
As the UK and Australia found out, half the battle is making sure the incumbents come to the table with a API that delivers in a way that is actually fit for purpose. As both markets work their way through the next stages of their open banking regimes, letâs hope we see less foot-dragging from incumbents and more APIs that deliver on the promise of open banking.
đ§ Podcast Recommendations
Revolut Applies for Banking License in the US and Launches Business Accounts with Ron Oliveira, CEO @ Revolut US â As noted above in this weekâs Grab Bag, Revolut hopes to become a chartered bank in the US. In this podcast, their US CEO talks about the decision to become apply for a charter and some of the other products theyâll be launching in the US.
How to Compete for Buy Now, Pay Later (BNPL) Customers â We all know BNPL is hot right now. In this podcast, the CEO of Amount, Adam Hughes, discusses the segment's growth and how FSI can remain competitive in the red hot BNPL space.
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đ§Â Feel free to reach out if you want to connect. I'm me@alantsen.com and @alantsen on the Twitters.
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According to Mckinseyâs Global Payments Report (2019) the market for cross-border SME payments is growing at a CAGR of 5-10%.