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Issue #84: Fiserv & Plaid Partner, Australia Moves To Give RBA Oversight of Apple Pay And Block Acquires Hifi
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It’s been another big week for fintech, so without further ado, let's delve into the major happenings from last week.
📣 The News Grab Bag
Orum, an A2A payments company, has launched an account verification service built on top of FedNow, the US Federal Reserve's new real-time payment rail. The service uses a webhook to send data back to the business, providing information about the account in real time without the need for human verification of the bank account. The service is compatible with the RTP network and allows customers to verify a bank account within 15 seconds before sending a payment.
🥡 Takeaway: FedNow has gotten off to a slow start. As the article notes, this has been driven by the slow uptake from financial institutions and the MVP nature of what was launched in July. In this regard, startups like Orum launching new capabilities on top of FedNow may be the catalyst needed to encourage other startups to build creative new solutions on top of the payment rail.
German insurtech startup Getsafe has acquired the German portfolio of French insurtech startup Luko — including liability, pet, and home contents insurance after the latter faced insolvency.
The acquisition has nothing to do with licenses and everything to do with Getsafe's growth goals, according to CEO Christian Wiens, who said the takeover facilitated the integration of Luko's customer base. The acquisition has brought Getsafe's customer base across Europe to 550,000, up from 400,000 before it expanded into France. The company sells insurance products directly to younger customers with a mobile-first strategy.
🥡 Takeaway: There have been a few bright spots in the world of insurtech recently, with a number of consumer propositions raising significant rounds this year (see, for example, Marshmallow’s $85m raise on a $1.25b valuation), signalling that investors might be starting to come back to the segment after many avoided it like a falling knife in 2022.
Fiserv has partnered with Plaid to give consumers more control over who accesses their bank account data. The partnership will connect customers at over 3,000 financial institutions using Fiserv's core banking platform with Plaid's roster of more than 8,000 third-party applications and services. This will allow consumers to share their financial information with the third-party financial apps and services of their choice and eliminate screen-scraping for millions of customers and thousands of financial institutions.
🥡 Takeaway: It’s interesting to see Plaid partner with Fiserv as, at one point, you might have imagined these two would be on a collision course — especially given that we’re seeing Open Banking startups sharpen their focus around payment. It’s clear there is a ton of opportunity for this to benefit both Plaid and Fiserv; now, let’s see if the cogs of the incumbent can move quickly enough to really make this work for the startup.
The Australian government plans to regulate digital wallet providers, including Apple and Google, like other payment services. The proposed amendment to the Payment Systems Act would give the Reserve Bank of Australia oversight of these providers and the ability to designate certain services or platforms for additional regulation.
The aim is to ensure that the shift to digital payments promotes competition, innovation, and productivity. The draft legislation is open for public consultation and is expected to be introduced to parliament later this year.
🥡 Takeaway: This has been on the cards for a while (pardon the pun) and was a key recommendation of the payments system review conducted by Scott Farrell for Treasury back in August 2021. It finally seems that the banks have been able to wrangle governments into regulating Apple Pay like other payment products. It’s unsurprising that banks have been pushing for this given the rising cost of paying the Apple Pay vig (estimates put in the $112m range per annum). It’ll be interesting to see the final form of the legislation and Apple’s response to it.
Block last week announced they’d acquired music-focused startup Hifi. The startup, which launched in 2020, provides financial services for artists, including tracking royalty income and offering a royalty acceleration service called "Cash Flow."
Hifi will join Block to further their shared purpose of economic empowerment for artists. The acquisition follows Block's purchase of music streaming service Tidal in 2021 and is part of the company's efforts to expand its mobile payment services. Damian Manning, Hifi's CEO, expressed excitement about the acquisition and the shared purpose of economic empowerment.
🥡 Takeaway: The public markets have been challenging for listed fintech companies with split focuses. Despite this, Block appears to be intensifying its focus on the music segment with this acquisition. It will be intriguing to see if they unveil any new offerings, potentially utilising Hifi's product as the cornerstone.
