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Issue #77: Better.com Lists (And Tanks), Ramp Raises $300m On A Down Round, And Is Klarna Back?
👋 Hi, FR fam. I hope you’ve all had a great week!
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Alright, enough with the preliminaries. Let's dive right into what's been making waves in fintech over the past week.
📣 The News Grab Bag
Ruh Roh, it’s been another brutal week for Better.com. After completing its SPAC merger and entering the public market, Better.com has seen its stock plummet. The company had previously claimed a $7.7 billion valuation and $500m in profits, but layoffs and a struggling housing market led to a decline in business and negative publicity. The company still pursued its SPAC plans, but its shares are now worth only $1.25 each, shedding over 90% of their value after listing on Thursday. Despite CEO Vishal Garg's optimism for the future, investors are clearly not confident about Better.com's prospects in a tough housing market.
BNPL OG, Klarna is experiencing significant growth in Europe, with a 26% increase in gross merchandise value in the UK and a 14% increase across Europe in the second quarter of the year.
The company has amassed over 100 million European consumers and struck deals with over 470,000 merchants. However, Klarna did not confirm whether the increased demand would result in a profit or drive up its losses.
Klarna’s CEO, Sebastian Siemiatkowski, noted that the company is strengthening its position in Europe and the US — despite posting a loss of $1b in 2022.
It’ll be interesting to see if Klarna can get back to its lean and profitable roots this year as it continues to look for a clear path to growth in a tough interest rate environment — especially for BNPL players.
Zopa Bank, based in the UK, has reported narrower losses and predicts full-year profitability in 2023. The bank achieved a pre-tax profit of £10.1m and grew its total operating income by 131% to £151m in 2022.
Its customer base expanded to approximately 868,000, and total deposits exceeded £2.9b, representing 202% year-on-year growth. Zopa attributes much of its growth to its Smart Saver product — a flexible savings account that offers higher interest rates.
Zopa has transitioned from a P2P lender to a more traditional bank. It’s also been trying to drive growth through acquisitions, recently purchasing BNPL player DividePay.
Coinbase has acquired a minority stake in Circle, and the two companies are dissolving their partnership in the Centre Consortium that issued the USD Coin (USDC) stablecoin.
Additionally, USDC is adding support for six new blockchains, bringing the total number of supported blockchains to 15. The specific blockchains were not disclosed, but Circle had previously mentioned plans to add Polkadot, Near, Optimism, and Cosmos in 2023.
The move comes amidst shifts in the stablecoin market, with PayPal introducing its own PYUSD token, and Coinbase sees the future of USDC expanding beyond crypto trading into areas like foreign exchange and financial inclusion.
The Reserve Bank of India is launching a pilot project in the same vein as UPI, but this time to simplify access to credit. The project's objective is to provide digital information that facilitates credit or loans to lenders. The platform, developed by the RBI Innovation Hub, will be an open API-based platform and standards so all financial players can connect in a ‘plug-and-play’ way.
The hope is that a platform like this will consolidate digital information from various sources, such as governments, banks, and credit bureaus. By doing so, it aims to make credit more accessible to previously underserved segments of the population.
The pilot program will initially focus on products such as Kisan Credit Card loans, dairy loans, MSME loans, personal loans, and home loans, with plans to expand the scope and coverage.
Indian fintech Paytm introduced a compact speaker called the sound box back in 2019. This speaker notifies merchants of successful payments. It is available to sellers for just over $1 per month and has been widely adopted by millions of merchants — according to Paytm “6.1 million merchants now paying subscriptions for payment devices like Soundbox and PoS”.
Although it sounds rudimentary, it is an ingenious solution to a common problem merchants face in a market where QR code-based payments are the norm — how do you quickly check if a payment has gone through?
The solution seems to have caught the eye of India's largest company, Reliance. According to reports, Reliance is testing its own version of the sound box payment system with its employees in some of its stores. The company's interest in the sound box comes as its financial services unit, Jio Financial Services, plans to expand to merchant lending and it sees this as another hook to get merchants using their offering.
If you haven’t seen the sound box in action, check out the video below from Paytm on how merchants use it.
Yahoo has acquired CommonStock, a social investing platform that allows retail investors to share insights based on information linked to their brokerage accounts.
According to reports about the acquisition, the purchase aligns with Yahoo's strategy to enhance Yahoo Finance as a comprehensive destination for retail investors. CommonStock, launched in 2020, enables users to connect their profiles to their brokerage accounts, allowing them to share real-time portfolio performance and discuss trades with friends. The company has raised around $34m and will now be integrated into Yahoo Finance's free and subscription products.
It’ll be interesting to see whether Yahoo can leverage an acquisition strategy (which historically hasn’t worked out for them) to bolster their one remaining crown jewel, Yahoo Finance.
📈 Notable Funding Announcements
Last week was another consistent performance in fintech financing, with 35 funding rounds completed with companies collectively securing $563m in investment.
The big news last week in fintech fundraising announcements was Ramp’s monster $300m funding round co-led by Sands Capital and Thrive Capital with participation from General Catalyst, Founders Fund and other existing investors.
What really grabbed attention was the post-money valuation on the round of $5.8b, a noticeable dip from their previous $8.1b valuation. Given the current headwinds in fintech financing, this is somewhat status quo — if not better, compared to the down rounds other big names like Stripe and Klarna have faced. Yep, even the high-flyers in fintech aren't immune to the current squeeze in later-stage funding rounds.
On the upside, according to their press release, Ramp has seen significant growth in transaction volume and has saved its customers over $600m and 8.5 million hours, all while reducing customer spending by 3.5%. Some fairly impressive numbers!
In a market still largely controlled by heavyweights like AMEX and other entrenched spend management software, Ramp is taking a different approach. By focusing on real return on investment rather than merely encouraging spending through points programmes, they're attempting to shake up the status quo. It's a bold move, and it'll be fascinating to see if this strategy can not only shake up the existing powerhouses but also expand Ramp's reach beyond its core startup audience.
Kenyan fintech Zanifu has raised $11.2m in a ‘pre-Series A’ funding round to scale its inventory financing offering. The funding round was led by Beyond Capital Ventures and Variant Investments, with participation from Founders Factory Africa, AAIC Investment, Google Black Founders Fund, and existing investor Launch Africa.
Zanifu provides inventory credit to retailers and plans to expand its solution to distributors. More specifically, they target businesses that struggle to access credit from formal financial institutions and de-risks the line of credit by directly paying their suppliers. Zanifu has already served 13,000 micro-businesses and plans to scale its operations in Kenya.
LemFi, a mobile remittance service, has raised $33m in Series A funding to simplify remittance payments for immigrants globally. The company aims to provide instant international transfers to the African diaspora community in Canada and the UK. LemFi plans to expand its services to migrant workers and families in the European Union by acquiring EU licenses. LemFi aims to provide simpler, zero-fee money transfers to migrants from emerging market countries. In a crowded market for North-South remittance flows, it’ll be interesting to see how LemFi tries to break through the noise.
🎧 Resources & Recommendations
Last week, FT Partners released a report that provides a deep dive into the innovations reshaping payroll and human capital management. Whether you're an industry player or just keen to understand its future trajectory, this is a read you won't want to skip. Highly recommended!
In the latest episode of 11:FS's podcast, they tackle a timely question: Is the fintech sector missing the mark with those aged 60 and over? The panel delve into the current landscape for this demographic, exploring not just the successes but also the challenges and untapped opportunities. If you’re curious about how well we’re serving all corners of this growing market, this episode is well worth a listen.
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