Issue #68: Mastercard Goes On A Spending Spree, More Money Pours Into the BNPL Segment And Aussie CDR Data Tells An Interesting Story

👋 Hi, FR fam. I hope you’ve all had a great start to the week.

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Ok, without any further ado, let’s get into this week’s news from the world of fintech.


📣 The News Grab Bag

JP Morgan pays €25m to settle French fraud case ⚬ Paypal acquires Japanese BNPL player, Paidy ⚬ Current is on the rise ⚬ Amazon wants to own the PoS segment ⚬ Monzo wants in on BNPLVertical fintech is reimagining community banking ⚬ Brazilian kidnappers also like faster payments ⚬ India continues to launch new open banking services ⚬ Why has El Salvador officially adopted bitcoin as its currency? Only 14% of UK consumers ‘completely understand’ Open Banking ⚬


📈 Notable Funding Announcements

It was another big week of funding announcements in the world of fintech. In total, 52 funding rounds were announced, totalling $1.7b.

🇧🇷 Brazil's Insurtech Pier Raises $20m

Last week Brazilian insurtech startup Pier announced a $20m Series B raise led by Raiz Investimentos. Pier plans to use the funds to continue to fuel its growth as it seeks regulatory approval to expand its insurance offering across other segments.

🤓 My Take: The Brazilian fintech ecosystem has been on a roll as of late. Although most of the limelight tends to fall on the challenger bank powerhouse that is Nubank, the rising tide that they’ve been able to create is lifting several other fintech startups with it.

In fact, according to CBInsight’s recent Q2 ‘State of Fintech Report’, Brazil dominates the fintech funding landscape with nearly 70% of funding in the region landing in the country. Undoubtedly, part of the reason for this high concentration of funding finding its way to Brazil is related to the monster rounds Nubank has raised. However, if you look beyond the funding numbers, an interesting story is unfolding in Brazil for fintech.

In part, the growing fintech ecosystem is being driven by the rapid digitization of the economy and adoption of fintech offerings1. For example, mobile banking has been commonplace in the country for years.2 However, alongside this, the Brazilian government has also been making strides on the infrastructure and regulatory fronts to improve competition in a fairly concentrated FS market. Specifically, the country is launching open banking, has introduced a fintech sandbox regime, and rolled out a faster payments network. Which is some fairly impressive stuff by global fintech standards.

In Pier’s case, they are taking on a growing segment of the FS market in Brazil. As with most rapidly modernising economies, insurance rates are still low in Brazil but quickly accelerating. Pier sees this as an opportunity. As their CEO and co-founder, Igor Mascarenhas, noted when they raised their last round of funding late last year:

“We are still an emerging country, and there are only 30 percent of people with car insurance, 10 percent with home insurance, and 2 percent with life insurance…Insurance is 3.8 percent of GDP, while it is 11 percent in the United States. We have a huge opportunity to increase the penetration and believe our great experience will be responsible for that.”

As I’ve noted in previous issues of FR, the insurance space in emerging markets is one many are still sleeping on. In regions like South America and Africa, the growing middle class will continue to look for financial products that meet their needs. The insurtech sector will be one of many that will likley benefit from this.

💳 Addi Raises $75m To Advance BNPL In Brazil

South American BNPL startup Addi last week announced an extension to their recent large Series B funding round. The $75m extension to the funding round they announced in May was led by Greycroft and nearly triples their valuation.

🤓 My Take: If software is eating the world, it feels like BNPL is eating fintech. At this point, it’s hard to go a week without news of a BNPL company raising a monster round of funding. Last week, Addi extended their already sizable Series B with an extra $75m, along with Aussie BNPL player Scalapay securing the bag from Tiger Global to the tune of $210m. Literally, in the space of a week close to $300m poured into the vertical.

In fact, it’s hard to find a market where BNPL isn’t gaining traction. In Addi’s case, it saw a big uptick in customer activity during COVID after refocusing its efforts from IRL to URL. According to reports announcing the round, Addi has grown around 3x since March/April of this year.

Interestingly, and has been pointed out in a few different reports announcing the round, LatAm is well suited to BNPL as the e-commerce sales growth skyrockets in the region. According to eMarketer, e-commerce sales are growing at a 36.7% clip in South America.

Although BNPL isn’t necessarily a winner takes all market, it’s likely we’re going to see some big players emerge. It’s still early in the race, but we’re already starting to see consolidation3 and some regional players — like Addi — emerge as leaders in their home markets. It’ll be interesting to see how bigger players like the new combined Square/Afterpay, who clearly have global aspirations, take on regions like South America — will they open the chequebook or take the locals on their own market? Let the BNPL games continue!


☝️ Things You Should Know About

🖥️ Open Banking API Performance

Australia is still in the early innings when it comes to the Consumer Data Right (CDR), so it’s probably unsurprising that we’re seeing some serious deviations in the speed and quality of the APIs being provided by data holders.

As a recent post from Aussie open banking startup, Frollo highlights it’s fairly clear there is still a fair bit of work to do on conformity testing. In fact, some of the variance in API performance is actually quite concerning. Let’s hope that things tighten up soon.

💰 Mastercard Goes On A Acquisition Spree

Last week Mastercard went on a bit of a spending spree announcing the acquisition of not one but two fintech startups.

In the space of two days, Mastercard announced they’d acquired two very different companies from the world of fintech — CipherTrace and Aiia.

The acquisition of CihperTrace seems to be Mastercard leaning into the blockchain space through a more benign channel, namely data intelligence. According to the press release announcing the deal, they’ll be acquiring CipherTrace to augment their own cyber security tools offering and better allow companies to comply with crypto regulation globally. It’s an interesting play and highlights the growing interest from incumbents on the world of on-chain data.

The second acquisition is a little closer to home for Mastercard. In the second deal they announced last week, Mastercard acquired EU focused open banking platform Aiia. In the press release announcing the deal, Mastercard noted that the acquisition was part of their expanding open banking efforts across the EU. As most FR readers will remember, only a few months ago, Visa ponied up and purchased Tink for the princely sum of $2.15b to expand its footprint in the EU open banking space. It’s clear that both card schemes have some serious ambitions in open banking across the EU.


🎧 Podcast Recommendations

Here are this week’s podcast recommendations. Enjoy👂

🍷 How To Invest In Wine ft. Anthony Zhang, Co-Founder of VinovestAlt investing has been running hot lately. This is a great interview with Vinovest CEO Anthony Zhang that covers how they allow nearly anyone to access the wine asset class.

💸 Sameer Gulati, COO of Plastiq — Addressing the Working Capital Gap for Businesses ⇢ Platiq is a super interesting company in the SME working capital space. In this podcast, their COO talks about their business model and how they landed on serving SME businesses as their core customer. This is another great episode of the Wharton Fintech Podcast and well worth a listen.


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1

For example, Brazil has consistently ranked highly on the EY Fintech Adoption Index.

2

In fact, more than 80% of mobile phone owners in Brazil already access their bank account via a smartphone.

3

For example, Paypal announced this week they were acquiring Japanese BNPL player Paidy.