Mastercard's CFO, Sachin Mehra, described India's UPI as a "fantastic" but "incredibly painful experience" for ecosystem participants at a recent conference. While UPI has facilitated over 10 billion transactions monthly in India, Mehra voiced concerns about its commercial sustainability and the financial impact on ecosystem participants.
🥡 Takeaway: Unlike card giants like Mastercard and Visa, which charge merchants a fee for transactions, UPI largely functions at no cost to merchants, leading to its widespread adoption. However, this economic model has raised questions about long-term sustainability, given the cost to ecosystem participants. Despite reservations from some, many businesses in India have innovated and built around UPI, finding ways to monetise the platform.
Notable Funding Announcements
Last week was a modest one for fintech financing, with 41 funding rounds completed and companies collectively securing $414m in investment.
Carefull has raised $16.5m in funding for its AI-powered financial safety platform for senior citizens. The platform offers issue detection, identity and credit monitoring, identity theft insurance, password and document vaults, and a Trusted Contacts system.
Carefull's service is used by more than 35 financial institutions and advisor groups. The company plans to use the funding to expand its platform, establish new enterprise partnerships, and advance its behavioural engine.
🥡 Takeaway: Amidst an ageing population, the need for such protective financial platforms is definitely growing. Carefull's funding round, led by Fin Capital, underscores a growing recognition of this need, hopefully heralding a new wave of fintech solutions centred around the financial safety of the senior demographic.
Berlin-based startup Upvest has raised €30m in funding and secured a deal with BlackRock to make investing more accessible in Europe. Upvest offers a plug-and-play API for fintechs, allowing them to develop investment products.
The company holds licenses for securities, crypto brokerage, and custody and has partnership agreements with BNP Securities and ABN Amro. The partnership with BlackRock will help Upvest broaden its offering to larger financial institutions, providing a better investment infrastructure for companies and upgrading their investment offerings. BlackRock participated in Upvest's funding round alongside other investors.
🥡 Takeaway: It's been a tough market for companies navigating this segment, yet just last week, Alpaca also announced a raise of $15m as it eyes Asia as their next frontier for growth. It's interesting to see players in this once-hot sector exploring new opportunities, like partnering with incumbents — especially since most were initially aiming to 'arm the rebels' who sought to disrupt them.
Matic, an embedded insurtech platform, raised $20m ($3m going to upsize its credit facility) as an extension of its Series B funding round. The round was co-led by IA Capital Group and Cultivation Capital, with participation from new investors, including Intuit Ventures, TruStage Ventures, and Assurity Ventures, among others.
Matic will use the funding to expand its carrier network, enhance its product portfolio, and grow its footprint as the embedded P&C insurance provider for mortgage and banking institutions. The company currently partners with over 100 lenders and banks and plans to expand into offering life insurance. Matic plans to expand beyond P&C insurance into life insurance and establish partnerships in other industries.
🥡 Takeaway: As noted above, insurtech funding is picking up in the latter half of this year, and there seem to be more chequebooks out and ready-to-fund opportunities in the segment — which is great news for insurtech startups!
🎧 Resources & Recommendations
In this episode of the Business Breakdowns podcast, Mark Tomasovic from Energize Capital discusses WEX. For those who haven’t heard of WEX, they are an OG vertical fintech company operating in the fleet card space. More specifically, he delves into WEX's fleet card market dominance, its history, the evolution of its clever gas station distribution model, and how they are approaching the growth of the electric vehicle fleet segment. It’s a fascinating deep dive into a company that has built a $2.3b revenue business on the back of a fleet card offering — well worth adding to your podcast playlist.
Last week, consumer fintech Braid announced they were shutting down. The startup had a rollercoaster journey from 2019 to 2023. They developed a ‘multi-player’ account called a money pool and raised $10m from notable VCs along the way, including Index and Accel.
In this piece, Amanda Peyton, co-founder of Braid, provides a detailed look at what it’s like running a consumer-facing fintech — dealing with fraudsters, navigating banking partner relationships and all while trying to find PMF amongst all the noise that comes with building a consumer proposition. This is definitely a post I’ll be forwarding to founders looking to build a B2C fintech startup.
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